US Trade Relations with China: Tariffs Fail to Shift Balance

China’s exports to the United States have seen a significant decline of 26% year-on-year in the eight months following the imposition of additional tariffs by President Donald Trump in April 2023. Despite this reduction, the anticipated victory for the United States in the ongoing trade war remains elusive, as China’s global trade surplus has continued to reach record highs. Analysts suggest that the recent US National Security Strategy report indicates a growing recognition within the Trump administration of the challenges ahead in achieving a favorable outcome in the trade conflict.

The report, released on December 4, 2023, reflects a noticeable shift in tone. While it criticizes previous engagement strategies with China, it does so with less hostility than in earlier documents. Trump placed blame on former administrations for failing to recognize that encouraging investment in China would not lead to the desired economic reforms. Instead, he argued, “China got rich and powerful, and used its wealth and power to its considerable advantage.”

Despite this, the report expresses aspirations for a more balanced relationship between the two nations. It highlights that China has recycled approximately $1.3 trillion of its trade surplus into loans across the Global South, which poses new national security and economic challenges for the US and its allies. This growing concern is underscored by the fact that European, Japanese, and South Korean entities collectively hold around $7 trillion in net foreign assets, while international financial institutions possess about $1.5 trillion in assets. The strategy outlines a commitment to reform multilateral development institutions to better serve American interests.

Furthermore, the report urges allies—such as Europe, Japan, South Korea, Australia, Canada, and Mexico—to adopt policies that direct China’s growth towards household consumption. The rationale behind this approach is based on the belief that regions like Southeast Asia, Latin America, and the Middle East cannot absorb China’s excess production capacity.

Chinese commentators have noted a perceptible softening in the US’s rhetoric. Guoping, a military columnist from Zhejiang, remarked that while the report still addresses Taiwan and the South China Sea, the language is less aggressive than in past iterations. He suggested that this reflects the reality of China’s growing strength and the US’s inability to achieve its objectives through confrontation.

The report indicates a pivot in US strategy, emphasizing the Monroe Doctrine as part of its efforts to maintain dominance in the Western Hemisphere. First articulated by President James Monroe in 1823, this doctrine asserts that the US will resist external interference in its sphere of influence. Li Haidong, a professor at China Foreign Affairs University, commented that while the language has changed, the underlying competitive mindset remains intact.

The impact of the US-China trade war can be seen in stark numbers. As US tariffs average around 55%, many Chinese manufacturers have relocated their production to ASEAN countries, such as Vietnam and Thailand, where tariffs are more manageable at around 20%. Despite the relocation costs and job losses in China, the broader economic impact has been limited. In fact, China has reported a 5.4% increase in total exports to $3.41 trillion in the first 11 months of 2023, alongside a 21.6% rise in its trade surplus to $1.08 trillion.

Exports to the US decreased by $89 billion, or 18.9%, to $385.9 billion, while exports to ASEAN surged by $72 billion, an increase of 13.7%. Other markets, including Hong Kong, India, Mexico, and members of the European Union, have also stepped in to mitigate the impact of the trade war, with exports to the EU rising by 8.1% to $508 billion.

In summary, while the US has made efforts to counter China’s economic rise through tariffs and strategic initiatives, the latest developments suggest a complex landscape where China’s resilience and adaptability continue to challenge American trade objectives. The evolving dynamics of this relationship will require careful navigation in the months and years ahead, as both nations seek to redefine their roles on the global stage.