The new era of Cold War is here?

US and China:

Well,  the new era of Cold war has begun. We are seeing the end of globalization and the beginning of a cold war between the US and China. We can probably see new lines been drawn and trade being done between friendly countries and similar regimes. Democracy vs. Totalitarian State.

US and China have blacklisted each other’s companies, barred flights and expelled journalists. The unfolding skirmish is starting to make companies nervous the trading landscape could shift out from under them.

Not long ago, US and USSR were conflicting on how the world should be governed and now we have the new world order drawn by US and China. Soon countries would require choosing sides and that will play a huge role in how business and trade is done. 

With US and China de-coupling we would see new locations such as Vietnam, Mexico, India, and other countries shaping up to provide to the large US consumers. Free Market will be the thing of the past and special treaties and groupings are going to be formed between different economies.

The pandemic will probably push countries including the U.S. to localize some production for health-security reasons. But moves to reconfigure supply chains have been under way since at least 2011, when the tsunami in Japan and floods in Thailand put a new premium on managing risks to production and diversifying suppliers. The so-called “China + 1” sourcing strategy adopted by many non-Chinese companies accelerated during the trade war.

And on Capitol Hill, Republicans and Democrats have found rare unity in their opposition to China, with lawmakers eager to take action against Beijing for its handling of Covid-19, forced technology transfers, human rights abuses and its tightening grip on Hong Kong.

Covid-19 has thus far taken its most serious toll on rich, peaceful countries. America, Britain, Italy, France and Spain, five of the six worst-affected, have collectively borne over half of recorded deaths from the virus worldwide. But the disease is now rippling through less stable places.

There are reasons to fear not only that conflict will help the virus to spread, but also that its spread may worsen wars. The two could feed upon each other, creating a cycle of misery it is difficult to arrest.

At the outset of the Peloponnesian war with Sparta, which raged from 431bc to 404bc, Athens was ravaged by a plague that swept through the city for three years, killing thousands of soldiers and a third of its inhabitants. “Such was the nature of the calamity, and heavily did it weigh on the Athenians; death raging within the city and devastation without,” recalled Thucydides, a Greek historian and general.

The Spanish flu of 1918, another world-shaping pandemic, festered in the trenches and barracks of the first world war and killed more people than the conflict itself. Over 36,000 American soldiers died before ever reaching France, with 12,000 dying on troop transports. In total, more American soldiers, sailors and Marines died of flu and pneumonia than bullets and bombs.

China has decided to impose a draconian national-security law on Hong Kong, slapped trade boycotts on Australia and other Western nations, and sent coastguard ships to sink or harass foreign vessels in the contested waters of the South China Sea. It is also true that the world is geopolitically distracted. It is hard for governments to chide China over democracy in Hong Kong, say, while also negotiating to buy Chinese ventilators.

India and China:

As India tries to reassess its trade ties with China, the government is reassessing ways and means to encourage substitution of goods imported from the neighbour.

India has barred Chinese firms from supplying critical communications infrastructure such as 5G equipment to state-run telecom companies and could even extend that to cover private telecom players. India has also banned 59 Chinese mobile applications, including top social media platforms such as TikTok, Helo and WeChat, to counter the threat posed by these applications to the country’s “sovereignty and security

In early March, Indian troops in Ladakh, a Himalayan region abutting China, delayed their annual summer exercise after soldiers were infected by covid-19. China went ahead with its own matching drill. But the People’s Liberation Army (PLA) peeled away from exercises and dashed to several disputed areas on the mountainous border, where it dug in to strategic territory. India’s army stumbled upon them at the end of April, prompting it to rush forces to the disputed area.

The entanglement of virus and war was encapsulated in a series of videos and photographs showing PLA troops in the aftermath of a brawl in May, wearing masks as they learned over trussed and bloodied Indian captives, mindful of good respiratory hygiene even during a skirmish between nuclear-armed rivals. Another fight erupted on June 15th, resulting in serious casualties on both sides (see article). “A section of the Chinese leadership believes that the…pandemic is a window of opportunity for China to expand its regional and global influence. “China stabbed us in the back,” complained an Indian officer to News18, a television channel. “In the middle of a pandemic, this was not expected.

Global Economy:

The global economy faces a bleak future in which capitalism could take a beating unless governments get their policy responses just right. Speaking at the Bloomberg Invest Global virtual conference, Nouriel Roubini predicted the recovery from the pandemic crisis will soon fizzle out and be more anaemic than the one that followed the global financial meltdown more than a decade ago. Joseph Stiglitz said politicians must fight that by assuring citizens that public support programs will continue as long as needed.

The coronavirus pandemic has subsequently pushed more companies to reckon with the risks of relying too heavily on China for their supply chains, amid existing concerns about forced technology transfers, cost and rising tensions that could damp investment in China.

But as governments have been preoccupied at home and distracted abroad, the virus has deepened geopolitical tensions—between America and China, above all—and worsened what was already a heated international mood.

“Some leaders may…see covid-19 as cover to embark on destabilising foreign adventures, whether to deflect domestic discontent or because they sense they will face little pushback amid the global health crisis,”