The 2020s in historical perspective
The English author George Orwell described the cold war as a “peace that is no peace.” According to Niall Ferguson, this phrase “nicely describes relations between the United States and China right now.”
“There’s a technological rivalry, an ideological rivalry and a geopolitical rivalry,” says Ferguson. “These two powers are colliding in a whole range of areas.”
Looking ahead, the US will struggle to close the manufacturing gap with China, he claims. “Despite efforts through tariffs, industrial policy and other measures, the US will find it significantly harder to manufacture goods than China.” Ferguson also expects significant US dollar depreciation over the next decade – which he expects will be positive for safe-haven assets such as gold and the Swiss franc.
Any great power that spends more on interest payments than on defence will not remain great for long.
Meanwhile, China is aiming to outpace the US in the race for technological supremacy, adds Ferguson. He points to China’s cost-effective, open source artificial intelligence models – such as DeepSeek – and the fact that China now generates twice as much electricity as the US. What China lacks is computational power, where the US dominates.
In terms of geopolitical rivalry, Ferguson notes that the US now spends more on interest payments than it does on defence, with this gap to double by 2040. According to Ferguson’s Law, which he claims can be used to predict the decline of empires, this pattern signals a profound risk to the durability of American power.
Ferguson predicts that by 2035, there will be three nuclear superpowers, with China joining the US and Russia. While a cold war with two nuclear superpowers is “relatively straightforward from a game-theoretical perspective,” he says, “the dynamics become far more complex with three – especially if two of them are allied.”
“The danger in any cold war is that it becomes hot – maybe over Taiwan – at some point in the next few years,” Ferguson warns. “If Xi Jinping and Donald Trump get it wrong, we could find ourselves facing as big a geopolitical crisis as the Cuban missile crisis – except that it would have much bigger economic consequences because of Taiwan’s centrality to the global economy.”
Ultimately, Ferguson believes the US and China will avoid open conflict over Taiwan, citing the doctrine of mutually assured economic destruction. “A détente between the superpowers was possible in the first Cold War, and I think it will be possible in the second Cold War.” Still, he expects China’s influence over Taiwan to grow, and over time, Taiwan may face a fate similar to Hong Kong’s.
In Ferguson’s view: “Cold War II will likely end, not with a bang, but with a whimper.”
