The history of trade with China is almost as old as the United States itself; today, the U.S. and China boast the world's #1 and #2 largest economies, respectively. Trade between the two countries has been massive, yet often contentious. During the more than 230 years of trade between the dominant powers in the East and West, China and the United States have witnessed a string of ups and downs, standoffs and reconciliations, and trade wars and physical wars. Here, Stacker takes a look at this history—with particular focus on the years since President Donald Trump took office—using a variety of historical and recent news sources.
Since the turn of the 21st century, the relationship has been particularly strained. Even before Trump’s inauguration, he was stoking the flames on the campaign trail, using language of “rape” and theft” in regards to Chinese trade practices. After months of back-and-forth negotiations and retaliatory tariffs, the trade war began in earnest on July 6, 2018. An endless stream of trade talks bouncing between Beijing and Washington D.C. reached a critical juncture in June 2019, when the sides agreed to a truce prior to the G20 summit. Yet just days after, the U.S. Treasury had officially designated China a “currency manipulator.”
When the two signed Phase 1 of their modern trade deal in Jan. 2020, the global COVID-19 pandemic had begun its spread. The agreement went into effect in February, and as of May, both countries have committed to implementing the first phase and creating measures to support their economies. COVID-19 has also invariably affected June’s G7 summit of global economic leaders—potentially the best upcoming opportunity for diplomatic progress—as its fate, whether virtual or in-person, is up in the air (but tentatively set for late June).
With a presidential election looming in November, and the final effects of a pandemic not yet fully understood, U.S.-China trade relations are entering new territory. As global law firm Mayer Brown points out: “COVID-19 is placing new pressures on business and the markets. No one, including the White House, saw this coming. … Regardless of who is ahead in the polls or who wins the election, trade officials in Beijing and Washington will presumably try to minimize any disruptions or shocks during the remainder of 2020.”
Here's a look at how the two global giants got to where they are today.
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Following the famous Boston Tea Party rebellion of 1773, Americans abandoned tea en masse as an unpatriotic beverage. The masses, however, still craved the caffeinated, rejuvenating drink through the Revolution and beyond. Once it was free from Great Britain and the king's monopolistic British East India Company, the newly-minted United States set its sights east, toward China. On Feb. 22, 1784, the U.S. declared its economic independence when the American trade ship Empress of China set sail from New York City. Packed with 242 casks of Appalachian and New England ginseng, which the Chinese coveted, the ship was to return filled with tea. The era of American trade with China had begun.
The United States soon learned that its appetite for silk, ornate furniture, tea, and other Chinese goods far outpaced China's interest in importing American merchandise. The British had, however, discovered one product the Chinese did want from the West: smuggled opium. The Chinese government tried in vain to suppress the British and American opium trade, and in 1840, China suffered a series of devastating defeats in what came to be known as the First Opium War. In 1842, Britain forced lopsided terms of surrender that heavily favored the West, known as the Treaty of Nanjing. Two years later in 1844, America secured similarly-favorable trading terms with the Treaty of Wanghia.
In 1940, the United States was not yet at war with Japan, and was overwhelmingly pro-China, which Japan had invaded and occupied. That year, President Roosevelt approved military aid to China's nationalist government, implemented a blockade of Japan, and ramped up pro-China propaganda at home. Although military aid isn't the same as trade, the move codified America's support for China as a critical economic partner.
In 1949, communist Chinese forces led by Mao Zedong defeated the U.S.-backed Chinese nationalist government, which fled to Taiwan. The People's Republic of China was then established. For the next two decades, trade between the United States and communist China was frozen, diplomatic relations ceased, and virtually all travel was halted. Soldiers from the two nations clashed in the Korean War, which began the following year. America would recognize the nationalists exiled in Taiwan as the legitimate Chinese government through the 1970s.
Throughout the 1968 election campaign, Richard Nixon signaled both to China and America that he was willing to help thaw the two countries' chilly relations. In 1971, two events changed history: China invited America's ping-pong team to compete on their turf, and President Nixon's Secretary of State, Henry Kissinger, secretly visited China to discuss resuming trade.
