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한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Ushering in a multipolar order requires a streamlined and coherent political agenda – not unfocused expansion.  The 16th BRICS Summit in Kazan, Russia, concluded last week with the usual grand declaration of the group’s commitments, concerns and aspirations.  Many media headlines, particularly in Western countries, focused on how the summit and BRICS generally, symbolised Moscow’s ability to circumvent the fallout of sanctions by turning to the global south. In this way, BRICS is indirectly viewed as a threat to Western efforts to isolate Russia, weaken its power projection capabilities, and end its invasion of Ukraine.  Western governments and analysts often struggle to frame BRICS’s evolution beyond a binary, zero-sum narrative in which the group is a key geopolitical challenge to the Western-dominated international order. This interpretation places the forces of democracy and liberal political values in one camp and authoritarian governments in another, with certain developing countries caught in the middle, trying to play one side off the other for their own benefit.  There is some merit to these kinds of headlines. Russia and China are primarily major status-quo powers. Both have been permanent United Nations Security Council (UNSC) members since its establishment. Moscow was the ‘other pole’ in the international order for most of the 20th century, a position Beijing is working towards. And the foreign policy goals of both place them in confrontation with the United States and its Western allies.  BRICS may be on a path towards unnecessary substantive bloat, and away from its core business.  So, are these two countries in a position to champion the global south’s cause, and why haven’t more representative bodies like the Non-Aligned Movement played a more prominent role?  The preoccupation with Russia and China detracts from BRICS’s broader, underlying geopolitical project – the need for global south countries to reform and shape the international order’s future direction on their own terms.  These include greater representation and agency in global policy- and decision-making bodies and facilitating greater freedom to trade, invest and borrow money outside the Western-dominated financial system. They also include a more just and equitable global power balance that reflects modern realities.  In pursuing these aims, BRICS countries have made steady progress on developing a shared strategic agenda for increased cooperation across various policy domains.  The Kazan summit’s 32-page outcomes declaration covers almost everything from reforming the UNSC and Bretton Woods institutions to climate change, biodiversity and conservation. It also covers challenges from global crises, conflicts and terrorism and a suite of economic development, health, education, science and cultural exchange-related issues.  A group of democracies, autocracies and theocracies speaking with one voice on human rights and democracy is absurd.  The group’s ballooning cooperation agenda may indicate progress. But it could also signify the limits of its diverse members’ ability to agree on ‘hard’ political and security matters central to the core business of reforming the international order.  The expansion of BRICS’ substantive agenda and its membership dilutes its primary purpose and reinforces the binary, zero-sum Western narrative its members constantly try to shed.  Tangible, albeit gradual, progress on establishing intra-BRICS institutions and processes such as the Interbank Cooperation Mechanism, the cross-border payment system and its independent reinsurance capacity suggest that BRICS’ clout and credibility are growing.  These initiatives could enable members to pursue their international economic objectives without the constraints and transactional costs associated with traditional financial bodies like the World Bank and International Monetary Fund. Ideally, this would improve their relative positions of global power and influence, and help deliver a more multipolar international order.  In contrast, deepening cooperation on big cat conservation, while important, doesn’t serve that purpose. Nor does facilitating youth exchanges on sports and healthy lifestyles or championing a BRICS alliance for folk dance. Including these kinds of initiatives in BRICS’ growing agenda detracts from its core objectives.  A streamlined agenda would divert attention from the contradictions and geopolitical manoeuvring of BRICS’ members.  More worryingly, this suggests that BRICS’ diverse constellation of member states is pursuing the path of least resistance – expanding their cooperation in every direction, hoping something eventually sticks.  