In 1950, the point of no return for conflict between the United States and Soviet Union, the United States represented about half of all global industrial production. Its Marshall Plan was funneling billions of dollars to Western Europe to reconstruct the war-ravaged economies there. But none of that money was flowing to the Soviet Union or the Eastern Bloc. During the following decades, the amount of trade between the two countries was so negligible as to be all but nonexistent. The only real constraint on hot war at the time was nuclear weapons. Instead, war was waged ideologically, economically via those exclusive spheres, and militarily only in peripheral countries such as Vietnam, Angola, and Nicaragua.

The U.S.-Chinese relationship, however, has evolved in the context of extraordinary economic interdependenceThe U.S.-Chinese relationship, however, has evolved in the context of extraordinary economic interdependence. Even with two years of Trump administration tariffs on Chinese imports and mass disruptions on global commerce and movement of people due to the pandemic, bilateral trade in goods between the two countries is likely to be around $450-$500 billion this year, with close to another $100 billion in services. That is down from highs over the past few years, but about where it was in 2011. Not captured in those official statistics are the additional $1.1 trillion that China holds in U.S. Treasury securities and the hundreds of billions of dollars of capital stock and factories in China either owned, constructed, or maintained by U.S. companies. These companies not only manufacture goods such as the iPhone for export to the United States, but also sell goods to consumers in China.

The interlocking economies of the two countries, which the historian Niall Ferguson and economist Moritz Schularick once dubbed “Chimerica” and which I have called an economic “superfusion,” both enriched and imperiled U.S. companies and consumers. The opening of Chinese domestic markets after China joined the World Trade Organization in 2001 was a boon for U.S. companies, such as Yum! Brands, Ralph Lauren, and microchip and hardware companies that sold to a China that was not yet able to make the high-tech products itself. U.S. manufacturing took a hit, just as it had taken a hit from Taiwan and Japan in the 1970s and 1980s and from Mexico in the 1990s, but U.S. consumers benefited from a slew of cheaper products that made middle-class life more affordable. During and after the financial crisis of 2008, the United States was bolstered by Chinese investment in the United States in the form of bond and hard assets.