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The Tell: U.S. and China need to figure out way to work together even as tensions heat up, says former Treasury trade expert

“The thing that we need to bear in mind in this process, notwithstanding the tensions that are growing, is that it’s awfully hard to see satisfactory outcomes occurring around the coronavirus without some measure of U.S.-China cooperation,” said Hormats, in an interview with MarketWatch.

This comes as Congress and the Trump administration have put pressure on Chinese companies listed in the U.S., and threatened to impose sanctions on Chinese officials and banks seen as threatening the fragile autonomy of Hong Kong, amid efforts by Beijing to put in place a new security law that would give Chinese state security license to operate in the city.

“The temperature in China and Washington is probably going to make it more difficult to have any collaborations,” he conceded.

See also: Senate passes bill that could delist Chinese companies from U.S. stock exchanges

Hormats’ worries reflect his long history of working in international trade, government and finance. Once vice chairman at Goldman Sachs’ international division, he worked under the Nixon administration in the U.S.’s early efforts to normalize relations with China.

After a viable vaccine or therapeutic treatment for the deadly disease was found, governments will need to muster all production and distribution facilities capable of manufacturing the treatment and spreading it swiftly across the globe.

“I think it’s awfully difficult to increase the volume and speed of production without mobilizing pharmaceutical companies in U.S., Europe, and not to mention Chinese companies,” said Hormats.

“There’s going to have to be a huge international effort to distribute this quickly around the world. In that equation, there will need to be some measure of collaboration with the Chinese,” he added.

Another area of potential common ground was the global financial markets crisis that soon followed after the health crisis in March.

“Not any country can print money indefinitely and has a Treasury that can issue huge amounts of bonds and still be bought by others,” said Hormats.

Emerging market economies dependent on U.S. and Chinese funding have been particularly hard hit by a sharp departure of capital from their borders.

Kenneth Rogoff, former chief economist for the International Monetary Fund, said Washington and Beijing both needed to work together to help restructure and reduce the debt racked up by poorer nations, as funds spent on interest payments could have otherwise been spent on saving lives, in a previous interview with MarketWatch.

Read: An emerging market debt crisis could be the next front in U.S.-China conflict

Hormats looked to the last recession in 2007-2009 as an example where the two superpowers could come together in times of crisis, noting the Federal Reserve and the People’s Bank of China conducted a dialogue throughout that trying period.

“They are going to have to figure out ways to collaborate together. This current situation has the deepest economic and financial implications I’ve ever seen while I was in government,” he said.

The Dow Jones Industrial Average DJIA, -0.25% and S&P 500 SPX, +0.00% was on pace to end higher for the week ahead of the Memorial Day weekend. The 10-year Treasury note yield TMUBMUSD10Y, 0.660% fell 4 basis points to 1.13%.

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