Instead of doubling down on hard strategic questions about a shared conception of multipolarity, and the steps necessary to reform global governance and security institutions, BRICS seems to be heading for greater expansion and formalisation. And with that come the risks, challenges and institutional dependencies that have led to the stagnation and ineffectiveness plaguing more established international organisations in recent years.  Perhaps the group’s core members recognise that they have very different ideas of what constitutes multipolarity. Russia (and China to an extent) envisage much more than global institutional reforms, focusing instead on reimagining international norms and core principles.  These differences are also reflected in BRICS’ expanding membership. It seems Russian and Chinese enthusiasm has been curbed by other founding members, who prefer a ‘partner country’ model for future growth. This contrasts with the full membership offers to Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and UAE in 2023. (Argentina’s new political administration declined, and the Saudis have remained non-committal.)    Most worrying, however, is BRICS’ preoccupation with promoting democracy, human rights and fundamental freedoms. There is no doubt that these terms are increasingly politicised and rife with double standards – among developing nations with mixed political systems and traditionally liberal, Western democracies. However, for BRICS to meaningfully champion normative values, its members must at least attempt to commit to common political governance systems in their own countries.  Having a group of partner nations composed of progressive constitutional democracies and closed repressive autocracies and theocracies attempting to speak with one voice on promoting human rights, democracy and fundamental freedoms is absurd. It reeks of empty political rhetoric at best, and Orwellian double-speak at worst.  This again dilutes BRICS’ key messages, undermines its important core business, and detracts from the significant progress being made towards a common strategic agenda.  BRICS primary goal moving forward should be to trim the fat.  A streamlined annual working agenda would divert attention away from its individual member states' contradictions and geopolitical manoeuvring. With a focus on addressing the international system’s failures, institutional reform and greater representation for global south countries in policy- and decision-making bodies could be prioritised.  This seems unlikely though, if this year’s summit is anything to go by. By following the path of least resistance, BRICS may be setting itself on a course towards increasing and unnecessary substantive bloat, and away from its core business.  Only time will tell if certain members are willing to be more assertive and correct course before they are too far down a path impossible to pivot away from. 

한국어로 읽기 Leer en español In Deutsch lesen Gap اقرأ بالعربية Lire en français Читать на русском Donald Trump’s return to the White House in January 2025, combined with a Republican-led US Senate, was widely feared among international allies and will be cheered by some of America’s foes. While the former put on a brave face, the latter are finding it hard to hide their glee.  On the war in Ukraine, Trump is likely to try to force Kyiv and Moscow into at least a ceasefire along the current front lines. This could possibly involve a permanent settlement that would acknowledge Russia’s territorial gains, including the annexation of Crimea in 2014 and the territories occupied since the full-scale invasion of Ukraine in February 2022.  It is also likely that Trump would accept demands by the Russian president, Vladimir Putin, to prevent a future Ukrainian Nato membership. Given Trump’s well-known animosity to Nato, this would also be an important pressure on Kyiv’s European allies. Trump could, once again, threaten to abandon the alliance in order to get Europeans to sign up to a deal with Putin over Ukraine.  When it comes to the Middle East, Trump has been a staunch supporter of Israel and Saudi Arabia in the past. He is likely to double down on this, including by taking an even tougher line on Iran. This aligns well with Israeli prime minister Benjamin Netanyahu’s current priorities.  Netanyahu seems determined to destroy Iran’s proxies Hamas, Hezbollah and the Houthis in Yemen and severely degrade Iranian capabilities. By dismissing his defence minister, Yoav Gallant, a critic of his conduct of the offensive in Gaza, Netanyahu has laid the ground for a continuation of the conflict there.  