The United States-China relationship is a dominant factor that will impact everyone for a generation, a banking executive told the Bermuda Captive Conference.

Andrew McDougall, Barclays’ group managing director and head of geopolitical risk, said there is an ongoing economic and technological struggle between the two countries, centred on artificial intelligence, advanced technology and rare earth minerals.

“China has a very explicit goal of getting advanced chips,” Mr McDougall said at the Hamilton Princess & Beach Club.

He said the Chinese are looking at developing an extreme, deep ultraviolet photolithography machine. Also called a photolithography machine, these are used in semiconductor manufacturing to print microscopic circuit patterns on to silicon wafers.

“Can they break the laws of physics? No, but they could probably get advanced chips — 2, 3 or 4nm chips — within a couple of years,” Mr McDougall said.

It is understood that the most advanced chips produced by American companies are generally smaller and more sophisticated than their counterpart in China, roughly 2 to 3nms compared with about 7nms.

Mr McDougall called the Taiwan election in January 2028 “the most important market event this decade”.

“Just put it in your diary, it is really important,” he said.

Taiwan is a major point of tension between the two superpowers because the island is home to Taiwan Semiconductor Manufacturing Company, the world’s major producer of advanced computer chips. Increased tensions could disrupt shipping and international commerce in the Taiwan Strait, a critical global trade route.

Investors are closely watching the election because any change in relations between Taiwan and China could move markets dramatically.

“The issue is around Taiwan and President Trump saying, well, maybe we’ll slow-walk military aid to the Taiwan military,” Mr McDougall said. “That is a big issue for the Japanese and South Koreans. They get 95 per cent of their energy through the Taiwan Strait.”

Mr McDougall said the global geopolitical dynamic is no longer just about tariffs or diplomatic rhetoric, but about deep structural vulnerabilities in critical supply chains.

“The US does not have enough energy for their AI infrastructure,” he said, adding that the US remains vulnerable to Chinese control over rare earth minerals.

Rare earth metals such as yttrium are used to make electric vehicle motors, wind turbines and smartphone screens.

Mr McDougall said efforts in Washington to reduce American dependency on China are real, but will take time — possibly five to ten years.

The panel also touched on the US’s ongoing conflict in the Middle East.

Mr McDougall said that even if there were a treaty tomorrow between the US and Iran, it could be months before there was any normality again in the Strait of Hormuz.

“Even then that is not including the damage to refineries, gas pipelines and to the dislocation of the global container fleet,” he said.

Panellist Peter Princi, managing director and financial adviser at Morgan Stanley, admitted he had been wrong about the US—Iran conflict.

“Two months ago, I predicted that this war would be over by the end of May,” he said. “I was wrong. Affordability issues in the United States are the number one concern as we go into midterm elections. Every dollar that gasoline prices go up sucks $150 billion out of the economy.”

Mr Princi said gasoline prices are up $1.40 compared to before the war with Iran, which roughly translates into $200 billion extracted from the US economy.

“That is a major conundrum for Trump,” he said.

Gregory Cobb, director of insurance solutions at Sage Advisory Services, said geopolitical volatility has become operational in everything that investors do.

“It is structural now,” Mr Cobb said. “It is forcing us as investors to focus more on risk management.”

He said they were having clients focus on asset-liability management. The situation is also forcing investors to build more resilient portfolios in terms of liquidity, with liquidity effectively becoming an asset in its own right.