From Decoupling to De-Risking: A New Era in Trade Between the West and China

Abstract

Since the Second World War, the welfare level of world societies has increased with the peace period brought by economic interdependence and the acceleration of globalization. However, the 2008-09 financial crisis, strained relations between the USA and China, the global pandemic, the Russia-Ukraine War and geopolitical tensions continue to negatively affect international trade and the global economy. Western and allied countries have experienced the effects of their dependence on the supply chains of countries with which they have bad diplomatic relations, in major shocks. Governments and policymakers of Western developed countries, especially the US, stated that it would be in line with national security interests for companies to move their production to allied -friendshoring- countries. Decisions taken by policy makers in the world’s developed economies have also prompted businesses to take new steps. In this study, which was prepared using secondary data, the economic decoupling of the US and allied countries from China was examined and concluded that the complete decoupling of economies will disrupt the world's economic stability and lead to a loss of global welfare.