It also prepares for a widening of the offensive in Lebanon and a potentially devastating strike against Iran in response to any further Iranian attack on Israel.  Trump’s election will embolden Netanyahu to act. And this in turn would also strengthen Trump’s position towards Putin, who has come to depend on Iranian support for his war in Ukraine. Trump could offer to restrain Netanyahu in the future as a bargaining chip with Putin in his gamble to secure a deal on Ukraine.  Pivot to China  While Ukraine and the Middle East are two areas in which change looms, relations with China will most likely be characterised more by continuity than by change. With Chinese relations being perhaps the key strategic foreign policy challenge for the US, the Biden administration continued many of the policies Trump adopted in his first term – and Trump is likely to double down on them in a second term.  A Trump White House is likely to increase import tariffs, and he has talked a great deal about using them to target China. But Trump is also just as likely to be open to pragmatic, transactional deals with Chinese president Xi Jinping. Just like in relations with his European allies in Nato, a serious question mark hangs over Trump’s commitment to the defence of Taiwan and other treaty allies in Asia, including the Philippines, South Korea, and potentially Japan. Trump is at best lukewarm on US security guarantees.  But as his on-and-off relationship with North Korea in his first term demonstrated, Trump is, at times, willing to push the envelope dangerously close to war. This happened in 2017 in response to a North Korean test of intercontinental ballistic missiles.  The unpredictability of the regime in Pyongyang makes another close brush of this kind as likely as Trump’s unpredictability makes it conceivable that he would accept a nuclear-armed North Korea as part of a broader deal with Russia, which has developed increasingly close relations with Kim Jong-un’s regime.  Doing so would give Trump additional leverage over China, which has been worried over growing ties between Russia and North Korea.  Preparing for a Trump White House  Friends and foes alike are going to use the remaining months before Trump returns to the White House to try to improve their positions and get things done that would be more difficult to do once he is in office.  An expectation of a Trump push for an end to the wars in Ukraine and the Middle East is likely to lead to an intensification of the fighting there to create what the different parties think might be a more acceptable status quo for them. This does not bode well for the humanitarian crises already brewing in both regions.  Increasing tensions in and around the Korean peninsula are also conceivable. Pyongyang is likely to want to boost its credentials with yet more missile – and potentially nuclear – tests.  A ratcheting-up of the fighting in Europe and the Middle East and of tensions in Asia is also likely to strain relations between the US and its allies in all three regions. In Europe, the fear is that Trump may make deals with Russia over the head of its EU and Nato allies and threaten them with abandonment.  This would undermine the longevity of any Ukrainian (or broader European) deal with Moscow. The relatively dismal state of European defence capabilities and the diminishing credibility of the US nuclear umbrella would not but help to encourage Putin to push his imperial ambitions further once he has secured a deal with Trump.  In the Middle East, Netanyahu would be completely unrestrained. And yet while some Arab regimes might cheer Israel striking Iran and Iranian proxies, they will worry about backlash over the plight of Palestinians. Without resolving this perennial issue, stability in the region, let alone peace, will be all but impossible.  In Asia, the challenges are different. Here the problem is less US withdrawal and more an unpredictable and potentially unmanageable escalation. Under Trump, it is much more likely that the US and China will find it hard to escape the so-called Thucydides trap – the inevitability of war between a dominant but declining power and its rising challenger.  This then raises the question of whether US alliances in the region are safe in the long term or whether some of its partners, like Indonesia or India, will consider realigning themselves with China.  At best, all of this spells greater uncertainty and instability – not only after Trump’s inauguration but also in the months until then.  At worst, it will prove the undoing of Trump’s self-proclaimed infallibility. But by the time he and his team come to realise that geopolitics is a more complicated affair than real estate, they may have ushered in the very chaos that they have accused Biden and Harris of. 

