New figures show that on trade, economic growth and inflation, China’s comprehensively come out on top and US sanctions have failed miserably.
The news that US inflation has reached its highest level for 40 years, at 7.5% in January, is the most explicit indicator of serious problems in its economy. The monetary tightening that will be used to attempt to bring this under control will both slow the US economy and inevitably spill over into major effects on the world economy.
This very high inflation is particularly significant when compared to 1.5% inflation in China, its main economic competitor, in the same month. US inflation is five times higher than China’s. These relative inflation levels have extremely restrictive effects on American economic policy – it will be forced to implement measures to slow its economy. In contrast, China, whose economy is already growing faster than the US, has room for a further economic stimulus without damaging inflationary pressures.
But this is only one of the symptoms that the US has suffered in a severe economic defeat in its competition with China. This, in turn, has major political consequences both in the US and internationally.
Analyzing first the domestic US political situation, unsurprisingly this high inflation has led to falling living standards for the overwhelming majority of the population, and has drastically undermined support for Biden’s administration. The latest average opinion polls show 54% of Americans disapprove of the Biden government, compared to only 40% approving.
The economic situation is the main driving force behind Biden’s fall in support. Polls show 68% of Americans consider the economy the most important problem confronting them, almost twice as many as those who cited Covid (37%).