Fortune - 04.2020

to put pressure on diversi-

fying supply lines.”

The superpowers’

diverging paths are pain-

fully apparent in technol-

ogy. Google, Facebook,

and Twitter are banned

in China, and first-time

foreign visitors marvel that

it is almost impossible to

get around, communicate,

or dine there without

relying on Chinese tech

giants Tencent or Alibaba.

In hardware, the U.S. has

cited security and human-

rights concerns in cutting

Chinese tech companies

out of its supply chains. It

has also placed telecom-

munications giant Huawei

and dozens of other Chi-

nese firms on a blacklist

that prevents them from

buying key components

from U.S. firms without

a waiver. Beijing has

responded by turning its

technological back on

America, accelerating its

drive for autonomy in ar-

eas such as semiconductors

and artificial intelligence.

Another symptom of the

diseased relationship is the

constricted flow of talent.

The 370,000 Chinese

students enrolled in U.S.

colleges and universities

account for 34% of all

international students in

the U.S., and many U.S.

schools rely on Chinese

tuition to balance their

budgets. But travel restric-

tions designed to contain

the virus have prevented

thousands of Chinese

students from returning

to the U.S. for this spring’s

semester. Even before

the outbreak, Chinese

students were finding it

harder to obtain U.S. visas,

and many in the applied

sciences complain of a

“red scare,” in which they

are increasingly viewed as

government spies.

The rift creates difficult

choices for economies

that trade heavily with

the superpowers. Taiwan’s

biggest chipmaker, the

$36-billion-in-revenue Tai-

wan Semiconductor Manu-

facturing Co. (TSMC),

supplies U.S. companies in-

cluding Apple and Chinese

firms including Huawei. In

recent weeks, the Trump

administration has pres-

sured it to shift production

of its military-use chips to

the U.S. TSMC says that it

hasn’t ruled out the pos-

sibility but that there is “no

concrete plan.”

The prospect of a split is

especially troubling in Aus-

tralia, a staunch U.S. ally

that is also the developed

world’s most China-reliant

economy, with trade worth

around $200 billion annu-

ally. Australia ships a third

of its exports to China, and

Chinese nationals account

for 15% of its tourists.

Former Australian Prime

Minister Kevin Rudd,

now president of the New

York–based Asia Society

Policy Institute, has been

beating the drum to warn

against separation. “A fully

decoupled world would

be a deeply destabilizing

place, undermining the

global economic growth

assumptions of the last 40

years,” he lamented in a

recent speech.

By mid-March, China’s

government was declar-

ing that the slowdown

caused by the coronavirus

was reversing, report-

ing that more than 90%

of the state-owned firms

it oversees had resumed

operation (though many

are far from full strength).

In theory, trade and invest-

ment between the U.S.

and China could stage a

“V-shaped” recovery, as

happened after the SARS

epidemic in 2003.

But COVID-19’s eco-

nomic toll, far greater than

that of SARS, is also affect-

ing an American public

that’s less sympathetic

than ever to China. In

2019, the percentage of

Americans with an unfa-

vorable attitude toward

China jumped to a record

high of 60%, according to

the Pew Research Center.

In the upcoming presi-

dential election, hostility

toward China may be the

rare issue on which Trump

and his Democratic oppo-

nent agree.

Both nations have

too much to lose from

completely severing their

myriad commercial con-

nections. And COVID-

has shown how much

damage the economic

equivalent of a quarantine

can do. For now, like the

rest of us in this age of

contagion, they’ll opt for

fewer contacts and less

prosperity in exchange for

less entanglement. Call it

the economic version of

social distancing. —With

reporting by Phil Wahba

THE BRIEF — GLOBAL TRADE

BY THE NUMBERS

–$

BILLION

Decline in China-U.S.

trade from 2018

to 2019

SOURCE: U.S. COMMERCE

DEPARTMENT

370,

Chinese students en-

rolled in U.S. colleges

and universities

SOURCE: INSTITUTE OF

INTERNATIONAL EDUCATION

60%

Share of Americans

with an unfavorable

attitude toward

China—a record high

SOURCE: PEW RESEARCH

CENTER

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.

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