Chinese leader Xi Jinping was unanimously “reelected” for another five-year term at the Two Sessions, and the Chinese government approved significant changes in the party-state structure to counter the US-led West’s dominance and promote economic and technological self-sufficiency. At the same time, China is engaging in diplomatic activism in the Middle East and elsewhere, forcing Israel to reconsider regional dynamics and prepare for a protracted state of “struggle” between the two superpowers.  In March 2023, Chinese leader Xi Jinping marked several highly successful events. Internally, he was “reelected” for a third term as President, and externally, he brokered a normalization agreement between Saudi Arabia and Iran – without any American involvement. These two developments coincided with the Two Sessions, China’s annual parliament meeting, where Xi passed far-reaching reforms aimed at increasing China’s economic and technological self-reliance in the face of Western adversaries. Judging by his remarks, it appears that under Xi China will continue its proactive foreign policy directed against the US-led global order. This in turn will test Israel’s ability to continue to maintain a balanced foreign policy vis-à-vis the two superpowers. Israel must now account for China’s growing influence in diplomatic and security theaters in the Middle East, as well as Beijing’s closer relations with Iran and Russia. To ensure its own security and economic interests, it must reconsider the regional dynamic while engaging in dialogue with the relevant actors. Finally, the escalation of tensions between the superpowers forces Jerusalem to prepare for extreme scenarios, most notably war in the Taiwan Strait. After a decade as president, Xi Jinping was unanimously reelected by the Chinese parliament for another five-year term. The vote – in which Xi was the sole candidate – was held as part of the annual Two Sessions, the Chinese legislature’s most important political gathering. The main event usually takes place over a seven-day period in March, when approximately 3,000 delegates from the National People’s Congress (NPC) – the legislative body – and some 2,000 delegates from the top political advisory body, the Chinese People’s Political Consultative Conference (CPPCC), convene in Beijing. In the course of the gathering, the Premier delivers a work report, while the delegates pass legislation, make amendments to the country’s constitution, and approve appointments in various state bodies. This year’s events were especially significant because they occurred immediately following the 20th Congress of the Chinese Communist Party (CCP), held in October 2022. At that gathering, which takes place every five years, Xi was also appointed to a third term as general secretary of the CCP and Chairman of the Central Military Commission. Since the 1980s, every five years, the CCP has introduced widespread reforms in the structure of the party-state. Previous reforms included changes to the balance of power between the Party and the state in ways that conformed to the incoming leadership's priorities and vision, as well as domestic and foreign developments. This year, the NPC approved significant changes in the party-state structure, continuing the trend in which the CCP under Xi has been "swallowing up" the government, with the lines between the two becoming increasingly blurred. These changes reflect Xi's belief that only a strong and centralized party can deal with domestic and foreign challenges, particularly the United States, China's main strategic rival. Indeed, during a heavily-publicized meeting at the start of the Two Sessions between Xi and representatives of the Chinese business sector, the Chinese leader stunned the audience by launching a direct attack against Washington, which he blamed for "the unprecedented severe challenges" that China is facing, and for trying to "contain, blockade, and suppress" China. What made his remarks particularly noteworthy was that despite rising tensions between the superpowers in recent years, Xi avoided explicitly naming and shaming the United States, instead allowing Chinese diplomats to spar with Western hawks. As a matter of fact, an examination of Xi’s writings reveals that even early in his political life, he saw the West, and the United States in particular, through a Cold War prism. However, it was the trade war waged by the Trump administration, which later escalated into a comprehensive technological and geopolitical war, that reinforced for him the need for economic and technological independence. The Biden administration went even further in its efforts to prevent China from gaining access to critical technology, and unlike its predecessor, has been successful in securing allies’ support. The Chinese countermeasures can be found in its most recent reforms, which included increasing the powers of the Ministry of Science and Technology (MoST) through the establishment of a new decision making body, the Central Science and Technology Commission, which is likely to be headed by Xi himself. Some of the ministry's specialized functions were transferred to relevant government ministries as part of the restructuring. The changes will allow the ministry to focus on macro-management of competition in innovation and to foster local development of basic research, core technologies, and a solution to the problem of the "bottleneck" imposed by the West, such as restrictions on China's import of microchips and airplane engines. In addition, a new institution, the National Data Bureau, will be tasked with managing digital resources, under the auspices