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Moves to stabilise China-US ties may have reached their “limit” since a summit eight months ago, a leading Chinese political scholar has warned.

Da Wei, director of the Centre for International Security and Strategy (CISS) at Tsinghua University, said both countries needed to make their intentions and goals more clear and convincing to each other. This was crucial to preventing “fundamental distrust”, Da told an international security forum in Beijing on Sunday. He also warned of “negative development” in bilateral ties, particularly on Taiwan, and technological and economic issues, noting that recent remarks from senior officials on either side had been marked by impatience, frustration, anxiety and disappointment. “This tendency is not good,” the US-China relations specialist told a panel at the World Peace Forum, which was jointly hosted by Tsinghua and the Chinese People’s Institute of Foreign Affairs, a government-run policy group.

BEIJING — China’s ambassador to the U.S., Xie Feng, has blamed U.S. tariffs and export controls for a drop in trade between the two countries.

That’s according to a speech he gave via video on Tuesday at Forbes’ U.S.-China Business Forum in New York, published online by the Chinese Embassy in the U.S.

The steep drop in trade with China could be a positive development, the United States' top trade official has told the BBC.

Katherine Tai said it "isn't necessarily negative. It could be a positive indication of diversification on both sides." The amount of goods the world's two biggest economies sold to each other fell 17% last year. It comes amid deepening divisions in the global economy.

In a sharp escalation of a trade war that began with his predecessor Donald Trump, US President Joe Biden’s administration recently unveiled a new set of tariffs on Chinese goods, including a quadrupling of the tariff on electric vehicles (EVs) that brings the rate to 100%. It did not take long for China to retaliate by launching an anti-dumping probe into chemical imports from the United States, the European Union, Japan, and Taiwan. Have US-China economic relations reached the point of no return?

President Biden and President Xi struggled to make progress on trade when they met in California in November

The US has been leading those calls for WTO reform in recent years.

https://www.project-syndicate.org/columnist/pinelopi-koujianou-goldberg

In a sharp escalation of a trade war that began with his predecessor Donald Trump, US President Joe Biden’s administration recently unveiled a new set of tariffs on Chinese goods, including a quadrupling of the tariff on electric vehicles (EVs) that brings the rate to 100%. It did not take long for China to retaliate by launching an anti-dumping probe into chemical imports from the United States, the European Union, Japan, and Taiwan. Have US-China economic relations reached the point of no return?

In the depths of the pandemic, as global supply chains buckled and the cost of shipping a container from China soared nearly twentyfold, Marco Villarreal spied an opportunity. In 2021, Mr. Villarreal resigned as Caterpillar’s director general in Mexico and began nurturing ties with companies looking to shift manufacturing from China to Mexico. He found a client in Hisun, a Chinese producer of all-terrain vehicles, which hired Mr. Villarreal to establish a $152 million manufacturing site in Saltillo, an industrial hub in northern Mexico. Mr. Villarreal said foreign companies, particularly those seeking to sell within North America, saw Mexico as a viable alternative to China for several reasons, including the simmering trade tensions between the United States and China. “The stars are aligning for Mexico,” he said. New data released on Wednesday showed that Mexico outpaced China for the first time in 20 years to become America’s top source of official imports — a significant shift that highlights how increased tensions between Washington and Beijing are altering trade flows. The United States’ trade deficit with China narrowed significantly last year, with goods imports from the country dropping 20 percent to $427.2 billion, the data shows. American consumers and businesses turned to Mexico, Europe, South Korea, India, Canada and Vietnam for auto parts, shoes, toys and raw materials.

In a sharp escalation of a trade war that began with his predecessor Donald Trump, US President Joe Biden’s administration recently unveiled a new set of tariffs on Chinese goods, including a quadrupling of the tariff on electric vehicles (EVs) that brings the rate to 100%. It did not take long for China to retaliate by launching an anti-dumping probe into chemical imports from the United States, the European Union, Japan, and Taiwan. Have US-China economic relations reached the point of no return?

The steep drop in trade with China could be a positive development, the United States' top trade official has told the BBC.

Katherine Tai said it "isn't necessarily negative. It could be a positive indication of diversification on both sides." The amount of goods the world's two biggest economies sold to each other fell 17% last year. It comes amid deepening divisions in the global economy.

