US-China Trade Relations and Market Trends

The Contentious U.S.-China Trade Relationship

Trade between the world’s two biggest economies has ballooned in recent decades, bringing significant benefits but also perils that have led to calls to rethink the relationship. U.S.-China trade exploded in the two decades after China joined the World Trade Organization in 2001. This trade has benefited U.S. and Chinese consumers and companies, but officials in Washington are increasingly concerned about the risks posed by Beijing’s state-led development.

President Biden has maintained tariffs on Chinese goods and introduced new trade restrictions in an effort to reshape the bilateral relationship.

Today, China is one of the largest export markets for U.S. goods and services, and the United States is among the top export markets for China. This trade has helped the United States in the form of lower prices for consumers and higher profits for corporations, but it has also come with costs. Though U.S. consumers benefited from the flood of cheaper goods from China, millions of Americans lost their jobs due to import competition. The United States has long accused China of pressuring American companies to hand over their technology, or pilfering it outright.

The optimism that accompanied China’s entry into the World Trade Organization (WTO) twenty years ago vanished as Beijing embraced state-led development, pouring subsidies into targeted industries to the detriment of U.S. and foreign companies. Meanwhile, investment by Chinese companies has raised national security concerns. As U.S. President Joe Biden embraces an increasingly aggressive approach, the future of the economic relationship is uncertain.

What is the history of the U.S.-China trade relationship?

For thirty years following the establishment of the People’s Republic of China in 1949, there was virtually no trade between the two countries; Washington had severed ties with the communist government in Beijing. In 1979, the United States and China normalized relations, prompting an explosion of trade over the next four decades from a few billion dollars worth to hundreds of billions of dollars annually. China also began a decades-long process of economic reform in the late 1970s under the leadership of Deng Xiaoping. His government loosened state control over the economy and allowed private industry to develop. Chinese policymakers aimed to boost trade and investment, and in 1986 Beijing applied to rejoin the General Agreement on Tariffs and Trade, the WTO’s predecessor. After protracted negotiations with the United States and other WTO members, China joined the WTO in December 2001.

China is now the third-largest export market for the United States, behind Canada and Mexico.

Source: Council on Foreign Relations