010% U.S. GOODS
IMPORTED
FROM CHINA2017 2018 2019 1990 2019CUMULATIVE CHANGE IN TRADE BETWEEN THE
U.S. AND CHINA SINCE 2017COMBINED U.S. AND CHINA FOREIGN DIRECT
INVESTMENTSU.S. GOODS
EXPORTED TO CHINASOURCES: U.S. DEPARTMENT OF COMMERCE; RHODIUM GROUP–4.6%–8.3%02040$60 BILLION2000 2010$9.92 B.16 FORTUNE APRIL 2020FROM THE MOMENT it erupted in
Wuhan, China, the COVID-
virus has proved particularly lethal to
patients with the prior, chronic ill-
nesses often described as “underlying
health conditions.” Now the contagion
is having a similarly grim effect on
the U.S.-China economic relation-
ship—where accumulated mistrust
and resentment have created un-
healthy conditions of a different kind.
As the virus shakes the world’s
business community, sending global
stocks into or close to bear-market
territory, it’s easy to forget that many
of the first economic warning signs
came from U.S. companies with
significant China exposure. Apple
and Nike reported supply-line dis-
ruptions. Ford, General Motors, and
Tesla shuttered factories in China
and fretted over shortages every-
where else. Starbucks and Walmart
closed Chinese stores, while Disney
suspended operations at parks in
Shanghai and Hong Kong.
At minimum, the chaos has
prompted U.S. investors and
executives to rethink the wisdom
of concentrating supply lines in
China and relying heavily on Chineseconsumers. More broadly,
the epidemic has added
kindling to a smoldering
debate about “decou-
pling”—the idea that after
four decades of stitching
the U.S. economy ever
more closely to China’s,
the time may have come to
pry them apart again.
Decoupling implies a
full split, and few busi-
ness leaders are willing to
use the “D” word on the
record. But proponents of
a more distant relation-
ship, including some of
President Trump’s top
economic advisers, have
seized on the contagion
as proof of the dangers
of doing business in a
secretive, Communist-
controlled economy. Over
the past few weeks, White
House trade adviser Peter
Navarro has called the
outbreak a “wake-up call,”
while Commerce Secretary
Wilbur Ross predicted it
would help bring manu-facturing jobs back to the
U.S. Even those who favor
continued engagement
warn that the virus may
hasten a decisive fracture
in relations already frayed
by three years of hostile
rhetoric over matters of
trade, technology, national
security, and human rights.
Trump and China’s
Xi Jinping in December
reached a “phase 1” deal
that puts trade hostilities
on hold. But escalating
conflict had already led
U.S. businesses to reroute
orders worth hundreds of
billions of dollars to other
countries, in industries
from textiles to toys. Huge
electronics retailer Best
Buy has suggested that it
will reduce products made
in China to 40% of the cost
of goods it sells, down from
60% in 2019. In a recent
earnings call, CEO Corie
Barry called the corona-
virus “one more piece of
evidence that will continueCONSCIOUS DECOUPLINGThe U.S-China economic relationship had begun to lag well before the coronavirus outbreak, amid tensions over trade.DEC.W.0420.XMIT.indd 16 FINAL 3/10/2020 5:59:34 PM