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Nixon shocked America and the world in 1972 by announcing plans for a historic trip to China while still mired in the unpopular Vietnam War. A bona fide cold warrior, Nixon's ulterior motive for the trip was to cause friction between the U.S.S.R. and China. The end result, however, was the same: The stage was set for a future of normalized relations, restored diplomacy, and trade.
In 1979, China and the United States formally resumed diplomatic relations, with each nation offering major conciliations to the other. The United States agreed to recognize the country's government, and both established most-preferred nation status in terms of trade.
Throughout much of the 1980s, trade relations were cozy between the United States and China. During President Ronald Reagan's visit, both sides reduced tariffs, eliminated penalties, and enacted reforms. By 1988, Chinese exports to the U.S. totaled $40 billion.
In June 1989, Chinese government troops brutally crushed a pro-democracy student rally in Beijing's Tiananmen Square, leaving hundreds of peaceful protestors dead while the world watched on television. The massacre prompted the United States to impose broad sanctions and suspend military sales to China. Beijing responded by freezing all U.S relations.
After a contentious decade following Tiananmen Square, President Bill Clinton signed the United States-China Relations Act in 2000, granting permanent normal trade relations with China and removing the previous stipulation that required annual reviews of the country's trade status. The act also helped China enter the World Trade Organization.
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In 2008, China surpassed Japan as America's largest foreign creditor. That year, China held $600 billion in U.S. debt, or treasuries. Two years later, in 2010, China would leapfrog once more over Japan—this time to become the world's second-largest economy.
As early as 2014, Donald Trump called out China for what he deemed unfair trade practices, telling followers that China was "not a friend of the United States."
“We can’t continue to allow China to rape our country and that’s what they’re doing,” Trump said during his campaign for president, per Dorcas Wong and Alexander Chipman Koty of China Briefing. “It’s the greatest theft in the history of the world.”
The former businessman and his running mate Mike Pence defeated democratic nominee Hillary Clinton and Tim Kaine. Despite losing the popular vote, Trump carried 30 states and secured 304 electoral votes.
Following trade talks that began in April, the two sides reached a deal in which the U.S. would allow Chinese banks and cooked chicken, and China would accept American beef imports and liquified natural gas.
In a move to boost domestic manufacturing, Trump issued global safeguard tariffs in January, which went into effect the next month. The restrictions included a 30% solar panel import tariff and 20% on washing machines.
U.S. Trade Representative Robert Lighthizer said, “President Trump has made it clear we must insist on fair and reciprocal trade with China and strictly enforce our laws against unfair trade. This requires taking effective action to confront China.” The March memorandum included the filing of a WTO case for China’s “discriminatory technology licensing practices,” restricting investment in several technology sectors, and a new list of tariffs.
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On April 2, in response to the previous month’s American steel tariffs, China imposed 15–25% tariffs on a list of 128 products worth $3 billion. The next day, the Office of the United States Trade Representative announced up to 25% tariffs on an initial 1,334-product list worth $50 billion. On April 4, China added 25% tariffs to another 106 products (like soybeans and automobiles) worth $50 billion.
China increased the 106-item list to 545, for an additional $34 billion in tariffs. Not stopping there, the country proclaimed a second round of tariffs, at 25% on 114 products for $16 billion.
July 6 marked Day 1 of the U.S.-China trade war. Trump stuck to his previous threats of full-scale tariffs, and the U.S. Customs and Border Protection agency began to collect 25% on 818 products.
In Washington D.C. in late August, mid-level representatives from the two sides fruitlessly met for the first time in months to prevent imminent tariff escalation. A month later, China canceled talks as the U.S. planned tariffs on $200 billion worth of products. Talks resumed in early November, when Treasury Secretary Steve Mnuchin and Vice Premier Liu He spoke by phone about a possible ceasefire.
In Dec. 2018 at the G20 Summit in Buenos Aires, President Trump and Chinese President Xi Jinping announced a truce in the trade war. Both sides agreed to 90 days without any aggressive or retaliatory moves, to allow time for negotiations.
