China–US Trade from 1970s to the Present

Abstract

<p>In the 1970s, China and the United States renewed trade relations after a historic meeting between US President Richard Nixon and Chairman Mao Zedong. By 1979, the two nations had normalised diplomatic relations. Four general phases of bilateral trade followed with varied but significant impacts on international trade as China became a global superpower.</p><p>In the 1980s, China’s reform measures ushered in mutually beneficial strategic collaboration with the United States that led to bilateral trade flourishing in the 1990s. In the early 1980s, China–US trade consisted mainly of agricultural and heavy industrial commodities. China’s economic reforms caught the attention of US companies eager to access China’s relatively cheap labour capacity and anticipated consumer market. The 1990s registered dynamic growth in bilateral trade with the increasing integration of supply lines across several industries as China pursued membership in the World Trade Organization (WTO). Commercial activity included more sophisticated technologies and services related to communication, computing, transportation, intellectual property, and financial services. While the balance of trade favoured the United States for much of this phase, by the late-1990s China and the United States settled into rough trade parity.</p><p>From 2001 to the financial crisis of 2008, trade continued to increase, although tensions escalated as implications of Chinese economic strength increased its geopolitical power. In 2001, China became a member of the WTO as the United States waged two major wars in the wake of the terrorist attacks of 11 September. China’s economy continued to grow annually at double-digit rates as it became the United States’ largest trading partner. Meanwhile, the US economy amassed a large national budget deficit as the balance of China–US trade shifted decisively in favour of China.</p><p>The 2008 global financial crisis exacerbated tensions over the ballooning US national deficit. In the aftermath, China–US trade rebounded to high levels, but tensions regarding trade practices and economic policies intensified. China tried to press its advantage from having directed trade surplus revenues into the purchase of US securities. It refuted charges from the United States that it had reneged on its WTO pledges to enact market reforms.</p><p>Trade relations soured further when the United States enacted tariffs and increased regulations on the technology sector in 2018. Despite the tariffs, trade between the two global superpowers continued to run at a historically high level. Political tensions and geopolitical competition again intensified in the wake of the COVID-19 pandemic and Russia’s invasion of Ukraine in 2022. China and the United States continue to restrict the trade of natural resources and technologies deemed important to national security. The decision to fortify or to decouple their national economies will have enduring consequences.</p>