Written by Lucy Brown, 8 Jan 2025.
The U.S.-China trade relationship has grown significantly since China joined the World Trade Organisation (WTO) in 2001. While this partnership has delivered economic benefits, it has also introduced significant challenges, particularly regarding economic competition, national security, and human rights concerns.
Historical Context and Economic Expansion
China's path toward economic liberalisation began under Deng Xiaoping in the late 1970s, leading to normalised relations with the U.S. in 1979. Following its WTO accession in 2001, China committed to trade reforms, dramatically increasing trade volumes. By 2023, U.S. imports from China had surged from $100 billion in 2001 to over $400 billion. This relationship has benefited U.S. consumers through lower prices and supported over a million U.S. jobs. However, the "China Shock," marked by significant U.S. manufacturing job losses, exposed the costs of rapid trade expansion. National security concerns have further strained relations, including allegations of forced technology transfers and espionage. Additionally, China's subsidies and currency manipulation disadvantage U.S. businesses, while human rights violations, particularly involving Uyghurs in Xinjiang, complicate the economic relationship.
Policy Responses and Trade War
U.S. trade policy shifted dramatically under the Trump Administration (2017–2021). Tariffs were imposed on $350 billion of Chinese imports, targeting unfair trade practices. China retaliated with tariffs on $100 billion of U.S. exports. Although the 2020 Phase One agreement halted further escalation, existing tariffs remained. The Biden Administration (2021–2024) has primarily maintained Trump-era policies, adding export controls to restrict China's access to critical technologies, especially semiconductors. These measures reflect an ongoing emphasis on national security and domestic manufacturing.
Economic and Political Impacts
The trade war significantly increased costs for U.S. firms dependent on Chinese imports, raised consumer prices, and reduced real income in both countries. U.S. agricultural sectors, particularly in Republican-leaning areas, suffered under retaliatory tariffs. Politically, anti-globalisation sentiment and domestic protectionism influenced policy direction, contributing to stock market volatility and economic uncertainty.
Looking Ahead
The U.S.-China trade relationship underscores complex challenges in balancing economic interdependence with geopolitical and domestic concerns. Long-term implications for global trade, income distribution, and regional disparities remain critical for future research. As tensions persist, policy decisions will continue to shape the evolving dynamics of this consequential relationship.
Council on Foreign Relations. "The Contentious U.S.-China Trade Relationship." Last modified December 2, 2022. https://www.cfr.org/backgrounder/contentious-us-china-trade-relationship.
Fajgelbaum, Pablo, and Amit Khandelwal. The Economic Impacts of the US-China Trade War. NBER Working Paper no. 29315. Cambridge, MA: National Bureau of Economic Research, September 2021, revised December 2021. http://www.nber.org/papers/w29315.
Benguria, Felipe, Jaerim Choi, Deborah L. Swenson, and Mingzhi (Jimmy) Xu. "Anxiety or Pain? The Impact of Tariffs and Uncertainty on Chinese Firms in the Trade War." Journal of International Economics 137, July 2022.
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