It is worth considering the strengths of the Cold War analogy.  First, the US and China are currently the only serious claimants to “superpower” status – much as the US and the Soviet Union once were.  They are both comfortably the world’s top two economies, underpinned by thriving technological sectors.  Together, the US and China account for around half of total defence spending.  The US armed forces have no peer globally, but the military balance in East Asia is shifting, courtesy of Beijing’s substantial and sustained investments over the past thirty years.[4]  Moreover, China can project power beyond the East and South China Seas through its expanding blue water fleet.  Like the Soviet Union, China has both the capacity and ambition to reshape the international system.

During the Cold War, the US and the Soviet Union competed at the systemic level, wrestling for influence in the developing world and innovating new military technologies to gain an advantage over the other.  Consider, for example, the space race, triggered by the launch of the Soviet’s Sputnik satellite in 1957.  Today, China and the US are locked in a similar tussle across a range of sectors, notably in AI and quantum technologies.  In international development, meanwhile, Washington is playing catch up.  Initiatives such as the Blue Dot Network and the India-Middle East-Europe Economic Corridor are belated responses to Beijing’s Belt & Road Initiative, which continues to shape international trade.  The US-China rivalry is particularly noticeable in global governance and institutions. Recall the Obama administration’s dissatisfaction with European allies for joining the Asian Infrastructure Investment Bank, Beijing’s answer to the World Bank.

The stakes are clear when it comes to exercising control over international trade.  Xi Jinping himself attended the opening of Chancay Port, Peru, in November 2024.  President Trump’s has repeatedly made remarks in relation to the control of the Panama Canal, and Beijing’s has responded unequivocally to the potential sale of Panamanian port assets by (Hong Kong based) CK Hutchison to a consortium including (U.S. based) BlackRock Inc.  In the world of international trade, there is no escaping the tension between governmental geopolitics and private enterprise.

The Cold War analogy’s advocates also point to the geographic similarities.  Following its victories on the eastern front during the Second World War, the Soviet Union remained encamped in Eastern and Central Europe.  This ensured a commanding position over the Eurasian landmass – famously described by Halford Mackinder as “the pivot region of the world’s politics”.[5]  Finding this intolerable, the US sought to contain the Soviet Union and prevent it from expanding beyond the Mackinder’s “heartland”, particularly in Western Europe.

While the potential flashpoints of today’s geopolitical rivalry are primarily located in the Pacific, Beijing’s influence over the Eurasian landmass is growing.  Much of its BRI funding is concentrated there. Meanwhile, the balance of power between Moscow and Beijing is shifting.  While President Putin continues to waste blood and treasure in Ukraine, Russia becomes more dependent on China.  120 years ago, Mackinder warned of the dangers of China becoming a Eurasian power.  He predicted that adding “an oceanic frontage to the resources of the great continent” would jeopardise “the world’s freedom”.[6] Similarly, contemporary historians such as Hal Brands worry that “a China that became preeminent within the Western Pacific and Western Eurasia…could coerce its foes on a worldwide scale”.[7] This underpins his belief that we are in a “new cold war”.[8]

Despite these similarities, today’s geopolitical environment differs from the Cold War in several notable ways, including the role of ideology; the relative importance of other actors in the international system; the degree of economic interdependence between the two superpowers; and the contrasting historical backdrops for the rivalry.

First, the Cold War was anchored in an ideological struggle between communism and liberal capitalism.[9]  The two superpowers saw each other’s governing systems as illegitimate and dangerous.  To varying degrees, leaders on both sides promulgated their ideas abroad to undermine the other.  The Soviets found receptive audiences in some quarters of the West – infamously in British intelligence through the ‘Cambridge Five’ spy ring.  In short, the Cold War was not just a geopolitical joust but a battle of ideas which penetrated domestic politics.

Contemporary China, by contrast, displays greater ideological elasticity than the Soviet Union.  Although Marxist-Leninist on paper, China is, in practice, a market-oriented society under a personalistic dictatorship.  President Xi exhibits nationalist, rather than internationalist, ambitions.  As such, there is no compelling model for misguided Western idealists to import as during the Cold War.

To address the China challenge, the Biden administration attempted to construct an ideological narrative of democracies competing against autocracies, but this framing is debatable in terms of accuracy and counterproductive as a strategy.  The US retains close partnerships and alliances with several non-democratic states, whom it will need to keep on side for the geopolitical struggle.  In short, the ideological dividing lines of today’s rivalry are thin, relative to those in the Cold War.