of the Chinese government’s top macroeconomic management agency, the National Development and Reform Commission (NDRC). This year's reforms likewise highlighted China's financial sector, with the establishment of the new National Financial Regulatory Administration (NFRA) and expanded powers for the China Securities Regulatory Commission (CSRC). It was also decided to cut 5 percent of the central government and party workforce. Beyond the economic rivalry with the United States, the ramifications of the war in Ukraine, and COVID-19 restrictions, Beijing faces a host of internal challenges: a skyrocketing debt-to-GDP ratio (at the end of 2022, it stood at 273 percent), a declining population, a real estate bubble, natural resource pollution, a slowdown in imports and exports, high savings levels among households, and income inequality. If the rivalry with the United States intensifies – for example, if China were to invade Taiwan – Beijing would have to anticipate the imposition of additional sanctions, similar to those that Russia has been struggling with for the past year. Yet until such time as the situation vis-à-vis the United States reaches a critical stage, if at all, and against the backdrop of increasing concern in the international business community about the direction China is heading under Xi, Beijing is attempting to project to the world “business as usual.” At the conclusion of the Two Sessions, the incoming prime minister, Li Qiang, appeared to be smiling as he told foreign reporters that the United States and China must cooperate, because “there are no winners in a conflict.” He also promised that he would ensure a competitive, market-oriented, and fair environment that would protect the rights of Chinese and foreign businesses. However, here too the Party’s “invisible hand” was evident when he added that “the role of the new government is to execute and implement the important decisions and plans laid out by the CPC Central Committee.” The new appointments of other senior positions reflected the same ambivalence that Li expressed in his remarks. On the one hand, the Congress decided to extend the terms of 24 of the 26 ministers and national commissions, among them the head of the China’s central bank, Yi Gang, and Finance Minister Liu Kun, even though they had reached retirement age. One of the two new appointees, on the other hand, is Minister of National Defense Li Shangfu, who has been sanctioned by the US since 2018 for purchasing Russian weapons. Unlike his predecessors, who had battle experience, Li is an aerospace engineer in training. He was the former director of the People's Liberation Army's (PLA) space and cyber programs, as well as the deputy commander of the PLA's Strategic Support Force, which was in charge of China's space, cyber, and electronic warfare capabilities. Aside from the obvious defiance toward the US, his appointment demonstrates the importance that China places on modernizing China's military technology, given the ever-increasing restrictions imposed on technological imports to China. Self-sufficiency should not be confused with isolationism. The agreement brokered by Beijing between Saudi Arabia and Iran on March 10 – while  the Two Sessions were in session – was the clearest indication that China intends to maintain its active foreign policy. Granted, China pushed through an open door, given the conflicting parties’ inherent need for an agreement to focus on their economies, and only time will tell whether the agreement will hold; nonetheless, this was the first time that Beijing has led any kind of mediation effort, let alone successfully, and the United States was not even in the room. In doing so, China has demonstrated that it can use its dominant economic and commercial position to advance diplomatic and security objectives, ostensibly as an "alternative" to the United States. China’s global ambitions are not limited to the Middle East. The Belt and Road Initiative (BRI), as stated in the government's work report, will celebrate its tenth anniversary in October. What began as a central-southeast Asian initiative has evolved into a global network of "silk roads" emanating from China and extending into space, with hundreds of massive infrastructure projects worth over $1 trillion in 146 countries. The BRI has had to deal with a number of implementation and funding challenges over the years, so it has been scaled back. At the same time, Chinese officials emphasize that it will remain a focal point of Beijing's foreign policy, with the emphasis shifting to smaller but more strategic projects such as bolstering global supply chains and cooperating in the digital domain, as well as healthcare, public policy, renewable energy, and people-to-people and diplomatic ties. Xi has unveiled other ambitious projects in recent years, most notably the Global Development Initiative (GDI), which is tasked with promoting the United Nations' goals for sustainable development, and the Global Security Initiative (GSI). At the conclusion of the Two Sessions, Xi announced the Global Civilization Initiative (GCI), the details of which remain unknown. As with the BRI, any success story that can be classified as development or security will be attributed to them, even if it occurred years before these initiatives. This is what happened with the Saudi-Iranian agreement or the Chinese peace initiative to end the Ukrainian war, both of which Beijing hailed as shining examples of the GSI in action. In practice, these initiatives reflect Beijing's desire to reshape the global order to reflect its interests and values, while undermining the