But the deal is limited and much of Washington now seems united and entrenched in its approach to China: strategic competition and decoupling. Tariffs are not where the main game is in international commerce now, although they are the most visible and crude form of protectionism. There are serious efforts underway to decouple the US and Chinese economies in technology, investment, finance as well as trade.

In the first of our three lead essays this week, Stephen Roach labels the decoupling a ‘strategic miscalculation’ driven by a ‘China deceit narrative, convinced that China has broken a solemn pledge made at the time of its WTO accession’. There was never any such agreement and, as Roach warns, the ‘narrative is at best patently naive or at worst an outright fabrication’ which ‘risks a policy blunder of epic proportions’.

China has not been standing idle. Beijing has retaliated with tariffs and escalated the trade war. Beijing has apparently ordered an outright ban on foreign computers and software from its government offices. That may speed up self sufficiency but will reduce productivity and slow innovation.

It seems that left to their own devices, the United States and China will head down the path of decoupling their economies — as costly as that may be for both — and may even enter a new cold war. In our second lead essay, Gary Hufbauer says, US Vice President Mike Pence has already announced a Second Cold War with ‘trade, investment and technology’ the weapons deployed thus far.

The United States and China are the world’s two largest trading nations and economies. Theirs is the largest economic relationship in the world based on mutually beneficial exchange and engagement by both governments, private sectors and societies. And it’s not just a bilateral relationship as both economies are the main hubs in global value chains that integrate the global economy. They are leaders in technology and are major sources of growth and innovation for the global economy. Forcing that relationship apart will make the world poorer, less stable and could easily lead to much worse.

Economic ties don’t just bring development and prosperity, they can reduce political and security risk. International markets and the rules that govern them constrain bad behaviour and give actors and countries a stake in the stability and success of other countries. A more self-sufficient China, Roach explains, ‘spells nothing short of a loss of control over a key aspect of [the US] relationship with China’.

The rest of the world may seem like innocent bystanders watching the heavyweights slog it out, but they are not. How far down the path of decoupling (or worse) the United States and China go will depend on how the rest of the world responds. The rest of us, just over 60 per cent of the global economy, have a huge interest and stake in seeing Washington and Beijing manage their large scale interdependence and return to engagement.

As Hufbauer notes, ‘China is already a much bigger economic partner for Asia than the United States’, and ‘unless China’s ambitions take overt military shape or China’s response to Hong Kong or the Uyghurs becomes visibly bloody, few Asian countries are going to join Washington’s decoupling crusade’.

In our third feature essay, Sourabh Gupta argues that ‘bilateral economic ties and global technology ecosystems are too enmeshed to be disentangled into neat geopolitical coalitions’. But that won’t stop Washington or Beijing from trying to force countries to choose their side. Already Mexico and Canada have had to swallow a poison pill in their USMCA trade agreement that effectively stops them negotiating an economic agreement with China.

Large countries have a tendency to prefer to deal with others bilaterally where they have the most leverage. The United States has opted for bilateral deals instead of regional, plurilateral or multilateral approaches under President Donald Trump. China’s Belt and Road Initiative of infrastructure investments is a set of bilateral arrangements resulting in a hub and spokes system.

To have the best chance at constraining US–China decoupling, and to increase the policy options and policy space, the rest of the world needs to double down on multilateralism. Protecting, strengthening and furthering multilateralism is not easy with the guarantor of that system over the past 70 years now actively trying to tear it down.

This past week saw the enforcement mechanism of global trade rules — the WTO’s Appellate Body — taken off life support with the United States vetoing the appointment of new judges. The rest of the world needs to act quickly to save or recreate the WTO dispute settlement mechanism through second best approaches like the GATT Article 25 option, which the European Union has opened up.

It’s time for the rest of the world — through the G20 group, APEC, the EU, ASEAN and East Asia and any coalition that can be mobilised — to stand up for their interests in the global economic order. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (or TPP-11 that was concluded after the United States opted out) and East Asia’s Regional Comprehensive Economic Partnership (RCEP) agreements are a start.

It’s a time for acting strategically to protect multilateral institutions and global public goods. Much of the angst around China’s rise comes from the uncertainty it causes and stress to the system in the areas where weak or no international rules exist — intellectual property, data flows, the digital economy and cybersecurity. As Gupta concludes, ‘perhaps a pathfinder group of liberal-minded developed and developing middle powers is ideally placed to devise the extensible architecture of rules that could hasten the recoupling of destinies across the Pacific’.

There aren’t too many other options to avert major damage to global economic and political security.

This week we launch our annual Year in Review series that will run through the new year. It’s an opportunity to review the politics and economics of the countries and subregions of East Asia, the Asia Pacific and South Asia, and look at what to expect in the year ahead.

The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.