Global markets have been impacted by the troubles between US and China over the past few years, and competition between these two powers creates risk and opportunity, as per T. Rowe Price. The investment management firm lists three themes to look out for when taking stock of US-China relations.

T. Rowe Price says that the US is focused on national security while wanting to get an edge in innovation. This is evident from many of the major trade and economic policies that the US has pursued over the past few years.

The investment management firm takes examples of the Trump administration’s move against the China-based telecom firms and more recently the CHIPS and Science Act. T. Rowe Price believes the trend may continue, as the US is considering expanding the list of technologies under export control, along with tightening outbound investments.

Secondly, the US may need to initiate its own foreign policies. “The Biden administration has made a point of engaging more closely with traditional U.S. allies in pursuing its foreign policy objectives,” as per Michael Pinkerton, Washington Associate Analyst, US Equity Division, T. Rowe Price.

The asset manager talks about the recent moves by Netherlands and Japan to introduce their own export controls on chipmaking equipment. The US effort to limit China’s access to advanced semiconductors is one thing, but US allies may not be aligned with every new restriction on China. This may lead to further geopolitical tensions.

Lastly, America’s measures towards China may lead to a response from Beijing. China’s response to the export controls has been limited compared to the tit-for-tat measures during the Trump administration. China recently hit back after it said it would investigate products sold by Micron Technology.

“The gradual decoupling of U.S. and Chinese technology appears likely to continue. Investors should be clear eyed in understanding that a deterioration in relations between the two nations could increase the risk of further sanctions,” concludes Pinkerton. “Still, these disruptive trends could create risks and opportunities for investors as the U.S. and China seek to shore up strategically important industries.”

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