The economic and trade structure of China and the United States is complementary, and the interdependence of the two countries cannot be easily separated.
Since China acceded to the WTO, the country has provided the United States with high-quality and inexpensive goods through trade, helping the American people manage inflation and consumer costs. The rapid development of China's economy has also provided huge market opportunities for American companies.
In 2014, China replaced Canada as the largest trading partner of the United States, and the Sino-U.S. economic and trade relationship has become deeply integrated, in the wider context of globalization. Since 2017, despite growing conflicts and frictions, China-U.S. economic and trade ties have shown surprising resilience and vitality, with bilateral trade only showing a relatively obvious decline in 2018 and then maintaining growth for four consecutive years.
Latest data from the U.S. Department of Commerce show that in 2022, the U.S.-China trade yielded a record high of $690.6 billion.
The U.S. annual goods trade deficit with China also reached $382.9 billion, second only to the record high of $419.4 billion in 2018. The share of U.S. exports to China has also been rising since 2007, reaching an all-time high of 8.6 percent in 2021. From the trade-in-goods structure of both sides, China's top ten exports to the U.S. have been relatively stable, mainly mechanical and electrical products, which accounted for 40 percent of China's total exports to the U.S. in 2022, labor-intensive products including toys and furniture, as well as textile products, plastic products, rubber products, etc.
The largest U.S. exports to China are mechanical and electrical equipment, as well as primary products including plant products and mineral products. China was the largest buyer of U.S. soybeans in 2022, and highly dependent on the import of agricultural and mineral products from the United States. The U.S.'s food, beverages, wine and vinegar, tobacco and textiles, all had seen a rise in their export volume to China in 2022. The Sino-U.S. trade structure determines that China is and will remain an irreplaceable trading partner of the United States.
Trade and investment are not zero-sum games, and the decoupling of the China-U.S. economies poses huge risks. The trade conflict between the two countries in recent years has not only brought great uncertainty to China's manufacturers and exporters, but also directly damaged the U.S. economy, in the form of rising consumer prices, delayed or canceled investments, reduced household wealth, slower job growth, and disrupted supply chain, etc. Most affected, however, by the government's actions, are the American people. According to Moody's Analytics, the value of more than 90 percent of the tariffs imposed by the U.S. on China are borne by American companies and households. The U.S. Chamber of Commerce's in-depth analysis of China-U.S. economic relations in 2021 also showed that since 2018, the trade conflict has cost the United States 245,000 jobs. If 25 percent tariffs are placed on all two-way trade, U.S. businesses and the economy would be significantly affected, with $190 billion annually in foregone U.S. GDP by 2025. If U.S. companies reduce cumulative FDI in China by 50 percent, the U.S. has to face $25 billion annually in lost capital gains and one-time GDP losses of up to $500 billion.
As the world's two largest economies, decoupling will cost far more than the two countries themselves. At present, many of the world's nations have leveraged their comparative advantages and cooperated with each other, forming a global industrial, supply and value chain that operates efficiently. The shock of U.S.-China decoupling would spread across borders, through global supply chains with significant implications for third countries. From 2017 to 2020, uncertainty caused by Sino-U.S. friction and geopolitical risks had a significant impact on the business plans of Japanese companies, with sales of subsidiaries in China falling sharply and parent companies' share prices also falling, according to a report by a Japanese research institute. The economic and trade decoupling between China and the United States will also directly reduce the flow of goods in third markets and damage job opportunities in other countries. The deterioration of the world economic environment will also contribute to the accumulation of global debt, raise medium-term financial risks, and hinder the long-term healthy development of the world economy.
In the face of global challenges, such as climate change, public health challenges, and marine pollution, decoupling is undeniably dangerous. As the world's first and second largest economies, China and the United States have more in common than ever before, particularly considering the backdrop of a sluggish global recovery, the climate and various humanitarian crises. The two sides should take cooperation as the cornerstone to achieve win-win results through cooperation, jointly avoiding the negative effects of major countries' economic policy adjustments. In so doing, this can create a fair and just international environment, foster a new impetus for global economic recovery and healthy competition between nations. This is not only conducive to the two sides, but also conducive to the peace and prosperity of the whole world.
Generally speaking, in the era of globalization, the behavior of any single country will have an impact on the other. Given the twists, turns and challenges in China-U.S. relations, mutually beneficial economic and trade links are the cornerstone of any in-depth dialogue between the two countries. As two major countries in the world, China and the United States should strengthen exchanges and coordination, properly handle differences, promote more practical cooperation, work together to meet global challenges, and contribute solutions to a better tomorrow for the whole of mankind.