On Jan. 7, 2019, a U.S. delegation was slated to resume trade talks in China. President Trump insists the trade war has weakened China and strengthened the position of the United States, but experts say "the measures have disrupted trade, hurt manufacturing, roiled international markets, and slowed the global economy."
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In mid-February, the two sides talked in Beijing in “what [was] widely interpreted as a goodwill gesture,” per China Briefing. They closed out the month with talks in D.C. as Trump met with Lie He; the president expressed “optimism,” extended the truce deadline, and referenced the possibility of finalizing a deal. A month later, negotiations resumed in Beijing after a hiatus, though nothing was resolved.
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Following D.C. talks in the first week of April, Trump said the sides would have an answer for the deal in the next four weeks. At month’s end, Mnuchin called Beijing talks “productive” But by May 10, a deal hadn’t been reached and a USTR “Notice of Modification of Action” boosted tariffs from 10 to 25%. Three days later, China retaliated on $60 billion of American goods.
Ahead of the G20 summit in Osaka, Japan, the two sides agreed to a truce that “would avert the next round of tariffs on an additional $300 billion of Chinese imports, which if applied would extend punitive tariffs to virtually all the country’s shipments to the United States,” according to the South China Morning Post.
The 14th G20 summit in Osaka was the first in Japan. As a result of the summit, Trump and President Xi Jinping agreed to restart trade negotiations. Per the BBC, Trump confirmed that U.S companies could sell equipment to Huawei and that there would be no new tariffs on $300 billion in Chinese goods.
On Aug. 6, the U.S. Treasury officially labeled China a “currency manipulator,” which resulted from a determination of “whether countries manipulate the rate of exchange between their currency and the United States dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade.”
Beginning Sept. 1 of last year, the U.S. started implementing tariffs on over $125 billion worth of goods, ranging from “footwear, diapers, and food products to smart watches, dishwashers, and flat-panel televisions,” per China Briefing. China then imposed new tariffs, including one at 5% on crude oil.
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Trump announced plans for Phase 1 of a trade deal to end the war, noting it would take several weeks to materialize. On Nov. 1, however, China won a WTO case that allowed them to issue $3.579 billion in sanctions on U.S. imports. The decision was the result of a U.S. failure to remove anti-dumping duties, per Reuters.
The U.S. Treasury dropped the “currency manipulator” label on Jan. 13, ahead of a deal. Two days later, the two sides finally signed Phase 1, a 96-page agreement trimming U.S. tariffs and increasing China’s purchasing of American products. As China Briefing’s Wong and Chipman Koty note, however, “The ink...was barely dry before a global pandemic broke out.”
The 2020 Group of 7 summit, originally scheduled for Maryland’s Camp David on June 10, was converted to a virtual meeting amid rising health fears. The decision was made "in order for each country to focus all of its resources on responding to the health and economic challenges of COVID-19," according to White House spokesman Judd Deere.
On May 7, Mnuchin and Liu He spoke by phone and, per the USTR, talked about the impact of COVID-19 on each country's economic growth, and efforts to support those economies, as well as implementation of the Phase One agreement. By May 13, per Dorcas Wong and Chipman Koty of China Briefing, Chinese tariffs on the U.S. totaled $185 billion, and U.S. tariffs on Chinese goods totaled $550 billion.
On Sunday, May 24, White House national security adviser Robert O'Brien announced the in-person G7 summit could occur at the end of June. Leaders had considered the possibility of a videoconference meeting, but Trump revitalized the idea of a traditional onsite meeting of G7 leaders to indicate a return to normalcy.
On May 27, following Beijing's proposal of national security legislation to be imposed in Hong Kong, Secretary of State Mike Pompeo certified that the State Department no longer considers Hong Kong to have autonomy from China. As part of the Hong Kong Human Rights and Democracy Act passed in 2019, the U.S. must annually verify the territory's semi-autonomous status. Should Hong Kong's status officially change according to the U.S., it would be subject to the same trade regulations and travel restrictions as any other city in China, posing a major threat to its position as a global business hub.
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