U.S./China Trade Relations
Ongoing trade discussions between the U.S. and China were high in the news cycle in March. The economic relationship between China and the U.S., which has expanded enormously during the last few decades, has been one filled with tensions, allegations of currency manipulation, outright theft of intellectual property (IP) and other speed bumps in the highway of trade between the two countries.
Some review of modern Chinese history may help set the backdrop for the current negotiations. These are offered in the bullet points that follow.
- The People’s Republic of China was established on Oct. 1, 1949, by Communist Party leader Mao Zedong after militarily running out the Nationalist government of Chiang Kai-shek, who set up a Chinese government in Taipei. The U.S. sided with Taipei, leading to a period of poor relations with China.
- In October 1964, China conducted its first atomic bomb test, a provocative event given high tensions between the U.S. and China over the escalating Vietnam conflict.
- In February 1972, after a period of “Ping-Pong Diplomacy,” President Richard Nixon visited China and met with Chairman Mao Zedong. The Shanghai Communiqué, signed with Premier Zhou Enlai, improved relations between the two countries.
- In 1979, President Jimmy Carter granted China full diplomatic recognition. This acknowledged the One-China principle and severed normal ties with Taiwan.
- In 1989, the U.S. froze relations with China and suspended military sales in the wake of the Tiananmen Square massacre of hundreds of protesting students in Beijing.
- In October 2000, President Bill Clinton signed the U.S.-China Relations Act of 2000. This paved the way for China to enter the World Trade Organization.
- In August 2010, China surpassed Japan as the world’s second-largest economy after it is valued at $1.33 trillion.
- Between 2010 and 2011, the U.S. trade deficit with China increased from $273.1 billion to a record-high $295.5 billion. The increase accounted for 75% of the entire U.S. trade-deficit increase.
- In March 2018, the Trump Administration announced tariffs worth about $50 billion on Chinese imports. These are levied in response to China’s alleged theft of U.S. technology and IP.
The historical stepping stones on this brief timeline bring us to the present, in which significant trade issues persist between the U.S. and China. These include the still-growing foreign-trade deficit, cyber theft and IP rights, China’s self-serving governmental policies concerning joint ventures with foreign companies, the U.S.-imposed steel and aluminum tariffs, and other items.
At the time of this writing, President Trump says there is no rush to complete a trade agreement with China. He insists that any trade deal with China address protections for IP rights, which after months of negotiation is still an obstacle. It has been reported that Trump and Chinese President Xi Jinping will hold a summit at the Mar-a-Lago resort in Florida in late March, though this may be in jeopardy without the completion of a comprehensive trade deal to sign.
In the meantime, steel and aluminum tariffs on metal from all affected countries continue unabated, effectively raising the price of raw materials to a large portion of those reading this column. This is, in essence, a tax on our domestic industry that needs to end.