The US-China relationship is dying a slow death

The Chinese authorities love enumerations: the Triple representation describes the responsibilities of the Chinese Communist Party; the five confidences they codify socialism with Chinese characteristics. The last eight suspensions they may become shorthand for the last stage of the disintegration of relations between Washington and the People’s Republic.

On Friday, Beijing ended bilateral cooperation on drugs, climate, military dialogue and crime, after the Speaker of the US House of Representatives, Nancy Pelosi, visited Taiwan, an island with an independent government over which China claims sovereignty. In the short term, little will change, because actual collaboration in those areas was minimal at best.

Some US negotiators may even be relieved. Over the weekend, the Chinese navy has turned the Taiwan Strait into a massive missile testing range, but that’s preferable to a full-scale blockade or invasion. Beijing has also banned a number of Taiwanese exports, mostly food. However, it has so far refrained from more serious economic retaliation, such as mobilizing nationalists against American products and companies, a tactic authorities have deployed in the past against Japanese and South Korean brands during diplomatic disputes.

In the current moment of economic weakness, Beijing regulators have reason not to scare off China’s largest financial partner, not least because economic decoupling is a specific goal of Washington’s hawks when it comes to China. Official data from 2020 showed that the stock of US foreign direct investment in China was 124 billion dollars. Americans also held almost $1.2 trillion in Chinese securities at the end of 2020, according to estimates by the Rhodium Group.

This does not mean that companies like Starbucks or Ford will be left completely alone. President Xi Jinping’s bureaucracy has other levers to pull to drive up the cost of doing business for American companies at the margins. That includes mundane but disruptive tactics at the base, such as problems getting work visas, customs holds, visits from quality inspectors, defeats in local courts and even administrative detentions.

In addition, China fell short of its trade deal commitment to buy more American goods, and is even less likely to try to ease the trade imbalance now: that’s bad news for American agriculture, among other sectors. The deterioration of trade relations may be slow, but it will probably be permanent.