Editor’s note: This year's election will impact companies in every industry. That’s why Harvard Business School’s Institute for Business in Global Society (BiGS) is launching its first-ever election guide for business leaders, offering insights from experts to help you navigate. In the coming weeks, we’ll publish a series showing how the Harris and Trump agendas will affect everything from trade and labor to diversity and environmental regulations. After the election, we’ll package these insights into a comprehensive guide showing what to expect in the months ahead. We hope you enjoy it.
BOSTON — The relationship between the United States and China is arguably the single most critical factor in shaping the global dynamic over the coming decade or more. While the contemporary U.S.-China relationship is relatively young — slightly more than 50 years — it has gone through many phases, each recasting the dynamics between the two powers, and the rest of the world, in unique ways.
Starting in the 2010s, early in Xi Jinping’s presidency, China’s position and posture in the global arena began shifting noticeably, and this evolution has generated new tensions and competitive dynamics with the United States. At that time, I was CEO of a Boston-based company building industrial water treatment projects worldwide, including several in China. The tone and tenor of our relationship with our Chinese partners and regulators became more challenging, until we were acquired by our large Asian partner in 2018. The evolution of the broader U.S.-China relationship mirrored this increasingly difficult dynamic and has since deteriorated even further.
How the U.S.-China relationship unfolds in coming years will shape not only the two nations, but also the entire global landscape. With the upcoming U.S. election set to determine party control of both the White House and Congress, the future trajectory of U.S.-China relations hangs in the balance, with major implications for geopolitical and military engagement, national industrial policy and competitiveness, and climate change collaboration.
Military and geopolitical engagement
Perhaps the most volatile and concerning aspect of the U.S.-China relationship is the military and geopolitical dynamic. Tensions in the South China Sea, the status of Taiwan, and increasing military buildup in the Indo-Pacific have brought the two powers to the brink of conflict on multiple occasions. How U.S. policy evolves in response to these tensions will be critical to maintaining regional stability and avoiding military confrontation.
The policy set by the next administration will have profound implications for the balance of power in the Indo-Pacific, in part because the administration will be governing during the “Davidson Window,” which postulates that 2027 is a high-probability timeframe for China to take action against Taiwan. This framework, introduced by Admiral Phil Davidson in 2021 as he was retiring as commander of the U.S. Indo-Pacific Command, continues to influence the posture and planning at the U.S. Department of Defense. While this may seem extreme, the seriousness and urgency of this mindset are palpable whenever I see colleagues whom I served with in the Navy and are now very senior leaders in the department.
Against this backdrop, both presidential candidates have demonstrated that they view China as a major threat, but the details of their postures on Taiwan vary. Former President Donald Trump’s approach during his first term included a strong, almost antagonistic emphasis on military presence in the Pacific, yet his stance on Taiwan was highly circumspect, even when compared with the long-held U.S. posture of “strategic ambiguity” about Taiwan.
By contrast, the Biden administration and Vice President Kamala Harris have made more explicit commitments to defending Taiwan: positioning the U.S. as a more assertive actor in countering Chinese military activities in the region, increasing military spending, and establishing firmer commitments to alliances such as AUKUS, a trilateral security partnership in the region between the U.S., the U.K., and Australia. All of this has further intensified tensions with China.
National industrial policy and competitiveness
In recent years, industrial policy has become a central focus in both the U.S. and China as each seeks to out-compete the other in key technology and manufacturing sectors. The U.S., through policies such as the CHIPS and Science Act and the Inflation Reduction Act, has signaled its intention to rebuild domestic industries, particularly in semiconductor manufacturing, clean energy, and advanced technologies. China, for its part, continues its drive toward self-sufficiency in key sectors, with an emphasis on becoming a global leader in artificial intelligence, 5G communications, and renewable energy technologies.
The outcome of the 2024 U.S. election will significantly influence how this industrial competition evolves. Regardless of the winner, national competitiveness will remain a priority for both countries. What remains uncertain is whether this competitiveness will be pursued through policies that encourage global cooperation and innovation, or through strategies that deepen economic fragmentation.
