Despite popular Western thinking that interdependence fosters peace and stabilizes relations with rival countries, the COVID-19 pandemic and the Russian invasion of Ukraine uncovered the perils of excessive economic interdependence. With China and Russia controlling major commodities and having strong ties with non-aligned developing countries, the West should be cautious when adjusting economic relations with their rivals.

Breakups Hurt

• Severing long-term trade ties will take long because countries must devise alternatives and mend loopholes.
• Reconnecting with China is more challenging because there has yet to be a consensus among the Western alliance on managing relations with China despite agreeing on de-risking and reducing interdependence with China.
• On the other hand, sanctions have eroded Russia's defense industry by restricting semiconductor procurement. China's ambition for technology self-sufficiency also hit a roadblock with the West bandwagoning for export controls on China.

Has the West lost its edge?

• The West's economic warfare against China and Russia may be ineffective because its global economic weight and influence have declined.
• China and Russia view the strategic competition with the West as an existential threat and will not submit to them easily.
• Further, intensified economic pressure may embolden Beijing and Russia as they feel they have nothing to lose.
• The West profound economic ties with China are hard to break, given its gravity. Although China has yet to succeed in greater financial self-reliance, more countries are open to settling bilateral trade in the Chinese Yuan.
• China may develop its indigenous semiconductor supply chain and use its manufacturing capacity of mature nodes as leverage.