U.S.-China Trade Relations

1. Tariffs & Trade War Escalation

Status of Existing Tariffs

• The U.S. maintains Section 301 tariffs (imposed under Trump and largely upheld by Biden) on $370+ billion worth of Chinese goods, covering electronics, machinery, and consumer products.
• Average tariff rates remain at ~19% on Chinese imports, compared to ~3% before the trade war.

Potential New Tariffs

• The Biden administration is reportedly considering new tariffs on strategic sectors, including:
  • Electric Vehicles (EVs): A possible 100% tariff (up from 27.5%) to block cheap Chinese EVs (e.g., BYD, NIO).
  • Batteries & Solar Panels: Higher duties to protect U.S. green energy industries.
  • Steel & Aluminum: Additional tariffs to counter China’s industrial overcapacity.
• Timing: New measures could be announced before the 2024 U.S. election to appeal to labor unions and domestic manufacturers.

China’s Retaliation Risks

• China has threatened counter-tariffs on U.S. agricultural exports (soybeans, pork) and luxury goods.
• Possible WTO lawsuits against U.S. measures (though the WTO dispute system remains weakened).

2. Technology & Export Controls

Semiconductor Restrictions

• October 2022 & 2023 U.S. Bans: The U.S. has blocked advanced AI chips (Nvidia, AMD) and semiconductor manufacturing equipment (ASML EUV machines) to China.
• China’s Response:
  • Domestic chip production push (e.g., SMIC’s 5nm chips, Huawei’s Kirin processors).
  • Export controls on gallium & germanium (key chipmaking materials).

AI & Cloud Computing Restrictions

• The U.S. is considering limiting Chinese access to U.S. cloud services (AWS, Microsoft Azure) over fears of AI military applications.
• China is advancing its own AI models (e.g., Baidu’s Ernie, Alibaba’s Tongyi Qianwen) but remains dependent on U.S. hardware.

3. Decoupling vs. "De-risking"

• Biden’s "De-risking" Strategy: The U.S. aims to reduce dependence on China in critical sectors (chips, EVs, rare earths) while maintaining trade in non-strategic areas.
• China’s "Dual Circulation" Policy: Focus on self-reliance (e.g., semiconductor subsidies) while keeping export markets open.
• Friend-shoring: The U.S. is shifting supply chains to allies (Mexico, Vietnam, India), but China remains deeply embedded in global manufacturing.

4. Investment Restrictions & Outbound Controls

• U.S. Bans on Chinese Tech Investments:
  • August 2023 Executive Order: Restricted U.S. investments in Chinese AI, quantum computing, and semiconductors.
  • TikTok Divestment Pressure: The U.S. is still pushing ByteDance to sell TikTok or face a ban.
• China’s Countermeasures:
  • Expanded anti-espionage laws, making due diligence harder for foreign firms.
  • Encouraging domestic alternatives (e.g., Huawei over Apple, Baidu over Google).

5. Diplomatic & Economic Dialogues

• Stalled High-Level Talks:
  • U.S.-China trade talks have no major breakthroughs since Treasury Secretary Yellen’s 2024 visit.
  • Working groups on export controls and financial stability continue, but progress is slow.
• APEC & G20 Engagements: Both sides avoid direct confrontation at multilateral forums but remain at odds on trade rules.