Back in “the good old days,” United States assisted China in joining the World Trade Organization (WTO), hoping to tame the sleeping giant by integrating it into the global economic rules. Optimists even hoped that China would become democratic. Soon enough, China’s huge demographic dividend was added to the division of labor system in global trade, and Europe and the US enjoyed an era of economic growth with low inflation.

At first, the world was optimistic that this boom would continue. In 2005, the New York Times columnist Thomas Friedman wrote The World is Flat, a bestseller which was translated into dozens of languages. Regarding politics, Francis Fukuyama’s masterpiece The End of History boldly proclaimed “the end point of mankind’s ideological evolution and the universalization of Western liberal democracy as the final form of human government.”

By 2023, however, Freeman began to write about a "trust" crisis between the US and China. From chips and technology to TikTok, the two countries have moved from peace and trust into Cold War containment, except against China rather than the Soviet Union. With autocratic regimes such as China and Russia becoming the biggest threat to global peace, Fukuyama’s contention that liberal democracy is the end point of history has been frequently discussed and debated.

In this volatile moment, the US presidential election coming at the end of the year will be the key to the future global direction.

Former president Donald Trump started a trade war with China during his term. His thinking was simple: quick suppression would force the opponent to seek peace. Aiming to recover the jobs China stole from American workers and to make America great again, he imposed high tariffs on Chinese goods. Accusing the Chinese government of excessively subsidizing the technology industry, he began to ban exports of products with high technological content. That turned out to be Pandora’s box, and the restrictions have not gone away. Suppressing China’s rise has become the main theme of both the Republican and Democratic US parties.

Of course, the presidential election will also involve domestic issues in the US, such as inflation, the timing of Federal Reserve interest rates cuts, and the massive fiscal deficit. However, if the world’s largest economy sneezes, the whole world may catch a cold.

Domestic financial institutions should not turn a blind eye to the world’s biggest gray rhino. This edition of the Taiwan Banker magazine will analyze the impact of the election on the economy and finance from various political and economic perspectives. If the senior management of financial holding companies fail to plan for the election now, it may be too late to react by the end of the year when it takes place.