Unable – and unwilling – to accept and respect each other’s red lines, the U.S. and China are urged to talk, talk, talk – and to keep all political, security and military lines of communication open and readily accessible.

This initiative mainly comes from the U.S. That seems to be Washington’s way of crisis prevention and management.

China does not fully share that view. China keeps repeating that the key issues of its sovereignty, territorial integrity and national security have been thoroughly discussed with the U.S. at the highest levels of state and government. Some of those discussions have even been codified in bilateral agreements.

Beijing, therefore, considers that permanent and endless talks cannot be a remedy for America’s alleged failure to act according to its commitments.

Hence the Chinese apparent conclusion that those lingering credibility problems are affecting security, trade, investments and China’s economic development.

Managing the collision course

Taiwan is at the center of those concerns. For China, everything about that “core red line” is crystal clear. In the U.S-China Shanghai Communiqué of February 27, 1972, it is explicitly stated that “the United States acknowledges that … there is but one China and that Taiwan is part of China.”

In spite of that, a semantic point – or a “strategic ambiguity” – was raised in Washington that the U.S. only acknowledged Taiwan as part of China, but it did not recognize China’s sovereignty over its self-governed province.

As a result, the U.S. continues to sell arms to Taiwan, acquiesces in visits of congressional delegations and maintains ties similar to official relations with independent states.

That infuriates China. Taiwan, for China, is an internal matter, and the U.S. position that Taiwan’s current status should not be changed unilaterally is taken by Beijing as a flagrant interference in its domestic affairs.

China’s contested maritime borders, and U.S. objections to alleged problems created by China along its eastern shores for air and sea navigation are another flammable issue. China believes that territorial claims with its neighbors are used by the U.S. to stir regional disputes. According to Beijing, those issues should be dealt with by east Asian nations.

With rising political and military tensions, the Taiwan Strait and the East China Sea are now busy waterways patrolled by Chinese, American and E.U. naval and air assets. Last Thursday (July 6), China’s President Xi Jinping called for “war preparedness” in PLA’s Eastern Theater Command to safeguard “territorial sovereignty, maritime rights … and national unity.”

The Korean Peninsula is another flashpoint. The U.S. wants to disarm North Korea. So, Pyongyang should stop missile testing and give up its large nuclear arsenal.

China, however, would only support a gradual, confidence building process. Pending Pyongyang’s agreement, credible security guarantees and economic assistance should be offered in exchange for nuclear disarmament and more peaceful inter-Korean relations.

There are no guardrails

The status of Taiwan, China’s unsettled maritime borders and Koreas’ unstable armistice remain the most acute political and security issues between the U.S. and China.

Sadly, there are no mutually acceptable solutions to any of those issues. And none are likely to appear for the foreseeable future.

Under those circumstances, U.S. and China will continue to reduce their exposure to trade and investment risks emanating from such hostile and conflict-ridden bilateral relations.

That process – called decoupling or de-risking -- has been under way for some time. The Trump administration introduced trade tariffs in March 2018 affecting an estimated two-thirds of imports from China. Those tariffs are still in place, and there are no signs that they will be repealed any time soon. Biden has also added a ban on exports of semiconductors and machines that make them as part of targeted measures to limit trade with China.

Evidence is already there to indicate that those measures are depressing the U.S.-China merchandise trade. In the first four months of this year, U.S. imports from China were down 24.3% from the year earlier, while American exports to China, over the same period, collapsed by a whopping 40%.

The U.S.-China trade is also declining as a share of America’s foreign trade. During the January-April period of this year, imports from China accounted for 13.2% of total U.S. purchases from abroad, a marked drop from 16.5% a year earlier. Over the same interval, U.S. exports to China were only 4.2% of total American sales abroad – a sharp decline from 7.2% in the first four months of last year.

A steady and significant deterioration of the U.S.-China bilateral trade is an ominous sign for future relations of the world’s two largest economies. And the last week’s vacuous economic and financial negotiations show that Washington and Beijing are caught up in a destabilizing process of global power realignments.