• Former SEC chief Jay Clayton said the US and China have become increasingly codependent in recent years. 
• If tensions rise between the two superpowers, it could pose huge risks for both economies, he told CNBC.
• "We are deeply embedded in China... That means that any kind of sharp pullback is going to have significant economic consequences."

Increasing tension between the US and China can pose huge economic risks to both countries due to their codependency on one another, according to former US Securities and Exchange Commission chairman Jay Clayton. 

The two superpowers have never been this intermingled in "modern history," he told CNBC, pointing to examples like US venture capital investments in China's ByteDance as well as Apple's reliance on Chinese consumers.

Apple has a tremendous influence over the market, Clayton said, making up over 7% of the S&P 500 alone.

The iPhone developer has grabbed a significant market share of China's smartphone sales too, making up nearly 24% in the fourth quarter of 2022, Bloomberg reported in January, citing Counterpoint Research.

"Our largest, most important global company has that kind of co-dependency with China," Clayton said on Friday. "We have to recognize that that's a whole new world for us."

ByteDance, the Chinese parent company of TikTok, could also be banned from the US soon, impacting some of its largest backers in the states. Private equity giants Sequoia Capital and KKR, for example, previously led ByteDance's capital raise two years ago. 

"We are deeply embedded in China. That's where we are. That means that any kind of sharp pullback is going to have significant economic consequences," Clayton said, adding that a "pivot has to come."