As US President Joe Biden and Chinese leader Xi Jinping prepare for their highly anticipated meeting, the world is watching closely to see if the two economic powerhouses can improve their strained relations. The outcome of this meeting holds immense significance for the global economy. The consequences of continued tensions between the US and China could potentially lead to slower growth and increased inequality on a global scale.

One of the major areas of contention is declining trade flows. As relations have deteriorated, US officials have aimed to "de-risk" from China by reducing exposure to Chinese markets and suppliers, without completely severing ties. Recent trade data indicates a noticeable shift, with Mexico and Canada overtaking China as America's top trading partners.

Despite this shift, the US and China remain highly interdependent economically. The record high trade volume in 2022, totaling nearly $691 billion, reflects this interdependence. However, on-the-ground realities suggest a changing landscape. A significant number of businesses are redirecting or planning to divert investments originally intended for China, indicating a trend of de-risking or decoupling.

The outcome of the Biden-Xi summit could determine the direction of economic relations between the two nations and potentially impact the global economy. Incremental progress and renewed communication may help prevent further fragmentation and maintain a stable global economy. However, expectations remain tempered, and major breakthroughs are not anticipated at this stage. The world anxiously awaits the outcome of this high-stakes meeting.