The Future of US-China Relations and Implications for Global Business

With an impending US election, the stakes are high not only for these two nations but also for countries like the UK, which has a business sector and foreign policy that usually closely align with American interests. At a recent Institute of Directors webinar, experts unpacked how the contrasting foreign policies of the two US presidential candidates—Trump and Harris—might reshape the geopolitical and economic landscape.

Bipartisan Consensus on China as a Strategic Challenge

Despite the polarized US political climate, there is bipartisan agreement on one issue: China poses a strategic challenge to American interests. This consensus is rooted in concerns over national security, economic dependencies, and the overarching influence China wields globally. Experts believe that both Vice President Kamala Harris and former President Donald Trump will continue a “tough on China” stance, albeit through differing approaches. Trump leans toward aggressive tariffs and “America First” rhetoric, while Harris is likely to favor building multilateral alliances alongside a cautious strategy based on rebuilding or maintaining supremacy in key sectors deemed critical to economic security and the global balance of power.

This bipartisan viewpoint underscores a new reality: for the UK, close ties with the US is likely to mean more pressure to limit its own relationship with China, particularly in certain sectors of concern or regarding direct Chinese investment into the UK. Already, the US has urged its allies to eliminate Chinese telecommunications technology from their systems, as seen with the Huawei debacle. For UK-based industries, especially those with deep supply chain connections in China, navigating this dynamic will require strategic planning and clear-eyed analysis of the chances that new negative catalysts further impact those supply chains.

Trump’s Approach: Economic Realignment Through Tariffs

If former President Trump returns to the White House, he has promised to apply extraordinarily high tariffs on China and lesser tariffs on all other countries exporting to the US. His aim is to reshape America’s industrial landscape by drawing manufacturing back within US borders and to get the best possible “deal” for the US out of each bilateral relationship. The tariff policy centers on creating domestic blue-collar jobs and reversing decades of what he views as harmful de-industrialization and over dependence on other countries, notably China. However, the reliance on tariffs as a tool is extremely controversial, with critics questioning their effectiveness in addressing the deeper issues within the US economy and risking a return to high inflation. Additionally, Trump’s tariffs could have ripple effects that strain international relationships, including a negative economic impact on US allies as well as even larger problems for countries which maintain close economic ties with China, such as Germany.

For UK companies, Trump’s tariff-heavy policy offers both risks and opportunities. On one hand, UK exports could become more costly in the US market; on the other hand, the UK can leverage its post-Brexit independence to negotiate more favorable trade terms than other countries, particularly if it brings in non-trade issues such as defense and security into the discussion. However, British industries—especially those tied to high-value sectors like biotech and pharmaceuticals—must brace for not only tariffs, but also other regulatory shifts such as the Biosecure Act, which as we will see below, could begin impacting international markets as soon as 2025.

Harris’ Strategy: Multilateral Alliances and Environmental Concerns

A Harris administration would diverge from Trump’s unilateral approach on trade, favouring collaboration with allies and adherence to established trade rules. While Harris will have to ensure that Republicans cannot outflank her administration on security policy related to China, her administration is also likely to pursue a more measured agenda focused on green industrial policies. Harris could seek to strengthen green technology partnerships with other countries ex-China, positioning the US as a global leader in the transition toward clean energy. Such a policy could look like a US-led Marshall Plan for the global south, using US financing and production to tilt the balance of power away from China and back towards the US. Another less dramatic (and costly) policy could be to create a US version of a Carbon Border Adjustment Mechanism (CBAM) and look to harmonize this with the EU as much as possible so that the US and EU create a strategy to both protect domestic industries as well as further the green transition.

For the UK, this shift in focus could open new avenues for collaboration on climate policy and green technology. The country’s own net-zero commitments align well with Harris’s anticipated focus on sustainable initiatives. However, the UK would need to navigate its own trade policies carefully, particularly if Harris decides to use trade as a tool to promote her administration’s environmental goals and America’s concerns about China’s dominance and over-capacity in green technologies such as solar power, batteries, and electric vehicles.

Supply Chain Security and the China-Free Strategy

Regardless of the election outcome, the trend toward “China-free” supply chains is accelerating and companies in certain countries are even using it as a marketing tool. The recent bipartisan push in the US to decouple certain products and sectors from China is in large part based on a desire to protect American industries from potential supply chain disruptions linked to future geopolitical tensions. In other areas, such as semiconductors, there is more of a blatant security angle and the US is attempting to hobble Chinese ambitions to create a globally dominant tech sector. No matter who wins the election, the US federal government will direct the billions of dollars of funds available to US (or at least non-Chinese) firms into domestic capacity building and production, even as China floods the rest of the world with high quality and low-price products.

One sector that the UK has a particular exposure to is life sciences and pharmaceuticals. In this area the US Congress is currently considering legislation (the Biosecure Act), which, if passed, will force UK and any other global company that wants to sell its products to the US government, to divest of partnerships with certain named Chinese contract research and manufacturing companies. Many of these companies are world-class and there is a dearth of competitors able to accommodate an influx of firms looking to “future-proof” their partnerships and supply chains, creating considerable risk for any transition. For companies looking to make such difficult choices, there will need to be careful analysis of not only the economic cost of any changes, but the likelihood of future political risks in any destination country, both from the manufacturer’s home country, as well as the US.

The UK’s Role in the Shifting Geopolitical Landscape

For the UK, it remains an open question whether the Labour government can balance its ties between the US and China, or if security concerns force Prime Minister Keir Starmer to pick sides. Recent developments, including the Prime Minister, Foreign Secretary and Chancellor’s outreach to China, signal a re-engagement in diplomatic relations at the highest levels. However, maintaining this UK-focused stance may prove difficult if US-China relations grow increasingly fraught. Under a Trump administration, the UK could find itself under pressure to sever or reduce economic and trade ties with China, while a Harris-led US will use softer tactics to achieve a similar goal on a smaller range of sectors and include a wider swath of allies.

In terms of trade, a comprehensive US-UK trade agreement seems unlikely under either candidate, given the constraints posed by American agriculture and labor standards. Still, partial agreements, particularly around services, could offer a pathway for mutually beneficial cooperation. For the UK government, this presents a chance to align selectively with US interests while safeguarding its economic independence.

What’s Next?

As the world watches the US election unfold over the next few weeks, UK businesses and policymakers should prepare for a range of scenarios. Whether Trump’s tariffs or Harris’s consensus-driven multilateralism prevails, the focus on China as a strategic concern is unlikely to waver. For non-US businesses, understanding these dynamics will be essential to mitigating risks and capitalizing on new opportunities within a rapidly changing global environment.

In the coming years, the UK will need to adopt a flexible approach, balancing its special relationship with the US while maintaining its economic links with China, when those particularly benefit Great Britain. The decisions made in the next few years will have long-term consequences for industries, supply chains, and the overall health of the UK economy in an increasingly fragmented and polarized world.

As Brandon Barford aptly summarized during the session:

Authors:

• Brandon Barford – Senior Advisor, GMTL ADVISORY LIMITED
• Steven Lynch – Chair, IoD Japan Group