The US-China Economic Relationship: A Comprehensive Approach

Abstract

The U.S.-China economic relationship has reached a critical juncture. Over the past year, the U.S. has imposed tariffs on $250 billion worth of Chinese imports and China has retaliated, raising tariffs on U.S. exports. The U.S. concerns that underpin these bilateral trade tensions stem from specific practices endemic to China’s economic model that systematically tilt the playing field in favor of Chinese companies domestically and globally. Progress on specific trade issues will require China to comply with its World Trade Organization (WTO) commitments and to make certain reforms that will likely touch on areas of state control over the economy. In addition, new trade rules are needed to address China’s economic practices not covered by its WTO commitments, including in areas such as state-owned enterprises (SOEs), certain subsidies, and digital trade. These issues also come at a time of increasing U.S. concern over the national security risks China presents, particularly with respect to technology access. Despite the challenges the U.S. has had at the WTO, the WTO should be central to resolving U.S.-China trade tensions. From this perspective, we outline a multipronged strategy, including bilateral, multilateral, and unilateral actions, as well as working with allies, that together would constitute positive next steps for this critical economic relationship.