Foreign Policy Missteps in U.S. - China Trade and Need for Doing Right Thing

When the U.S. is doing good, it spreads the good vibes and repercussions to many other countries. The U.S. has been on a good path in the past few years which invariably takes one major country on a road to success. The country which rides along these good tidings is China. As the U.S. biggest trade partner, China will be travelling on a good path when U.S. is in sound health and doing good. In fact, these are the times for China to shine and reciprocate some of the light on the world as well. By some common sense, stronger fundamentals in a country over a period of time will spill over and give rise to stronger trade partners. If you look at the voluminous trade between China and U.S., the point will hit home that these two countries are in very good standing due to the strong interlink at play. If one partner remains stagnant and the other rises and rises, the interlink comes into picture and pulls the partner along a similar upward rise. When the U.S. sneezes, the world catches cold. When the U.S. takes a good pill, the health of the world improves. When a country as big as China comes into a good territory, it leads to healthy outcomes to the world. 

What is this huge trade about and why does it make both countries dependent on one another, more so China due to significant exports. To tell the picture on the ground, a lion's share of U.S. commodities used in day-to-day life are made in China. Touch anything and it will be Made in China. Look at anything that is of some quality, looking good and decent, it will be from China. I became a huge fan of China, its manufacturing prowess, and the quality of the items. The imports by the U.S. include a range of products from electronics - cell phones and other household goods, computers and parts, machinery and electrical equipment, textiles and apparel - clothing and accessories, footwear, furniture and bedding, toys and sports equipment, automotive parts, chemicals and pharmaceuticals, plastic products, metal products, etc. Touch anything among these categories and you will end up using a Chinese product. In a way, Chinese products have become a lifeline for the U.S. citizens.

The trade relationship between the United States and China is one of the largest in the world. Since China joined the World Trade Organization (WTO) in 2001, bilateral trade has surged, benefiting both economies. It will be spell binding to look at the billions of dollars of trade across the board. While the United States exported $147.8 billion worth of goods to China in 2023, the U.S. imported $427.2 billion worth of goods in the same year, indicating a significant import size. For all that India banks on U.S., the numbers dwarf in relative comparison with China. India exported goods worth approximately a mere $77.5 billion to the U.S. while it imported $40.7 billion in the last fiscal year. The U.S. as a nation imported six times less from India with the same population size. This need not increase or decrease and could also remain the same. I work in this little bracket and content about this. 

When such strong headwinds in U.S. can uplift China or when the extremely good products from China are available at affordable prices for U.S. consumers, the trade should continue in same fashion. Remember, the trade relation U.S. has with China is extremely sacrosanct, in good spirit and beneficial for both the countries. However, policy bloopers are carried out in the open by the 2 recent administrations in U.S. under the last two presidents. You need to enter the competition and make competitive products but cannot hinder the trade with protectionism. Good quality products available at fair prices are a win for consumers. You can make a much better product at a lower price but cannot subvert the competition altogether. 

While calling trade practices of China as unfair, the U.S. has imposed unfair tariffs on Chinese goods. This error has taken birth in 2018 and has been continuing in the last two terms. In 2018, President Trump initiated a famous trade war by imposing tariffs on Chinese goods worth billions of dollars. The tariffs covered a wide range of products, from steel and aluminum to consumer electronics and clothing. The rationale was to protect American industries from what the administration considered unfair competition and to pressure China into changing its trade practices. China retaliated with tariffs on U.S. goods, affecting American farmers and manufacturers. This is the first misstep against a great nation and a manufacturing hub of the world like avoiding highways or tollways and taking smaller roads to reach destination. This is subverting the competitive highway and riding along the comfort of service roads. 

In January 2020, the U.S. and China signed the Phase One trade deal. This agreement required China to purchase an additional $200 billion worth of U.S. goods and services over two years, including agricultural products, manufactured goods, and energy. The deal also included commitments from China to improve intellectual property protections and remove barriers to American companies in the financial services sector. While you can definitely improve trade, there is no need for confrontation, tariffs and name-calling. 

