The COVID-19 pandemic has exacerbated fragmentation of the postwar world order. Its most poignant manifestation is in an intensifying competition between the United States and China for political and strategic influence. In essence, the post-Cold War globalized economic order has gradually morphed into a “one world, two systems” configuration, edging toward a new Cold War. The focus of this confrontation is the battle for market dominance in high technology and industries of the future – seen as necessary to protect economic and national security.

Attempts to sever economic relationships (“decoupling”) in a highly interconnected global economy will prove difficult and costly to all due to transition costs and efficiency losses. Moreover, the dividing line between the two spheres—one led by the United States and the other by China—is not clearly defined. Major countries and regions such as Europe, Asia, and Africa have aligned themselves with one or the other contestant with varying degrees of convergence depending on the issues, sometimes driven by economic opportunism. Consequently their alliance with either rival cannot be taken for granted, making for an unstable dynamic as the strategic competition continues and one world splits into two systems.

Image: An Apple logo is seen next to logos of Huawei at a smartphone store in Beijing, China August 11, 2020. Picture taken August 11, 2020. REUTERS/Tingshu Wang