United States-led West's dominance in its spheres of influence. For example, Xi described the GCI as "a new form of human civilization" that "shatters the myth that modernization is equal to Westernization. The bottom line is that the Two Sessions and the extension of Xi’s term of office indicate that China will continue to push itself to the forefront of the international stage. The next five years will be defined by a stronger push for self-sufficiency, financial stability, and technological advancement. At the same time, China will not close itself off to the rest of the world. On the contrary, China will not back down from "a struggle" against what Xi refers to as the West's and the United States' "attempts to blackmail, contain, and blockade" it. This spirit was evident during the first press conference given by China's new foreign minister, Qin Gang, who warned that "if the United States does not hit the brakes, but continues to speed down the wrong path...there will surely be conflict and confrontation." While Western doors are closing in on China, Beijing will continue to see Israel as a backdoor for securing core technologies that will help it achieve self-reliance, rendering Israel obsolete in the long run. This is evident in the recent influx of Chinese commercial delegations to Israel, following Beijing's lifting of travel restrictions. Simultaneously, the US-Israel Strategic High-Level Dialogue on Technology, launched during President Joe Biden's July visit to Jerusalem, will examine Israeli-Chinese cooperation, particularly in the less regulated hi-tech sector and academia. The agreement reached between Saudi Arabia and Iran, as well as Xi's recent visit to Russia, during which the parties agreed to "increase contacts over security issues in the Persian Gulf," indicates that China's diplomatic activism in the Middle East will only grow. The evolving situation in which China and the US both play key roles in regional geopolitics – against the backdrop of increased competition between the two countries and the war in Ukraine – forces Israel to reconsider regional dynamics. In order to prevent Iran from acquiring military nuclear power in peaceful means, Jerusalem must deepen its dialogue with Washington, Beijing, Moscow, and its Arab partners in the Negev Forum on regional security and economic interests. Finally, if a conflict between China and the United States is truly "inevitable," Israel must prepare for the worst-case scenario, in which two superpowers go to war in the Taiwan Strait, and consider the implications for its relations with Beijing.

With relations at an all-time low, punitive actions targeting China have become politically popular, even if they have no analytical basis. Five years ago, then president Donald Trump launched a tariff-fueled trade war with China designed to reduce the bilateral trade deficit. His successor, President Joe Biden, then added a decoupling focus by restricting high-tech exports and curtailing professional and financial links. Both wanted to reduce imports of manufactured goods and bring home more jobs. How should one judge the effectiveness of their policies? Back then, and even more so today, the logic of Trump’s fixation on trade deficits made little sense. But security concerns have now become the rationale for reducing America’s trade relations with China and undercutting China’s growth potential. Against these yardsticks, the results are mixed but on balance unconvincing, given the costs in the form of inflationary pressures, repressed export growth, and a projected decline in global output. But U.S. politicians from both parties strongly support these restrictive measures because the costs are not obvious to their constituents, while the benefits from appearing to be tough on China resonate well with voters. Rising trade deficits The recent U.S. Census Bureau data indicate that the politically sensitive U.S. merchandise trade deficit with China was larger in 2022 than when Trump became president, while America’s overall trade deficit hit an all-time high of $1.18 trillion. This reinforces the views of nearly all the economists surveyed at the launching of Trump’s trade war: that the tariffs would not reduce U.S. trade deficits and the costs would be paid largely by Americans. For the Trump administration, the wild card was the “phase one” purchase agreement, which called for an increase of $200 billion in China’s imports from the United States. But state-to-state purchase agreements have no logical basis when global trade is largely shaped by the market-driven decisions of firms and consumers and subject to unpredictable events such as the coronavirus pandemic. Economic principles tell us that how much a country saves and spends determines its trade balance. The combination of Trump’s large tax cuts and Biden’s huge expenditure initiatives has led to soaring budget deficits, which are mirrored in record trade deficits. All this has little to do with China. Yet the Biden administration still insists that China honor the purchase agreement and links the removal of tariffs to its fulfillment. Asking China to honor an agreement that made no sense to begin with as a condition for dropping another equally ineffective policy defies logic. Trade diversification but increasing import dependence on other countries But this focus on bilateral trade numbers overlooks the sharp decline in China’s share of trade with the United States. Whereas China accounted for 47 percent of the U.S. trade deficit in 2017, it accounted for only 32 percent last year, with most of this decline offset by the increasing shares of other