Even the present Biden administration is taking the same stand and repeating the blooper started by Trump. The Biden administration has continued and expanded upon the tariffs imposed by the Trump administration on Chinese imports. This approach reflects ongoing concerns over China's trade practices, particularly regarding state subsidies and intellectual property theft, which are seen as giving Chinese companies an unfair advantage.  

As recently as two weeks back, in 2024, Biden announced new tariffs targeting $18 billion worth of Chinese imports, including significant sectors such as electric vehicles (EVs), semiconductors, and various critical minerals. These tariffs aim to protect U.S. industries and address what the administration perceives as unfair competition. For instance, tariffs on electric vehicles will increase from 25% to 100%, and those on semiconductors will rise from 25% to 50% by 2025. The administration’s tariffs are part of a broader strategy to ensure fair competition and support domestic manufacturing. This includes maintaining the tariffs initially imposed by Trump, which covered over $300 billion in Chinese goods. Additionally, the administration has committed to rigorous enforcement and collaboration with private sector entities to prevent technology theft. These acts and thought process by the two admins are some of the biggest stumbles of U.S. foreign policy and need to be corrected immediately doing what is right. 

As mentioned, the relationship with China and their goods are sacrosanct, inviolable to U.S. consumers. This needs to be hailed, encouraged and continued rather than acting in a way that is detrimental to this cause. This stance against the foreign nation will be against the interests of U.S., given how much committed Chinese is to the cause of U.S. by giving a lifeline array of goods. Acknowledge, appreciate and attest to the great trade happening underway rather than pointing fingers at minor loopholes.  

We need to come out of this mindset and look at the excellent landscape created by this trade. The economies of the U.S. and China are deeply intertwined. The U.S. imports a vast array of goods from China which benefit American consumers through lower prices and greater variety. Conversely, China is a major market for U.S. exports, such as aircraft, agricultural products, and semiconductors. This trade supports millions of jobs in both countries, fostering economic stability and growth. When a country is doing good, it propagates to the other and vice versa. Considering the size of each country, you can perpetually be in good standing if the trade continues unabated. 

Global supply chains are intricately linked, with China playing a pivotal role in manufacturing and assembly for numerous industries. Disrupting this relationship could lead to significant economic consequences, including higher production costs, supply shortages, and decreased competitiveness for U.S. companies in the global market. 

Both nations are leaders in technology and innovation. Collaborative efforts and competition in areas such as 5G, artificial intelligence, and renewable energy drive technological advancements that benefit global progress. Maintaining a stable trade relationship encourages continued innovation and technological exchange, which are crucial for addressing global challenges. Economic ties between the U.S. and China act as a stabilizing force in international relations. A healthy trade relationship reduces the risk of conflicts and fosters cooperation on global issues such as climate change, public health, and security. 

American consumers and businesses benefit directly from U.S.-China trade. Affordable consumer goods from China increase the purchasing power of American households, while U.S. businesses profit from access to the vast Chinese market. Disruption in trade can lead to higher prices and reduced market opportunities, negatively impacting both consumers and businesses. In essence, preserving and nurturing the U.S.-China trade relationship is essential for economic stability, technological progress, and geopolitical harmony. This trade link is one of the reasons behind enhanced global standing and success of both these major countries. 

This year is for the dragon to shine. The numbers also tell a similar picture. The growth rate of China’s GDP has seen an increase over the last two years. In 2023, the growth rate was 5.2%, which was a significant rise from the 3% growth rate in 2022. This upward trend continued into the first quarter of 2024, with a growth rate of 5.3%, marking the steepest yearly expansion since the second quarter of 2023. These figures indicate a robust recovery and growth trajectory for the Chinese economy during this period. Overall, China’s economic performance has been robust, with the government setting a GDP growth target of around 5% for the year. Imagine what a country of 1.41 billion in good standing can do to the world, itself and the U.S. You cannot entertain a mere thought against their cause, leave alone talk, action or policy.