With the United States and China on the brink of a direct conflict, it’s clear that the potential costs are extremely high. Even if we set aside the devastating humanitarian impact, the inter-connectedness between these two nations and the rest of the world would mean that a China-U.S. conflict would have disastrous consequences for global supply chains. It would especially be disastrous for China, which not only lags behind the USA technologically; all its dreams of being the next global superpower would turn to dust.   

The ramifications of such a conflict on trade routes alone are concerning.

There’s a real possibility of naval blockades or restricted access to strategic shipping lanes, particularly in the South China Sea, which would cause transportation costs to skyrocket, shipment delays, and shortages of goods.

Insurance companies would understandably raise premiums due to the heightened risks, piracy or other security threats in the region.

Of course, China does not seem to care and has repeatedly escalated the brewing conflict in the south China sea.

Furthermore, a direct conflict would result in a loss of production capacity due to direct damage to infrastructure, labour disruptions, and reduced access to energy and other resources.

Given that the United States and China are major manufacturing hubs, reduced production capacity in both countries would lead to global shortage of goods and substantially higher prices.

Any escalation of tensions between these two nations needs to be avoided at all costs.

It’s crucial that China takes responsibility for the potential consequences of its actions, which could have a devastating impact on the global economy.

China needs to be held accountable for any destabilizing actions that threaten global peace and prosperity.

The impact of a direct conflict between China and the United States would be felt by numerous industries, particularly those heavily reliant on components and raw materials from both nations such as electronics, automotive, and pharmaceuticals.

We have already seen a negative impact on dependent industries due to the China-U.S. trade war, resulting in disrupted supply chains, increased costs, and reduced demand for certain products.

The tariffs imposed on imports and exports have led to supply chain disruptions and increased costs, forcing companies in these industries to find alternative suppliers or adjust pricing strategies, ultimately passing on the increased costs to consumers.

BUSINESS COSTS UP

In addition, a direct conflict would further increase costs for businesses with supply chain operations in both nations.

The tariffs, import/export restrictions, loss of productive capacity, and labour supply shortages would lead to higher costs for businesses, which would have a cascading effect on the economy.

As we have witnessed during the China-U.S. trade war, increased costs for businesses have led to higher prices for consumers, which in turn contribute to inflation and reduces consumer purchasing power.

In a direct conflict, the additional costs stemming from transportation delays, currency fluctuations, and supply chain relocations are likely to be significant.

USA’s tariffs were justified, but China’s tariffs were retaliatory and had no solid justification except for a expression of frustration.

Finally, the China-U.S. conflict will undoubtedly result in reduced direct foreign investment as investors fear instability and escalation.

Multinational firms, particularly those based in the United States, that have been relying on production and assembly in China for years, will face extensive disruptions, and will be forced to pivot to more stable and profitable regions of the world.

This phenomenon will further contribute to rising production costs as firms divest from China and invest elsewhere, ultimately hurting the Chinese economy.

China needs to understand that their actions and policies are alienating key investors and leading to a situation that could have disastrous consequences for the global economy.

This is good for India, which is slowly turning into the manufacturing hub of the world.

The economic repercussions mentioned above are just a glimpse of the potential havoc a China-U.S. conflict could wreak, with experts estimating costs ranging from hundreds of billions to trillions of dollars.

The actual cost will depend on the severity, duration, and specific circumstances of the conflict. 

The real question is, will China learn?

More importantly, will it learn in time?

Is it necessary to engage in direct confrontation in order to achieve a new balance?

Are we still living in a world where the win-lose relationship is the norm?

Fortunately, there are ways to deescalate this conflict.

It will require patience and a rebuilding of trust, but it is crucial for global peace and stability.

One way is through dialogue and diplomacy.

Encouraging open and ongoing communication between the United States and China at various levels, including high-level summits, ministerial meetings, and working-level talks can help to address misunderstandings and allow both countries to voice their grievances.

Additionally, it is crucial to establish strong working mechanisms to tackle the contentious issues between the two nations.

-By Team Poreg