East Asian economies. Europe’s share of America’s overall trade deficit also declined from 21 percent to 18 percent. Only Canada and Mexico, via the United States-Mexico-Canada Agreement (USMCA), were able to increase their share from 11 to 18 percent. More insights can be gleaned from looking at the components of trade. Although the value of U.S. imports from China was essentially the same in 2022 as it was in 2017, total U.S. imports increased by about $900 billion during this period. As a result, China’s share of the total, made up largely of manufactured goods, fell from 22 to 17 percent. This decline, however, did not reduce America’s dependency on imports of manufactured goods. The share of imports relative to overall expenditures on manufactured goods rose steadily to 34 percent in 2022 from 23 percent two decades ago. The decline in China’s share of U.S. imports of manufactured goods was more than offset by imports from other countries, notably Mexico and Vietnam. These two developing countries, more than others, were able to import heavily from the United States based on their locational advantages and free trade agreements. Vietnam and China share a border and are linked by the ASEAN-China trade agreement, while Mexico and the United States also share a border and are linked by the USMCA trade agreement. Less noticed, however, is the behind-the-scenes role that China plays in supplying the components and materials for these other countries’ exports to the United States. Most of Vietnam’s increased exports were in product lines where U.S. imports from China fell, such as computer accessories and telecommunication equipment. China’s exports to Vietnam have more than doubled since 2017, and its trade surplus nearly tripled by 2022. China’s exports to Mexico increased by nearly 30 percent last year, on top of a 50 percent increase in 2021. China may be exporting less to the United States directly, but it is now indirectly exporting more. This explains why China’s share of global manufacturing production has continued to increase from 26 percent in 2017 to 31 percent in 2021. As for U.S. exports, the total averaged about $1.5 trillion from 2017 to 2020 but then jumped to $1.9 trillion in 2022. But this increase was not in manufactured goods but in exports of energy products and chemicals to Europe, spurred by the Ukraine crisis. The trade war did little to expand U.S. exports to China, the share of which fell from 8.4 percent in 2017 to 7.5 percent in 2022. Costs and benefits of decoupling According to one study, U.S. firms were handicapped by tariff-related higher costs of their imported inputs, and coupled with China’s retaliatory tariffs, this resulted in U.S. exports to China being 23 percent lower than they would have been in the absence of the trade war. The consequence is that America’s trade war policies generated very little growth in exports of manufactured products, despite the priority given to those policies by both the Trump and Biden administrations. If the purpose of the U.S. punitive actions toward China was to weaken China economically, there is no clear evidence of that happening. By developing alternative export markets and tapping pandemic-driven demand in the West for manufactured goods, China pushed its share of global exports to record levels in recent years. Meanwhile, China’s imports as a share of its GDP have been declining steadily, from a high of 28 percent in the early 2000s to 17 percent in 2022. One could argue that the world has become more dependent on China in trade while China has become less dependent on the world. The benefits of decoupling—if any—should be weighed against the costs imposed on U.S. consumers and producers and damage done to the export competitiveness of U.S. firms. To counter such tendencies, the Biden administration is promoting domestic manufacturing with subsidies in the Inflation Reduction Act. Such actions can be justified for strategic reasons, but the rationale is weakened by protectionist Buy America conditions. U.S. policymakers often counter by pointing to China’s use of subsidies to promote strategic industries, but Chinese firms were keen to import key technologies and components to ensure that their products were globally competitive on cost and performance grounds. The recent semiconductor and other U.S. restrictions on China’s access to high-tech products are also problematic because these products are “dual use,” with a much larger commercial market relative to military applications. Such restrictions hurt the many U.S. firms that derive significant revenues from selling to China and may contravene World Trade Organization guidelines. The costs of trade-related distortionary policies can be substantial. One oft-cited study estimates that taxpayers end up paying about $250,000 for each job saved in typical Buy America programs. At a broader level, a recent International Monetary Fund study estimates that a combination of U.S. trade and technological decoupling measures could reduce global GDP by some 7 to 12 percent. Ultimately, the problem lies in the lack of clarity on U.S. policy objectives. What does it mean to undercut China, and how will the United States know if it has succeeded? With U.S.-China relations at an all-time low, punitive actions targeting China have become politically popular, even if they have no analytical basis. The reality is that the United States and China have no choice but to continue trading with each other. But with security overriding commercial considerations, the economic interdependence built up over decades is now being reversed, leaving everyone worse off.

