As the world’s two largest economies were unable to reach a long-term settlement, universities become affected. Changes appeared in student application rates, educational exchanges, scholar visa approvals, revenue streams, and international research cooperation. Of greater concern has been a change in campus atmosphere toward suspicion, mistrust, and ethnic profiling. The long-term effects of the US-China trade war and the accompanying intellectual property debacle will hobble academic talent flows, internationalization, university-industry linkages, and peer assessments. In the new norm of neo-globalization within an increasingly unstable world order, universities in these two countries risk having diminished capacity as institutions for peace and global common good. In a binary world with a bifurcated academy in which counties line up on each side, international academic and scientific interdependency deteriorate. In China, a slowing economy weakens university excellence initiatives. In the US, university autonomy declines with government directives to reject research funding from Chinese companies. The paper argues for greater protection of the free flow of information and a campus atmosphere free of unnecessary secrecy. There will be no winners in such a race to the bottom in which academic staff, postdoctoral fellows and students feel scrutinised, stigmatised and on edge because of their ethnicity or nationality. Rather than cutting off research cooperation and university-industry cooperation, the US universities deserve more trust based on their know-how, experience and mechanisms for dealing with intellectual property.