The headlines about U.S.-China trade relations seemed encouraging early this week. Both sides expressed optimism on the Phase 1 trade deal as they held the first direct call between trade officials since the deal was signed early this year.
But despite this progress, U.S.-China relations remain under stress. Two days after the call, the Chinese military fired two missiles into the South China Sea. The move came after China said a U.S. U-2 spy plane entered a no-fly zone without permission during a Chinese live-fire naval drill in the Bohai Sea off its northern coast. The U.S. confirmed a U-2 flight in the region, but said it did not violate international rules.
The sources of friction between both countries are deeply engrained, and the conflict has moved past tough rhetoric. Observers in both the U.S. and China now talk of the potential decoupling of the two countries’ economies, going well beyond the rejigging of supply chains. Recent actions point to attempts to sever more commercial ties between the two countries, particularly in the tech industry.
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