China’s leadership has managed well in adjusting to the trade and technology restrictions imposed by successive U.S. administrations. Trump’s tariffs did not achieve the objective of reducing the bilateral trade deficit, but they did lower China’s share of U.S. trade. If the intention was to weaken China economically, however, this has not yet happened.
The combination of pandemic-related global demand for China’s manufactured goods and China’s success in developing alternative markets minimized the negative consequences of the trade war. Any reduction in China’s “direct” exports to the United States has been offset by increased “indirect” exports from other countries.
Meanwhile, China’s share of global exports hit record highs and its imports as a share of GDP declined steadily. The world has become more dependent on China, while China has become less dependent on the world. If Biden’s intention is to focus more on security concerns by limiting China’s technological progress and diversifying supply options, the cost is likely to be substantial in the form of inflationary pressures, production inefficiencies, and damaged global growth prospects. U.S. politicians, however, have strongly supported these punitive measures since the benefits from appearing to be tough on China resonate well with voters. For Beijing, the major challenge now is to develop alternative export markets and to become more technologically self-sufficient.
To read the full article please click here. Our thanks to the China Leadership Monitor and the authors, Yukon Huang and Genevieve Slosberg, for kindly sharing these insights.