For only the second time in 20 years, China trade have fallen below 10% of total U.S. trade for two consecutive months, according to my analysis of the latest U.S. Census Bureau data.

If China should finish the year in single digits — it did so for the months of March and April, the latest data available — it would mark the first time it will have happened on an annual basis since 2003.

The “quiet” trade war that has been underway between the U.S. and China for a few years now is getting louder.

A recent series of punitive actions by both countries is making their ongoing dispute “more explicit,” says Christopher S. Tang, distinguished professor and Edward W. Carter Chair in business administration at the UCLA Anderson School of Management.

On the domestic level, Beijing’s policymaking is already becoming less agile and adept. Examples of this more rigid approach, and its downsides, aren’t hard to find. Consider last winter, when the government decided to force an abrupt nationwide switch from the use of coal to gas in heating systems. It sounded like a smart move for a country as polluted as China. But the edict was enforced suddenly across the country, with no exceptions. Thus in China’s frigid north, many coal-burning furnaces were ripped out before new gas ones could be installed—leaving entire towns without heat and forcing villagers to burn corn cobs to survive. If China continues down its current course, expect many more cases where even well-intentioned policies are implemented in a rash and clumsy way, leading to still more harmful consequences. Since personalized dictatorships are necessarily bad at admitting fault—for nothing can be permitted to damage the myth of the omnipotent leader—China will also likely become less adept at correcting mistakes once it makes them. Or at confronting the underlying problems that are dragging down its economy, such as an overreliance on bloated and inefficient state-owned enterprises (SOEs), which have only grown bigger and more powerful since Xi took office; dangerously high debt levels, especially among local governments; and a tendency to react to every downturn by pumping more cash into the system, especially for unnecessary infrastructure projects. In fact, China is not only unlikely to address any of these shortcomings; it’s likely to compound them. That is just what it did on Oct. 7, when the People’s Bank of China announced yet another costly stimulus program: a $175 billion plan to shore up small and medium-sized businesses. With each new budget-busting move, and in the absence of reform, the odds that China will experience a seriously destabilizing economic crisis—which China bears such as Ruchir Sharma, the head of emerging markets at Morgan Stanley, have been predicting for years—keep rising. “The big question is whether one of the ticking time bombs—bad debt, overheated property markets, oversized SOEs—will explode,” Gabuev says. “Because of Xi’s concentration of power, no one will give him advance warning if one of these bombs is about to go off. And because he doesn’t actually understand macroeconomics very well, and everyone is afraid to contradict the emperor, there’s a huge risk that he’ll mismanage it when it does.” Indeed, the government’s response to any instability is likely to be ugly. As Schell explains, “Xi has really put China at enormous risk. And because his only tool is repression, if things go wrong we’re likely to see even more crackdowns.” Such predictions should worry everyone. China is the world’s largest economy by some measures, so if it melts down, the entire planet will pay the price. But the history of other autocracies, such as Vladimir Putin’s Russia or Kim’s North Korea, suggests that Xi’s relentless power play could produce even worse consequences. Since taking power, Xi has charted a far more aggressive foreign policy than his predecessors, alienating virtually every neighbor and the United States by pushing China’s claims in the South China Sea, threatening Taiwan, and using the military to assert Beijing’s claims to disputed islands. Should China’s economic problems worsen, Xi could try to ratchet up tensions on any of these fronts in order to distract his citizens from the crisis at home. That temptation will prove especially strong if U.S. President Donald Trump keeps poking China by intensifying the trade war and publicly denouncing it. And things could get scarier still, Pei warns, if China’s economic problems spin out of control completely. In that case, the Chinese state could collapse—a typical occurrence among typical dictatorships when faced with economic shocks, external threats (especially a defeat in war), or popular unrest—but one that, given China’s size, could have cataclysmic consequences if it happened there.

Caught in the middle are US and Chinese companies with around $550 billion in revenues at stake in each other’s markets. In many cases, these enterprises are also intimately interconnected through industrial supply chains. Unwinding commercial ties that took decades to build would be costly and pose significant risk to both US and Chinese companies. But our analysis suggests that US companies, because of their strong push over the years to source and sell in China, collectively have far more to lose in the near term—with respect to both revenue and access to critical components and materials.

