America’s fundamental strategy of creating trading blocs of approved partners will have disastrous global consequences. The Great Depression in the 1930s was brought on, in part, by U.S. protectionism. The world must now guard against a similar calamity.

In this interview, Professor Huang Yiping discusses with James Chau, president of the China-United States Exchange Foundation, the trajectory of China’s economy and the factors that influence it. He also discusses the end of China’s so-called economic miracle and explains why the country is now working to transition to a more normal economic growth model. Will China’s local government debt lead to a systemic financial crisis? Huang elaborates on “three perils.”

Now that the United States has introduced a new set of import tariffs on Chinese goods, the world’s two largest economies appear to be on the brink of open economic warfare – and developing countries are in danger of getting caught in the crossfire. Beyond the risk that they could face sanctions or other trade restrictions if one superpower perceives them to be helping the other, Sino-American trade tensions are eroding the value of many of these economies’ comparative advantages, such as cheap labor and land. Coping with these challenges will require skillful economic statecraft.

The United States does not have a coherent trade policy. It has a political strategy masquerading as trade policy that has taken dead aim at China. Unsurprisingly, China has responded in kind. With the two superpowers drawing on their allies for support – the US leaning on the G7 and China turning to the Global South – economic decoupling is the least of our problems.

The Biden administration’s new tariffs on Chinese goods are primarily symbolic and political, with negligible economic impact, but they aim to protect and foster the U.S. clean energy supply chain, particularly in the EV sector. However, the tariffs are politically motivated and could undermine industrial policy goals by focusing on geopolitical competition rather than applying uniformly to all countries.

While high officials in the Biden administration — and President Joe Biden himself — have repeatedly proclaimed that America does not seek to decouple from China, the latest move to impose extreme tariffs on certain Chinese goods goes in exactly that direction. It’s a bad idea driven by U.S. election year politics.

China's post-COVID economic outlook challenges the comparisons to Japan's economic slowdown experience. Resembling 1990s South Korea, China has substantial growth potential through structural shifts toward a consumption-driven economy and inter-governmental reforms for sustained high-quality growth.

As China grapples with enormous challenges – including an imploding property sector, unfavorable demographics, and slowing growth – doubts about the future of the world’s largest growth engine are intensifying. Add to that China’s geopolitical rise, together with deepening tensions with the United States, and the need to understand China’s political economy is becoming more urgent than ever.

The short answer is yes, but they must be willing navigate their differences in constructive ways. A good playing field on which to start is new-energy vehicles. Joint efforts by major Chinese and American EV players could accelerate the industry in America and fuel exports to the rest of the world.

The Government Work Report has defined China’s policy goals and priorities for 2024. High-quality economic and social development beckons.