The Spillover Effects of U.S.–China Competition

The Spillover Effects of U.S.–China Strategic Competition

Peter Lee

The ongoing strategic rivalry between the United States and China is reshaping far more than the political and economic environments of the two countries themselves. Its spillover effects are cascading across the international system, altering the trajectory of the Russia–Ukraine war, accelerating Japan’s transformation into a “normal state,” and driving a global restructuring of supply chains. Together, these shifts are redefining the geopolitical and economic landscape—and in many ways creating new challenges for China.

1. The Russia–Ukraine War: A Conflict Redirected by U.S.–China Rivalry

Europe entered the Russia–Ukraine war with the ambition of weakening Russia over time—much as the Soviet Union was drained by its long war in Afghanistan. By helping Ukraine sustain prolonged resistance, European governments hoped to strategically contain and eventually constrain Moscow.

Yet the intensification of U.S.–China competition altered that calculus.

As China advanced in key areas—from technology and military capacity to discussions around de-dollarization—the United States reassessed its global priorities. China, not Russia, emerged as Washington’s primary strategic rival. This shift led to a recalibration of American policy toward the Ukraine conflict:

      ?    U.S.–European unity on Ukraine began to diverge,

      ?    Washington displayed growing hesitation toward “endless support,”

      ?    and space was quietly created for Russia to secure a “face-saving” exit.

In essence, the United States has become more willing to manage the Russia challenge rather than defeat it—if doing so helps keep Russia from aligning too closely with China. As a result, Russia’s ability to seek a relatively dignified conclusion to the war is, to a significant extent, a byproduct of U.S.–China strategic rivalry.

2. Japan: Using the U.S.–China Rivalry to Accelerate Its Normalization

Since the end of World War II, the United States has imposed strict limitations on Japan’s military development. Washington valued Japan as an economic power, but treated its military potential with caution. However, as China’s rise becomes America’s central strategic concern, this long-standing arrangement is shifting.

Japan possesses deep technological capability, industrial strength, and untapped military potential. Historically, its navy defeated both the Beiyang Fleet and Russia’s Pacific and Baltic fleets, and Japan fought the United States across the vast Pacific theater during World War II. Its military tradition and strategic discipline have never fully disappeared—only restrained.

Today, the U.S.–China rivalry provides Tokyo with a rare opening:

      ?    Washington is loosening restrictions on Japan’s military buildup,

      ?    supporting Japan’s expanded regional security role,

      ?    and enabling Tokyo to reemerge as a “normal” and potentially major military power.

Japanese society, shaped by decades of American influence, has evolved into a unique hybrid of Eastern discipline and Western values. This moment allows Japan to fulfill long-standing political ambitions—to normalize its defense posture and restore its status as a strategic power in Asia.

Such a transformation will profoundly influence the Asian balance of power and global geopolitics.

3. Global Supply Chain Reconfiguration: Strategic Uncertainty Drives Production Away From China

The trade war and technological decoupling between China and the United States have introduced unprecedented uncertainty into global supply chains.

The value of a “chain” lies in its seamless connection: once any link becomes unstable, the entire upstream and downstream network is at risk. Recent years have seen:

      ?    Volatile U.S. tariffs targeting China-made goods,

      ?    politically driven export and import restrictions,

      ?    and escalating technology controls tied directly to U.S.–China competition.

Multinational corporations, faced with these strategic risks, are accelerating their relocation of production from China to Southeast Asia, South Asia, and parts of Central America. This global reconfiguration carries significant consequences for China:

      ?    Manufacturing vitality weakens,

      ?    employment pressure increases,

      ?    local government finances and real estate markets deteriorate,

      ?    and systemic financial vulnerabilities accumulate.

In short, China’s economic environment is becoming more challenging as global firms rebuild supply chains around geopolitical risk avoidance.

Conclusion

The U.S.–China rivalry is no longer confined to bilateral tensions. Its spillover effects are reshaping war dynamics in Europe, shifting the strategic balance in East Asia, and driving a worldwide restructuring of industrial supply chains. These changes collectively form a new external environment—one in which China faces rising geopolitical constraints and increasing economic pressure.

For the foreseeable future, the ripple effects of U.S.–China competition will remain a decisive force shaping global politics, security, and economic development.