US companies have around $400 billion of revenue at risk in China. (See Exhibit 1.) While that represents only 5% of their total revenues, its loss would translate into around 15% of their market capitalization, or about $2.5 trillion in value.2 We found that seven major US industrial sectors—consumer electronics, motor vehicles and parts, aerospace, medical supplies, medical equipment, machinery, and enterprise hardware—derive 7% to 16% of their global revenue from China.3 Overall, Chinese firms have three to five times less revenue exposure to the US market; only the consumer electronics, enterprise electronics, and machinery sectors rely on the US for at least 7% of revenue.

The Chinese economy is too big for decoupling to be a realistic prospect. China is the world’s largest manufacturer of goods, with an output equivalent to that of all U.S., German, and Japanese factories combined. Under a decoupling scenario, goods shortages would be likely, and inflation would spike as U.S. firms struggle to source products. In addition, Chinese supremacy in producing dishwashers, computers, or toys does not threaten U.S. interests. Cutting ties to China in such noncritical sectors—as decoupling would —is not needed. A U.S.-China decoupling would accelerate the fragmentation of the global economic landscape. Under a decoupling scenario, all countries around the world would have to pick sides between the United States and China. This could yield unpleasant surprises for Washington. China is the biggest trading partner of the majority of countries, and the citizens of many emerging economies appear to prefer China over the United States. As a result, decoupling could well backfire: It would deepen China’s global influence by forcing countries to shift away from the United States. Cutting all ties to China would diminish those economic interdependences that give Washington leverage over Beijing. Partners have much to lose if relations sour, but adversaries do not. U.S. sanctions on China—for instance, the ones that would be imposed if a conflict were to erupt in Taiwan—would be toothless if Washington and Beijing did not have trade and financial ties anymore. To put things differently, economic interdependences between the United States and China benefit U.S. security; they act as a deterrent against China’s territorial ambitions.

The prevailing belief among policymakers is that the surge of Chinese imports into the US market during the 2000s hollowed out America’s manufacturing base, making the kind of rapid military build-up that enabled the Allies to win World War II all but impossible. In US policy circles, the “China Shock” is often portrayed as a massive error that devastated towns across the Rust Belt and led to a sharp increase in inequality.

Consequently, there is widespread agreement among policymakers and commentators that the US must prevent a “China Shock 2.0” by imposing massive tariffs and trade restrictions on Chinese technologies such as cell phones, drones, and, crucially, EVs, solar panels, and green-energy equipment. President Joe Biden and his predecessor, Donald Trump, the presumptive Republican nominee in November’s presidential election, disagree on most issues. When it comes to dealing with China, however, both appear to be competing for the title of America’s most protectionist president.