A second Trump administration would likely double down on “America first” policies that include tariffs, decoupling, and protectionism. This could accelerate the shift toward a more fragmented global economy where the U.S. and China create parallel technology ecosystems, intensifying the rivalry. A Harris administration, by contrast, could continue current policies aimed at balancing competition with strategic engagement (“derisking,” rather than “decoupling”) in key areas where collaboration is still possible. However, the Biden administration’s recent tariffs on key climate technologies, including solar panels, electric vehicles, and other components, are likely to remain in a Harris presidency.
Finally, while Trump has indicated he will continue the rollback of government programs and regulations begun in his first administration, many Biden-Harris administration programs heavily benefit Republican states and districts, so they may persist in some manner. Another critical consideration is that for the U.S. to continue to prepare for a potential conflict with China, U.S. industrial and manufacturing capacity (e.g., shipbuilding) must grow considerably, so we may see an expansion of activity in this area from either administration.
Climate collaboration and competition
The U.S. and China are the world’s two largest carbon emitters, and both are central to the solutions needed to tackle climate change. As the world’s largest economies, they play a pivotal role in carbon reduction strategies, from renewable energy innovations to government policies and financial investments that drive the transition to greener economies.
Historically, despite their tensions, the two countries have collaborated on global climate accords, such as the Paris Agreement. But this collaboration has been fragile. China’s environmental record is mixed, and U.S. engagement on climate change has oscillated between committed participation and withdrawal, depending on the administration in power — and that is likely to continue.
For example, a second Trump administration may once again extricate itself from the UN Climate Conference of the Parties (COP). A more adversarial stance from a Trump administration could lead to a breakdown in cooperation, with both the U.S. and China focusing solely on their own competitive advantages in green technologies and competing to provide these to the global market.
By contrast, a Harris administration would almost certainly lean even further into the UN COP. Harris is more likely to use climate as an opportunity to collaborate with China, pressuring it to meet emissions targets and work together on global clean energy initiatives. This may be especially true as the Inflation Reduction Act helps the U.S. inch closer to its 2030 and 2050 commitments to lower emissions.
In a world struggling to meet global climate goals, the stakes are extremely high, and the U.S. election will play a critical role in determining whether cooperation or competition defines this dynamic.
Strategic imperatives for business leaders
The next administration’s approach to military engagement, national competitiveness, and climate change will shape not only U.S. foreign policy, but also the trajectory of global peace and prosperity. While much of the current discourse around China is focused on political rhetoric and personality clashes, the real conversation should center on how the U.S. can strategically navigate this critical relationship.
Managing uncertainty and robust contingency planning are key success factors for today’s business leaders. This will be increasingly true in the next several years along multiple global dimensions, especially this critical U.S.-China axis. Here are four key areas that call for special attention:
The topics of military innovation and spending, global competitiveness, and climate change are large levers driving the global economy. Revisiting your enterprise’s strategy with an eye toward these dynamics likely will uncover new threats and opportunities.
Companies that do business in Asia, or that rely on that part of the world for their supply chains, should continue to watch the changes closely and aim to build in additional resilience and optionality. It is especially important to understand the implications to your business if the U.S.-China tensions become an active conflict.
We are operating in a context that increasingly is being guided heavily by national policies, not only in the U.S. and China, but globally. It is vital to ensure that your company has the requisite level of policy expertise and invests in understanding and helping to guide policy.
Every business is affected by the macro financial markets. The volatility and uncertainty of the current global dynamic influence investor sentiment and capital flows. It is critical to do contingency planning around your investment and financing strategies to ensure a healthy balance sheet and access to capital.
Navigating the path forward
Almost certainly, there will be very different strategies and styles from a Trump White House compared with a Harris White House. Given the nature of an election cycle without robust primaries or debates, we unfortunately don’t have clear signals about exactly how a President Harris or a President Trump would navigate these waters. And while there are plenty of references to China in this election cycle, few address the most critical strategic issues.
My view is that, regardless of the outcome, the U.S. must delicately and intentionally balance competition with cooperation, recognizing that in many areas, especially climate change, collaboration is essential and also can be beneficial to the U.S. and the world. The tone in the White House and Congress in the years ahead will matter mightily, not only for U.S.-China relations, but for the future of global leadership in an increasingly multipolar environment. The stakes in this election are extraordinarily high — not only for the U.S., but for the world.