U.S.-China relations are headed for the ‘darkest chapter yet,’ says Eurasia Group

CNBC reports that relations between the U.S. and China — the world’s top two economies — could worsen further as both countries have signaled that they are prepared to fight each other in many more ways, according to a political risk expert.

“There’s a lot of room for escalation here. I think that it’s, by now, quite clear that we’re in for the darkest chapter yet of U.S.-China relations,” Todd Mariano, director for U.S. at Eurasia Group, told CNBC on Thursday.

“We’re seeing moves now more on the technology and export front. I think the troubling sign is simply the multiplicity of fronts at which the two countries are fighting or preparing to fight,” he said.

In the past few years, disputes between the two countries were focused on areas such as their trade imbalance and contest in technology — which triggered a tariff war threatening to derail the global economy.

In recent months, the U.S. and China have hit out at each other over a wider range of issues which include the origin of the coronavirus and the autonomy of Hong Kong.

Hong Kong, a major business and financial center in Asia, is a self-governed Chinese territory that has a special trading relationship with the U.S. But Washington has started to pare back some of the city’s privileges under U.S. law as Beijing tightens its control over the territory by enacting a national security law.

In addition, China’s expanding Belt and Road Initiative and continued assertions in the South China Sea also feed into its tensions with the U.S., according to Mariano.

The Belt and Road Initiative is a massive infrastructure push that many analysts and critics see as China’s way of spreading its global influence through lending. The South China Sea is an important sea route for world trade where Beijing has claimed most of it as its own territory, even though other countries also lay claim to parts of it.    

“Having such a widespread conflict, I think, really undermines the ability of policymakers to sort of cordon off and resolve tensions on these issues,” said Mariano.