In 1945, the Soviet Union and the US emerged from the ashes of war as the most dominant powers in the international system.  At the time, some included the UK in this superpower club, but London could no longer afford the membership dues.[10]  Six years of conflict undermined its capacity as a world power.  A clear gap emerged between the top two and the rest. The Cold War was unquestionably a bipolar affair.

Today, however, such conditions no longer hold.  The US share of global GDP has more than halved since 1950.  Meanwhile, expectations for China’s growth are dampening.  Those who predicted that China would inevitably overtake the US are now strangely quiet, as Beijing wrestles with a housing bubble, high youth unemployment, and ballooning debt.  Although the US and China occupy the top spots in most rankings, other actors do not trail far behind, relative to the Cold War.  Despite strong headwinds, the European Union is still an economically influential bloc, while the UK, France, and Russia maintain the trappings of great power status, including expeditionary militaries and nuclear arsenals.  English law continues to act as a legal platform for cross-border transactions, despite competition worldwide from increasing sophisticated jurisdictions.   Japan remains an economic powerhouse and is investing heavily in defence, while the world’s most populous country, India, holds significant potential.  Indeed, some foresee that the international system will soon be tripolar – with Delhi as a third pole, alongside Washington and Beijing.[11]  India’s trajectory is uncertain, as it faces many obstacles to achieving high-income growth.  What is clear, however, is that increasingly assertive Indian leaders will tread their own path.  India will soon be able to project power beyond the Indian Ocean and have the capacity to control the maritime trade routes running through it.

The modern world is also marked by the diffusion of power to non-state actors. Consider, for example, commercial behemoths such as SpaceX.  While large multinational firms have wielded extraordinary power before (the East India Company springs to mind), the sheer number of conglomerates with international presence is unprecedented.

Furthermore, the democratisation of technology over the past fifty years is changing the character of war.  Non-state actors can access cheap, disruptive technology to impose disproportionately high costs on their adversaries.  Look no further than the significant disruption caused to international trade since 2023 by the Houthi rebels in Yemen attacking commercial shipping vessels.  All achieved with relatively inexpensive drones and missiles, and despite coercive measures from the world’s preeminent military.  This is not to say that the nation state is unimportant. Far from it.  Rather, the point is that the two superpowers will not have it all their own way in a world where power is increasingly saturated.

As disciples to their ideological creed, the Soviets effectively sealed themselves off from international markets.  China, by contrast, took a more flexible approach under Deng Xiaoping’s leadership, becoming a hub for cheap manufacturing.  Today, it is the world’s largest trader and is integral to the global economy.  US-China trade totalled almost $700bn in 2022, while China currently owns around $770bn in US Treasury holdings.   Chinese multinationals are so deeply embedded in the West that they become household names. The Soviets could boast of no equivalent to Huawei or Alibaba.

This era of economic interdependence may be on borrowed time, however, now that ‘de-coupling’ seemingly enjoys bipartisan support in the US.  Yet unpicking a deeply interwoven trade relationship will not be simple, painless, or quick.

First, ‘de-coupling’ too fast will backfire, damaging the US economy.  Take, for example, the proposals of the USTR in response to Chinese market dominance in the logistics, shipping and shipbuilding industry.  If implemented, the imposition of multi-million dollars of fees per port call across swathes of the maritime industry will cause significant economic pain and disruption.

Second, diversifying US-China supply chains will also quicken the transition to multipolarity, as other Asian states hoover up the opportunities.

Third, China is reducing its dependence on the US following the trade war during the first Trump administration.  Its top trading partner is ASEAN, followed by the EU, both of which contain US partners and allies.

As such, there is no simple lesson or playbook that one can extract from the Cold War for today, given the global extent of economic interdependence.

The Cold War’s historical backdrop differs starkly from today’s competition.  The US-China rivalry follows decades of cooperation, trade, and peace.  It is almost fifty years since China’s border war with Vietnam and over seventy years since its last major war in Korea.  In comparison, the Cold War followed the most destructive conflict in human history.  The Soviet leadership remained deeply suspicious of the capitalist powers, despite their wartime collaboration.  The British and American interventions in the Russian Civil War lived long in Stalin’s memory.  For their part, Western leaders watched in horror as the Soviet Union swallowed Eastern Europe.

