Weekly Global Economic Update | Deloitte Insights

Many countries are attempting to reduce their dependence on the United States

• British Prime Minister Keir Starmer went to China recently. Canadian Prime Minister Mark Carney was there as well. Soon, the leaders of Germany, Finland, and Ireland will also be traveling to Beijing. All of these countries were, until recently, firm allies of the United States, and had often supported US efforts to limit China’s access to advanced technologies and to their own markets. Recently, however, some governments have begun reassessing their economic strategies in light of global trade policy shifts, including new US tariffs and broader uncertainty around long‑standing economic and political alliances.

If the massive US market becomes more constrained or less predictable, then the leaders of these countries would like to find economic access elsewhere. And what better place than China, the world’s second largest economy. Moreover, China has lately eased trade restrictions and encouraged more economic liberalization and integration.

What might this mean for the United States? In a way, the United States could be repeating what China did in the 15th century. At that time, China was the richest nation on earth, having developed the leading technologies of the time and having built an impressive economic infrastructure. Yet, after engaging in pioneering exploration and building trading relations around Asia, the Middle East, and Africa, China turned inward, reducing engagement with the world. In the long run, this led China to fall behind the West and miss the opportunity to benefit from the industrial revolution. Only in the past half century has China reversed its isolation and once again become a global power.

What is the United States doing and how might it affect the long-term role of the country in the global economy? First, it has taken steps to limit certain forms of trade and cross-border economic activity. Plus, the United States has withdrawn from several international organizations and questioned the importance of military alliances. These actions could, over time, reduce the role of the US dollar in the global economy. The dollar has recently declined, hitting a four-year low earlier this week.

Second, the country is cutting back on government funding for some scientific research. Such funding played a major role in fueling innovations that sustained US dominance in multiple industries over the postwar era.

Third, innovation was also fueled by the United States welcoming the world’s best talent. Recent changes in immigration policy may impact its position in science and technology, hence. In recent decades, a large share of innovation and enterprise creation was due to immigrants.

What might a world with lessened US engagement look like? It may take decades before the full implications emerge. And that assumes that the inward turn of the United States is not reversed under a future administration. Often, in US politics, when the pendulum swings too far in one direction, it quickly reverses course. That could happen in the near future regarding trade, migration, and funding for research. In any event, a world in which the United States is less of a dominant political force (even though it will be a major economic force) would be like a return to the 1920s and 1930s, during which, the country was the world’s dominant economy but played only a minor role in geopolitics.

Meanwhile, other countries are not standing still: In Europe, Canada, Singapore, and the United Arab Emirates, among others, there are efforts to attract scientists from the United States. The goal is to boost their ability to develop cutting-edge ideas, industries, products, and companies.

Back to Kier Starmer. As prime minister of the United Kingdom, he leads what was traditionally the closest ally of the United States. There used to be talk of a special relationship. Increasingly, the relationship is viewed as transactional rather than based on emotions or values. Starmer could draw criticism from the United States in going to China, similar to the criticism recently faced by his Canadian counterpart. But Starmer seems to be convinced that the United Kingdom needs a new approach to trade. He took with him several leaders of British companies who are keen to boost their economic relations with China. Plus, if the United Kingdom cannot maintain a special economic relationship with the United States, it will likely seek to restore some of what was lost with the European Union post Brexit. Although it seems unlikely that Britain will rejoin the European Union, a more integrated relationship is a strong possibility.