While nuclear weapons exist, there remains a danger that they will be used.  After all, for centuries national conflicts have led to wars, with nations employing their deadliest weapons.  The current deterioration of U.S. relations with China might end up providing us with yet another example of this phenomenon.  The gathering tension between the United States and China is clear enough.  Disturbed by China’s growing economic and military strength, the U.S. government recently challenged China’s claims in the South China Sea, increased the U.S. military presence in Australia, and deepened U.S. military ties with other nations in the Pacific region.  According to Secretary of State Hillary Clinton, the United States was “asserting our own position as a Pacific power.”  But need this lead to nuclear war?  Not necessarily.  And yet, there are signs that it could.  After all, both the United States and China possess large numbers of nuclear weapons.  The U.S. government threatened to attack China with nuclear weapons during the Korean War and, later, during the conflict over the future of China’s offshore islands, Quemoy and Matsu.  In the midst of the latter confrontation, President Dwight Eisenhower declared publicly, and chillingly, that U.S. nuclear weapons would “be used just exactly as you would use a bullet or anything else.”  Of course, China didn’t have nuclear weapons then.  Now that it does, perhaps the behavior of national leaders will be more temperate.  But the loose nuclear threats of U.S. and Soviet government officials during the Cold War, when both nations had vast nuclear arsenals, should convince us that, even as the military ante is raised, nuclear saber-rattling persists.  Some pundits argue that nuclear weapons prevent wars between nuclear-armed nations; and, admittedly, there haven’t been very many—at least not yet.  But the Kargil War of 1999, between nuclear-armed India and nuclear-armed Pakistan, should convince us that such wars can occur.  Indeed, in that case, the conflict almost slipped into a nuclear war.  Pakistan’s foreign secretary threatened that, if the war escalated, his country felt free to use “any weapon” in its arsenal.  During the conflict, Pakistan did move nuclear weapons toward its border, while India, it is claimed, readied its own nuclear missiles for an attack on Pakistan.  At the least, though, don’t nuclear weapons deter a nuclear attack?  Do they?  Obviously, NATO leaders didn’t feel deterred, for, throughout the Cold War, NATO’s strategy was to respond to a Soviet conventional military attack on Western Europe by launching a Western nuclear attack on the nuclear-armed Soviet Union.  Furthermore, if U.S. government officials really believed that nuclear deterrence worked, they would not have resorted to championing “Star Wars” and its modern variant, national missile defense.  Why are these vastly expensive—and probably unworkable—military defense systems needed if other nuclear powers are deterred from attacking by U.S. nuclear might?  Of course, the bottom line for those Americans convinced that nuclear weapons safeguard them from a Chinese nuclear attack might be that the U.S. nuclear arsenal is far greater than its Chinese counterpart.  Today, it is estimated that the U.S. government possesses over five thousand nuclear warheads, while the Chinese government has a total inventory of roughly three hundred.  Moreover, only about forty of these Chinese nuclear weapons can reach the United States.  Surely the United States would “win” any nuclear war with China.  But what would that “victory” entail?  A nuclear attack by China would immediately slaughter at least 10 million Americans in a great storm of blast and fire, while leaving many more dying horribly of sickness and radiation poisoning.  The Chinese death toll in a nuclear war would be far higher.  Both nations would be reduced to smoldering, radioactive wastelands.  Also, radioactive debris sent aloft by the nuclear explosions would blot out the sun and bring on a “nuclear winter” around the globe—destroying agriculture, creating worldwide famine, and generating chaos and destruction.   Moreover, in another decade the extent of this catastrophe would be far worse.  The Chinese government is currently expanding its nuclear arsenal, and by the year 2020 it is expected to more than double its number of nuclear weapons that can hit the United States.  The U.S. government, in turn, has plans to spend hundreds of billions of dollars “modernizing” its nuclear weapons and nuclear production facilities over the next decade.  To avert the enormous disaster of a U.S.-China nuclear war, there are two obvious actions that can be taken.  The first is to get rid of nuclear weapons, as the nuclear powers have agreed to do but thus far have resisted doing.  The second, conducted while the nuclear disarmament process is occurring, is to improve U.S.-China relations.  If the American and Chinese people are interested in ensuring their survival and that of the world, they should be working to encourage these policies.

China's development needs a peaceful international environment, particularly in its periphery. We will continue to play a constructive role in global and regional affairs and sincerely look forward to amicable coexistence and friendly cooperation with all other countries, the United States included. We will continue to push for good-neighborliness, friendship and partnership and dedicate ourselves to peace, stability and prosperity in the region. Thus China's development will also mean stronger prospect of peace in the Asia-Pacific region and the world at large. China and the US should, and can, work together for peace stability and prosperity in the region. Given the highly complementary nature of the two economies, China's reform, opening up and rising economic size have opened broad horizon for sustained China-US trade and economic cooperation. By deepening our commercial partnership, which has already delivered tangible benefits to the two peoples, we can do still more and also make greater contribution to global economic stability and prosperity. Terrorism, cross-boundary crime, proliferation of advanced weapons, and spread of deadly diseases pose a common threat to [hu]mankind. China and the US have extensive shared stake and common responsibility for meeting these challenges, maintaining world peace and security and addressing other major issues bearing on human survival and development. China is ready to keep up its coordination and cooperation in these areas with the US and the rest of the international community. During his visit to the US nearly 25 years ago, Deng Xiaoping said, "The interests of our two peoples and those of world peace require that we view our relations from the overall international situation and a long-term strategic perspective." Thirteen years ago when China-US relations were at their lowest ebb, Mr. Deng said, "In the final analysis, China-US relations have got to get better." We are optimistic about the tomorrow of China-US relations. We have every reason to believe that so long as the two countries view and handle the relationship with a strategic perspective, adhere to the guiding principles of the three joint communiqués and firmly grasp the common interests of the two countries, we will see even greater accomplishments in China-US relations.

