Though the United States and China signed a “phase one” trade agreement in January 2020 as a first step towards controlling a trade war that began in July 2018, the crux of the goings-on in US-China relations is less about the trade war and more about the two countries becoming strategic competitors. While China, under President Xi Jinping, will seek to challenge American dominance, Washington will resist and not cede place to Beijing.

The competition does not indicate the start of a new Cold War or a full reversal of globalisation. It is more an attempt at decoupling the economies of the United States and China. Both countries are seeking to reduce interdependence that is likely to result in a bifurcation of globalisation. This will not occur overnight. It is a process that will take many years to unfold. There will be twists and turns but the direction of that journey has been set.

The fundamental reasons behind this transformation are the US assumptions that China will not move towards democratisation and its economic success-driven foreign policy will encourage authoritarianism around the world. On the other hand, the United States believes it is committed to democracy. There is a bipartisan agreement in the United States that it must take a robust stance vis-à-vis China as the latter emerges as a serious strategic competitor that could surpass the United States in specific technologies.

On its part, China, under Xi, started to prepare for such an eventuality several years before US President Donald Trump began the formal process of decoupling. Xi departed from his predecessors in jettisoning former president Deng Xiaoping's policy of ‘hide and bide’. He also adopted a policy to reduce Chinese dependence on, and make China competitive with, the United States shortly after he assumed power in 2012.

Even though Trump formally started the process of decoupling before China was ready, Beijing will persevere. It is politically impossible for Xi, now the strongman of China, to appear weak under US pressure. His political future requires tough posturing by Beijing.

As the decoupling process intensifies, the US-China differences are likely to widen, gradually forcing other countries, including those in the Gulf, to increasingly choose sides. While there may be short-term opportunities in this process for third countries, the overall long-term effects could be negative for the world at large. The interest of third countries that are not directly involved in the contest of values (e.g. democracy versus authoritarianism) lies in remaining neutral.