Relations between the US and China were poor even before the visit of the House of Representatives speaker to Taiwan. Now they have the potential to turn very nasty indeed – with significant consequences for the global economy.
At the moment, things look containable. Financial markets have responded relatively calmly to Nancy Pelosi’s visit and the military exercises that Beijing has ordered in response. The assumption is that China will put on a show of strength and leave it at that.
However, its president, Xi Jinping, also has economic and financial weapons at his disposal and may choose to use them. At the milder end of the spectrum, China could make it more difficult for US companies to access its market. It will be in no hurry, for example, to allow Boeing to resume sales of its 737 Max planes.
This would accelerate the decoupling of the world’s two biggest economies – a trend that began when Donald Trump was in the White…