If China and the United States can sustain such a process of serious dialogue, they will keep their relationship from worsening even if they cannot formally restrain their competition. And if dialogue leads one to ask the other for deeds to demonstrate goodwill, the paper has suggested some that could be undertaken with no security hazard and only slight political risk. No one should have the illusion that happiness is in this couple’s future. All this work would be to allow a non-violent cohabitation that is better than the alternative of destitute divorce or murder-suicide.

Slowing the pace of climate change and getting “tough” on China, especially over its human-rights abuses and unfair trade practices, are among the top priorities President Biden has announced for his new administration. Evidently, he believes that he can tame a rising China with harsh pressure tactics, while still gaining its cooperation in areas of concern to Washington. As he wrote in Foreign Affairs during the presidential election campaign, “The most effective way to meet that challenge is to build a united front of U.S. allies and partners to confront China’s abusive behaviors and human rights violations, even as we seek to cooperate with Beijing on issues where our interests converge, such as climate change.”[1] If, however, our Biden truly believes that he can build an international coalition to gang up on China and secure Beijing’s cooperation on climate change, he is seriously deluded. Indeed, though he could succeed in provoking a new cold war, he won’t prevent the planet from heating up unbearably in the process.

President Biden is certainly aware of the dangers of global warming. In that same Foreign Affairs article, he labeled it nothing short of an “existential threat,” one that imperils the survival of human civilization. Acknowledging the importance of relying on scientific expertise (unlike our previous president, who repeatedly invented his own version of scientific reality), Biden affirmed the conclusion of the U.N.’s Intergovernmental Panel on Climate Change (IPCC) that warming must be limited to 1.5 degrees Celsius above pre-industrial levels or the planet will experience calamitous, irreversible consequences. He then pledged to “rejoin the Paris climate agreement on day one of a Biden administration” (which he indeed did on his first day in office) and to “make massive, urgent investments at home that put the United States on track to have a clean energy economy with net-zero [greenhouse gas] emissions by 2050” – the target set by the IPCC.

Washington needs to bend the arc of the relationship between the two most important geopolitical actors of the 21st century, but had better be careful not to break it altogether. That is a significant risk, especially in an election year in the highly polarized U.S. Bottom line: America should confront China where it must over crucial policy issues — but at the same time seek zones of cooperation wherever it can. One possible area of cooperation may seem odd, but offers a real chance to work together: the Arctic. China, despite lacking actual shoreline there, has been interested in what sailors call the High North. Beijing has been granted observer status in the and has been active in maritime operations, largely in concert with Russia. It is , establishing a satellite ground station and a broader research facility. China is also building a 30,000-ton , comparable to the largest Russian vessels. The Chinese are mostly interested in exploiting minerals, oil, gas and commercial shipping routes. But there may be room to cooperate, and some initial Arctic confidence-building measures the U.S. could explore include joint search-and-rescue exercises, scientific research and protocols for ship and aircraft proximity (which could later be applied in the South China Sea if they were successful in the Arctic). A second obvious place to work together is in controlling Kim Jung Un of North Korea. Neither the U.S. nor China has any interest in permitting Kim to further expand his nuclear arsenal (especially the U.S., given its allies in East Asia). For China, a war between the U.S. and North Korea would be a disaster — Kim would lose, and waves of refugees would flow across the China-North Korea border. Working together, the U.S. and China could put irresistible economic, diplomatic and military pressure on North Korea to cease provocative actions and control its small but significant nuclear capability. True, no approach has worked with North Korea thus far. Trump's "personal diplomacy," President Barack Obama's "strategic patience," and President George W. Bush's stick-over-carrot approach did not slow the growth of the nuclear arsenal and the ballistic missiles. In the end, it seems, all roads to Pyongyang run through Beijing. Another potential zone of cooperation is the environment. The U.S. and China, as the two largest economies in the world, both have a vested interest and fundamental responsibility in ameliorating the degrading global climate. And they found when Obama was president. Step one in building a zone of cooperation here is for the U.S. to re-enter the Paris climate accords, something the Trump administration has adamantly opposed. Fortunately, Joe Biden has pledged that should he win election, the U.S. would rejoin the pact.