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Washington’s New Narrative for the Global Economy

While the Biden administration’s economic agenda represents a welcome departure from past Democratic presidencies, its latest actions against China have raised concerns about protectionism. But recent developments suggest that the US can address its national-security concerns without undermining the global economy.

CAMBRIDGE – Two competing agendas are currently vying to shape the United States’ domestic and foreign economic policies. One agenda is inward-looking, focusing on the creation of an inclusive, resilient, prosperous, and sustainable American economy. The other focuses on geopolitics and on maintaining US primacy over China. The future of the world economy depends on the outcome of this conflict and whether these opposing priorities can coexist.

US President Joe Biden’s administration represents a radical departure from previous Democratic administrations, pursuing ambitious industrial policies to revive domestic manufacturing and facilitate the green transition. It has also adopted a tougher stance on China than any previous administration, including former President Donald Trump’s, treating the Chinese regime as an adversary and imposing export and investment controls on critical technologies.

Until recently, however, the Biden administration did not articulate a coherent vision that combines these various elements and reassures other countries, including China, that its economic strategy is not centered on confrontation, unilateralism, and protectionism. But recent remarks by US Treasury Secretary Janet Yellen and National Security Adviser Jake Sullivan indicate that the administration is now taking steps to address this issue, potentially signaling the emergence of a new Washington Consensus.