US-China Trade Volume Surges Amid Strained Relations
The trade volume between the United States and China continues to surge despite the strained relations between the two countries. Over the past few years, US-China relations have deteriorated with successive US presidents, including Donald Trump and Joe Biden, accusing China of unfair trade practices, intellectual property theft, and increasing trade deficits. However, despite this rhetoric and ongoing trade disputes, trade between the two nations is actually growing.
In 2022, the trade volume reached a record high of $690.6 billion between the US and China in the last three years. The US exported goods worth $153.8 billion to China, experiencing a 1.6% increase, and imported goods worth $536.8 billion from China, reflecting a 6.3% increase compared to 2021.
These statistics indicate that both economies are highly dependent on each other, despite their adversarial relationship. The economic advantage of trade has outweighed the rancor of unfair practices and disputes. The US cannot simply decouple from China, as it is a major trading partner.
While the negative perception of China prevails among American consumers, with 78% seeing it as an economic threat and 73% as a security threat, US companies are also pessimistic about doing business in China. Around 66% blame the uncertainty of bilateral relations, 55% do not consider China a top investment priority, and 49% find it less welcoming to foreign companies due to travel restrictions, rising labor costs, and trade disputes.
The US has attempted to mitigate its dependency on China through a strategy of de-risking – being more independent and less reliant on a single economy. During US Treasury Secretary Janet Yellen‘s visit to Beijing in July, the US advocated for de-risking from China. It has committed billions in high-tech manufacturing and scientific research to bolster its industry as a countermeasure to China’s growing influence. However, achieving de-risking without conflict is challenging, as China remains both a competitor and a trade partner.
The US’s approach to China seems flawed in several ways. First, imposing tariffs on goods has not deterred trade or reduced the trade deficit, but instead increased both. The trade deficit reached a record high of $382.9 billion in 2022, consistently favoring China.
Second, despite China’s rise, the US economic power has remained stable. The US still accounts for 26% of global output, while China’s share currently stands at 18%. The US economic supremacy is not under threat from China’s ascent.
Third, attempting to move supply chains outside China to decouple or de-risk will not diminish China’s global influence. Even if the US shifts to alternative supply chains, these chains will likely still depend on China for critical components. Shifting iPhone manufacturing from China to India is an example of this interdependence.
Furthermore, seeking allies in Europe, Taiwan, Japan, India, and the Trans-Pacific Partnership will not effectively counter China’s economic growth. Threatening companies like Taiwan Semiconductor Manufacturing Company (TSMC) or implementing export restrictions on Huawei will not significantly impact China’s global influence either. In fact, the International Monetary Fund (IMF) has already projected China’s economic growth to surpass major economic powers such as the US, Germany, Italy, the UK, France, the Netherlands, and Spain.
Lastly, the US undermines the rules-based trading system it helped establish in the 1950s. Trade barriers, export controls, and technology bans have eroded the order based on free markets. This deterioration will have far-reaching implications for the global economy.
In conclusion, the US-China trade volume continues to surge despite strained relations. Both countries remain highly dependent on each other economically, leading to increased trade even in the face of disputes and negative perceptions. The US approach to China, including tariffs, attempts at de-risking, and seeking allies, has proven ineffective in reducing China’s influence. Instead, the US should focus on reducing tariffs, relaxing technology bans, and stabilizing relations with China to achieve a more productive outcome.
