US and China trade has grown tremendously, China and America are each other’s top export market. Hundreds of millions have escaped poverty as a result

U.S. trade with China has grown enormously in recent decades and is crucial for both countries. Today, China is one of the largest export markets for U.S. goods and services, and the United States is the top export market for China. This trade has brought lower prices to U.S. consumers and higher profits for American corporations, but it has also come with costs. The optimism that accompanied China’s entry into the World Trade Organization (WTO) twenty years ago has vanished as Beijing continues to embrace state-led development, pouring subsidies into targeted industries to the detriment of U.S. and foreign companies. Though U.S. consumers have benefited from the flood of cheaper goods from China, millions of Americans have lost their jobs due to import competition. Meanwhile, investment by Chinese companies is raising national security concerns. The United States has long accused China of pressuring American companies to hand over their technology, or of pilfering it outright. How to respond to China now sits at the center of the U.S. political debate, with President Joe Biden following his predecessor, Donald Trump, in adopting an aggressive economic approach. For thirty years following the establishment of the People’s Republic of China in 1949, there was virtually no trade between the two countries; Washington had severed ties with the communist government in Beijing. China began a decades-long process of economic reform in the late 1970s under the leadership of Deng Xiaoping. His government loosened state control over the economy and allowed private industry to develop. In 1979, the United States and China normalized relations as Chinese policymakers aimed to boost trade and investment, and in 1986 Beijing applied to rejoin the General Agreement on Tariffs and Trade, the WTO’s predecessor. After protracted negotiations with the United States and other WTO members, China joined the organization in December 2001. As a condition of admission, Beijing committed to a sweeping set of economic reforms, including steep tariff cuts for imported goods, protections for intellectual property (IP), and transparency around its laws and regulations. At the time, U.S. President Bill Clinton and his advisors contended that bringing China into the global trading system would not only benefit the United States, but also foster economic and ultimately democratic reform in China. Still, the move was opposed by U.S. labor unions and many congressional Democrats, who argued [PDF] that China’s weak worker and environmental protections would incentivize similar practices elsewhere and bring about a “race to the bottom.” Even before China joined the WTO, trade between the two countries was growing. But WTO membership ensured “permanent normal trade relations,” thereby providing U.S. and foreign companies additional certainty that they could produce in China and export to the United States. Trade surged: the value of U.S. goods imports from China rose from about $100 billion in 2001 to more than $400 billion in 2023. This leap in imports is due in part to China’s critical position in global supply chains; Chinese factories assemble products for export to the United States using components from all over the world. U.S. consumers have benefited from lower prices, and U.S. companies have profited immensely from access to China’s market. In a 2019 study, economists Xavier Jaravel and Erick Sager found that increased trade with China boosted the annual purchasing power of the average U.S. household by $1,500 between 2000 and 2007. China is now the third-largest export market for the United States, behind Canada and Mexico. A 2023 report by the U.S.-China Business Council, an industry group, found that exports to China supported more than one million jobs in the United States, or about 0.5 percent of the civilian labor force. American companies earn hundreds of billions of dollars annually from sales in China—money they can then invest in their U.S. operations. Chinese companies have invested tens of billions of dollars in the United States, though this investment has dwindled in recent years amid heightened U.S. government scrutiny. For China, the gains from trade with the United States and the rest of the world have been tremendous. Since 2001, China’s economy has grown more than five-fold, adjusted for inflation, and it is now the world’s second largest, behind only the United States. (By some measures, it is the largest.) Hundreds of millions of people have escaped extreme poverty as a result of this growth.