​Although the dollar continues to be the dominant global currency, Russia and China could dent this dominance. In the aftermath of global financial exclusion, Russia has had to make some strategic adaptations. The West’s sanctions had crippling consequences, and the Kremlin scrambled to find alternatives. In light of these developments, China became an important ally, and the Yuan—its currency—has taken on a more prominent role. It is telling that in Russia, the yuan has surpassed the United States Dollar (USD) in trading volume, a feat achieved a year after the Ukraine conflict, which triggered a series of sanctions against Moscow. As Russia and China band together, one wonders what other shifts will take place and how they will shape the future. Change is afoot, and the Russian market bears witness. The month of February saw a watershed moment as the yuan surged past the dollar in monthly trading volume for the first time. The momentum continued into March as the gap between the two currencies widened, showcasing the growing sway of the yuan. It’s an impressive feat, considering that the yuan’s trading volume on the Russian market was once quite insignificant. The winds of change blew through Russia’s financial system as the year progressed. Additional sanctions had taken their toll on the few remaining banks that still held power to make cross-border transactions in the currencies of countries that had been deemed “unfriendly” by the Kremlin. One such bank was Raiffeisen Bank International AG, whose Russian branch played a significant role in facilitating international payments within the country. However, the lender found itself under the watchful eye of both European and US authorities, which only added to the pressure. These events spurred the Kremlin and Russian companies to shift their foreign-trade transactions to currencies of countries that had not imposed sanctions.Converging coalitionsThe bond between Russia and China is growing stronger, with both nations seeking to bolster their positions on the global stage. Their alliance has spread across various spheres: military, economic, and political. With relations between Russia and the West crumbling, China has emerged as a key partner for Russia, providing it with the necessary support to counter economic and political pressure. On the other hand, China is keen on expanding its global reach, especially in the Eurasian region, and sees Russia as an important ally in this regard. President Xi Jinping’s recent visit to Moscow and his pledge to expand cooperation are likely to take this partnership to greater heights. Trade and investment ties are set to grow stronger, with both nations seeking to reduce their dependence on Western economies. Russia’s focus on infrastructure development and mega projects is also likely to benefit from China’s expertise in these areas. Energy is another significant area of collaboration, with Russia being a leading exporter of oil and gas and China being the world’s largest importer of these resources. Technology is also an essential domain, with both countries investing heavily in research and development to remain competitive in the global economy. While the alliance between Russia and China will likely have far-reaching geopolitical consequences, it is a complicated relationship with both nations pursuing their interests, even as they work towards common goals. As a result of Western sanctions, Russia has shifted its foreign trade transactions away from the dollar and euro to currencies of non-restricted countries. By doing so, the Kremlin and Russian companies hope to decrease their dependence on the Western financial system and explore new avenues for conducting their trade and economic activities. This shift in strategy reflects Russia’s determination to maintain its economic stability despite restrictions on its access to the global financial system. It also underlines the growing importance of alternative currencies in global trade as countries strive to minimise the impact of sanctions and safeguard their economic interests.Structural overhaulsThe Russian Finance Ministry was not immune to the winds of change either. Earlier this year, it made the switch from the dollar to the yuan for its market operations. It even went a step further by devising a new structure for the national wealth fund, earmarking 60 percent of its assets for the yuan. The Bank of Russia joined the chorus, urging its people and businesses to consider moving their assets to the rouble or other currencies considered “friendly.” This would help mitigate the risk of having their funds blocked or frozen. As the world undergoes a seismic geopolitical shift, it seems Russia is moving in tandem, searching for ways to secure its economic future. However, the dollar still reigns supreme in the Russian market. Even with all the changes taking place, it remains the most widely used currency, ceding its throne only occasionally to the yuan. This underscores the enduring dominance of the dollar, which has played a significant role in Russia’s financial landscape for years. However, as the world continues to evolve, one wonders how long it can hold on to its crown.