Deep US-Chinese commercial ties persist despite mounting tension

The US-China trade war continues in full swing amid mounting tensions, but neither country wants to sever commercial ties

Chinese President Xi Jinping shakes hands with then US Vice President Joe Biden in 2013.

Seven months after President Joe Biden took office, the US-China trade war that began under former president Donald Trump rages on, with Washington maintaining tariffs on more than $250 billion in Chinese goods and Beijing retaliating with approximately $110 billion in tariffs on American products.

The Biden administration is conducting two reviews of its China and trade policies, and many hard-hit American businesses hope to see results by the end of the year.

“The administration appears to be near the end of that review process, and so maybe in the fall we will understand what US policy towards China and US trade policy toward China will be, but right now that hasn’t been articulated,” Craig Allen, the president of the US-China Business Council and a former commercial attaché at the American embassy in Beijing, told The National.

The US-China Business Council recently spearheaded a letter with more than 30 other organisations, including the powerful US Chamber of Commerce, asking Treasury Secretary Janet Yellen and US Trade Representative Katherine Tai to “continue negotiations with China to remove both nations’ counterproductive tariffs as soon as possible.”

The organisation's annual 2021 survey found that 82 per cent of its more than 200 members have had their business impacted because of the trade war.

But the tariffs have not dented the voracious US appetite for Chinese-imported goods.

A February report from the nonpartisan Congressional Research Service found that China remained the largest US trading partner in 2020 with total trade at $659.5 billion. China was the largest source of US imports for 2020 at $539.2 billion and its third largest export market at $120.3 billion.

“Frankly after two years it’s surprising how little effect the tariffs have had,” David Dollar, a senior fellow at the Brookings Institution’s China Centre, told The National.

“We’re actually going to have a new high in US trade with China this year, including a new high in our imports.”

Mr Dollar said the American tariffs “did not include a lot of the popular items like laptops, tablets, smart phones that the US imports or medical equipment” and pointed to a pandemic-induced demand surge for those products.

He noted that China has started to ship its items hit by US tariffs such as textiles, clothing and footwear to southeast Asia and Europe, managing to increase its exports on aggregate.

The Biden administration has also come under pressure from Congress to curb its imports of the raw materials used to make solar panels, potentially complicating its efforts to grow the American green energy sector and throwing a throwing a possible wrench in negotiations with China to set ambitious carbon reductions targets ahead of the UN climate conference in Scotland in November.

The US in June banned the import of polysilicon from the Hoshine Silicon Industry Company after US Customs and Border Protection said it had information implicating the company in the use of forced Uighur labour in Xinjiang.

“They are the biggest supplier, but it’s very different to put sanctions on an entire industry than on an individual company,” said Mr Allen. “It’s unfortunate that the Chinese side is not allowing any labour inspectors into Xinjiang to visit these factories to confirm and attest that they’re meeting International Labour Organisation requirements.”

Mr Allen also noted that Chinese students in the US higher education system pump an additional $15 billion into the American economy.

Still, campus-wide closures across the country amid the pandemic have forced many Chinese students to study remotely from their own country, while international students have struggled to receive visas from the State Department ahead of the upcoming school year.

“It’s not very certain how much of the $15 billion, if any, has been lost,” said Mr Allen.

“There’s a real resiliency in this market, and many parents want to send their students to the United States for [university]. And despite that upheaval or turmoil in the bilateral relationship, they’ve continued to do so.”

Additionally, Chinese investors hold approximately $1.4 trillion in US debt, whereas American investors hold only $100 billion in Chinese debt – a bête noire for numerous US politicians.

“The impact is very, very little,” said Mr Dollar. “I don’t worry that they’re going to quickly sell off those assets because they bought them for their own purposes, and that hasn’t changed. It would be disruptive to their own economy.”

“If the Chinese did try to shoot themselves in the foot and sell a lot of that quickly, there are other players in the US and globally who would buy it, and so it shouldn’t have much of an effect on the US economy.”