The beginning of the Cold War also marked the thirtieth anniversary of the Russian Revolution.  The interim years were not kind to ordinary Russians.  War, famine, and repression caused the deaths of tens of millions.  In the late 1940s, George Kennan, the intellectual architect of containment, judged that the Russian people were “physically and spiritually tired”.[12] The same assessment could not be made of China today.  One scholar contends that the lack of near-term memories of war, combined with a fear of encirclement, means that, “in a crisis, the Chinese are more likely to resemble the Germans in 1914 than the Russians after World War II – excitable, rather than exhausted.”[13]

President Xi and his advisers seem more risk-averse than Kaiser Wilhelm II and his bellicose entourage of generals and politicians.  Yet the pre-First World War analogy is worth exploring briefly.  Like today, the world was multipolar with two states, the UK and Germany, leading the pack.  Similarly, trade flowed between these rivals.  Rising Germany aligned with Austria-Hungary, an ailing great power seeking to assert control in its region.  The reader may draw their own parallels to today’s partnerships.  Moreover, several great powers bound themselves to smaller states in politically explosive regions.  Russia, for example, felt compelled to defend Serbia.  Might a comparison be made with the US and Taiwan today?  Honouring prior commitments and balance of power concerns ultimately sucked European states into the quagmire of the trenches in 1914.  They went to war despite unprecedented levels of economic interdependence.

No historical analogy is perfect.  The pre-1914 world lacked nuclear weapons, making direct comparisons difficult.  Yet that brief example offers a more realistic parallel than the Cold War.  The latter provides a misleading sense of familiarity for governments and market participants looking to navigate the new world of international trade.  To look to the Cold War is to obscure the unique characteristics of today’s geopolitical landscape.  Unlike the bipolar US-Soviet rivalry, which was shaped by ideological confrontation and economic separation, today’s competition is defined by deep interdependence, shifting power balances, and a more complex international order.

The world is moving beyond the unipolar order, into a world of increasing multipolarity or even non-polarity.  Power is diffusing, with influential states and non-state actors shaping the global system in unpredictable ways.

For those engaged in the world of commerce, the risks are clear.  For many, there is also opportunity.  Churchill is credited with the memorable: “Never let a good crisis go to waste”.  There have been plenty of crises to choose from affecting the world of international trade across the last five years.  It will be the companies who best understand and navigate the delicately poised, multi-factorial international relations of the modern world that will be best placed to take advantage of the current state of deepening tension and regulatory unpredictability.

References:

[1] Zara Steiner quoted in Paul Kennedy, ‘The Rise and Fall of the Great Powers redux’, The New Statesman, 20 September 2023.

[2] Niall Ferguson, ‘The New Cold War? It’s with China, and it has already begun’, New York Times, 2 December 2019.

Niall Ferguson, ‘Cold War II’, National Review, 17 December 2020; Niall Ferguson, ‘How to Win the New Cold War’, Foreign Affairs, January 2025.

[3] Kurt M. Campbell and Jake Sullivan, ‘Competition without catastrophe: how America can both challenge

and coexist with China’, Foreign Affairs, 98:5 (2019), pp. 96-111; Robert Kaplan, ‘A New Cold War has begun’, Foreign Policy, 7 January 2019; Alan Dupont, ‘The US-China Cold War Has Already Started’, The Diplomat, 9 July 2020; and Gideon Rachman, ‘A New Cold War: Trump, Xi and the Escalating US-China Confrontation’, Financial Times, 4 October 2020.

[4] China’s defence budget grew by 7.2% in 2022-23, marking the 29th consecutive year of increased defence expenditure. International Institute for Strategic Studies, ‘The Military Balance’, 124 (2024), p. 243.

[5] Halford J. Mackinder, ‘The Geographical Pivot of History’, The Geographical Journal, 23:4, (1904), pp. 421-437.

[6] Mackinder, ‘The Geographical Pivot of History’, p. 437.

[7] Hal Brands, ‘The Eurasian Century, Part V: Beijing’s Gambit’, Engelsberg Ideas, 6 December 2021.

[8] Hal Brands and John Lewis Gaddis, ‘The New Cold War America, China, and the Echoes of History’, Foreign Affairs, 100:6 (2021), pp. 10-21.

[9] To be sure, pragmatism occasionally trumped dogma; some American leaders embraced right-wing dictatorships to unite against the greater threat of communism. One of NATO’s founding members, for example, was António Salazar’s Portugal.

[10] William T. R. Fox, The Super-Powers: The United States, Britain, and the Soviet Union – Their Responsibility for Peace (New York: Harcourt, Brace & Co., 1944).

[11] Manjari Chatterjee Miller, ‘India will carve its own path’, Foreign Affairs, December 2024.

[12] X (George F. Kennan), ‘The Sources of Soviet Conduct’, Foreign Affairs, 25:4 (1947), p. 577.

[13] Odd Arne Westad, ‘The Sources of Chinese Conduct’, Foreign Affairs, 98:5 (2019), p. 92.