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RyanCole Weldon-Carroll

Wnorowski

AP Economics

2-13-17

US-China Trade Policy and Implications

International trade can be a helpful yet highly controversial matter. In an increasingly

globalized economy, let alone world, international trade seems natural if not inevitable. New

relationships are constantly being formed. Yet, in this international market, it is hard to say who

receives the true benefit from such relationships. The United States trades with many other

nations for many different products, but, arguably, none is more valuable than the United States

relationship with China. Is the current US trade policy with China a benefit to the US consumer?

The United States and China have extensive trade history between them. Throughout this history

the relationship between the United States and China has been tested and changed many times

over. This relationship may change yet again under the Trump presidency as we will learn how

his policies differ from those of President Obama and who will receive benefits in each situation.

Under the policies of President Obama, the American consumer benefitted while, based on the

stated policies of President Trump, the American consumer is predicted to be hurt.

The founding of the Peoples Republic of China, the current state that China is in,

occurred in 1949.1 During that time, the United States and China had a hostile relationship due to

the sway that the Soviet Union had over China and their communist alliance.2 After Mao Zedong

and his communist army won the Chinese civil war a communist government took over.3 This

newly founded communist state did not sit well with the United States as a global war was being
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waged between communism and democracy to determine the government of the future. This goal

is what produced the hostile relationship between the US and China. For the next 40 years, from

1949 until 1969, the United States did all that it could to disrupt Chinas economy in order to

prevent it from growing stronger and discourage its communistic practices. Then, in 1970, the

relationship began to shift as China sought to move away from the Soviet Union.4 Diplomatic

relations began to be restored in the early 1970s sparking new ground for the US and China.

This bridge began when President Richard Nixon made a historic trip to China in 1972

which ended an almost two-decade long trade embargo.5 However, this trip alone was not enough

to restore relations completely and spark healthy trade between the two nations. At the time,

China was attempting to normalize following their break from the Soviet Union and they didnt

see the benefit in extensive trade with the United States. In order to remedy this problem, the

National Council for US-China Trade, later renamed to the US-China Business Council, was

established between the two nations in 1973, marking the first business delegation trip to China

since the founding of the Peoples Republic.6 Trade with China began slowly, consisting of

primarily agricultural products. However, all that changed when full diplomatic relations with

China were established in 1979 and trade took off.7 With this new establishment, businesses

across the US were jumping at the chance to trade with China. Products traded shifted from

agriculture to automobiles, planes, and more. This trend continued as China was granted most-

favored-nation status in 1980.8

However, this growth and prosperity in trade relations was interrupted in the beginning of

the 1990s following the Tiananmen Square incident. The military crackdown upon the students

protesting at Tiananmen put China in the global spotlight, and not in a good way. It was

considered an egregious violation of human rights by many in the world, especially the United
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States. This incident sparked great debate within the United States about how to handle the

actions of China how, if at all, to continue trade. President Bush called an end to all government

interactions with China following the incident, but still some thought actions should be take

further. Quickly, debate rose up in Congress about whether or not to renew Chinas most-

favored-nation status to the United States, and that status came to represent the United States

stance on human rights issues and how they would be dealt with.9 This became a heated topic in

the 1992 presidential campaign between Bush and Clinton.10 However, this heated debate quickly

simmered down after President Clinton took office and failed to follow through on his heated

campaign remarks. Ultimately, the allure of China and its business and trade opportunities won

over the United States Congress and President; China was given permanent normal trade relation

status in 2000 ending the relationship issues of the 1990s.

Trade between China and the United States has benefitted and flourished under the

direction of President Obama. Since China was given permanent normal trade status by the

United States, economic and diplomatic ties and cooperation have continually escalated, albeit

on some precarious terms. Despite increased cooperation between the two nations, the

relationship is still very much strained due to Chinas less strict human rights laws and the

situation regarding Taiwan. In spite of this, the US and China have been able to build a

successful trade relationship. Under President Obama, American total trade with China increased

from 12 percent to 16 percent.11 This increase in trade has produced benefits for many different

people.

First, President Obama has enacted strict policies of enforcement, helping to regulate all

of the United States international trade. During President Obamas consecutive terms, the United

States has enacted 23 trade enforcement challenges, 14 of those having been enacted against
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China.12 President Obama filed these challenges to bring attention to countries and their policies

that were breaking the rules of the World Trade Organization (WTO).13 The primary subject of

these challenges at the WTO have been illegal tariffs that other countries, especially China, have

been placing on United States exported goods. Every single challenge filed under the Obama

Administration has been victorious.14 These challenges that were filed against China have been

found to have been worth billions of US dollars combined for numerous different industries

including farmers and ranchers, manufacturers of high-tech steel, aircraft, and automobiles, solar

energy exporters, and many others.15 This has been of great benefit to the American worker and

producer. United States exporting companies received more money from exports due to fewer

tariffs which leads to more jobs and higher wages which, in turn, boosts production again. In

addition, every billion dollars of United States exports supports nearly 5,800 jobs.16

Second, President Obama promoted an open and active trade relationship between the

United States and China which produced an increase in trade between the two nations. In fact,

trade and investment both hit new records under President Obama.17 As a result of this all-time

high, the number of jobs produced by Chinese direct investment in the United states increased

from 15 thousand to 80 thousand. Increased trade between the two nations also produces benefits

for the US consumer, as they are able to attain goods at a lower price than without trade. China is

able to produce goods at a lower price due to their lack of a government issued minimum wage,

resulting in a lower price for the US consumer when these goods are imported rather than

manufactured by the United States.

However, in spite of all these economic benefits from increasing trade, there is still one

growing economic issue that haunts US trade with China: the increasing trade deficit.

Throughout the modern history of US-China trade, beginning in about 1985, there has been an
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ever-growing deficit that the US has with China in terms of trade. In 2015, this deficit hit a

record high 365.7 billion dollars. As trade and dependence upon China only seems to increase,

there seems to be no foreseeable end to this deficit.

On the contrary, President Trump has taken an almost opposite stance on China than that

taken by President Obama. We have yet to see how President Trumps economic policy with

China will truly play out, yet he has outlined some specific actions that he would like to take.

One example of his intended actions towards China, in attempts to lower the trade deficit, is to

impose tariffs up to 45 percent on Chinese imported goods.18 Another outlined action that

President Trump claims to take is to label China as a currency manipulator in the global trade

economy.19

It seems that through these policies that President Trump attempts to push China in order

to obtain better deals, yet it is highly predicted that such policies would prove to have drastic

consequences for the United States economy and its people. Economists that any tariffs the

United States poses upon Chinese imports, China will retaliate with tariffs of their own,

ultimately resulting in a trade war between the two nations20. This would ultimately be

devastating to the American consumer and worker. America is still very reliant upon China for

importing consumer goods, and such tariffs would ultimately hurt consumers by increasing the

price of essential products. American workers would be hurt due to the increased price upon

potential exports to China, resulting in a decrease in production which would lead to a decrease

in the work force.

International trade, while a seemingly abstract and complex concept detached from our

everyday lives, is a paramount aspect of our economy. Our trade with China has become

indispensable, and it is important to maintain a positive relationship with China in order to


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benefit the American consumer. The policies of President Obama benefitted the American

consumer greatly, while the proposed policies of President Trump are predicted to hurt the

average consumer. However, nothing is yet set in stone. As we have seen from President Trump,

he often changes his actions dont always match his words. With that in mind, the changing

landscape between the United States and China is unpredictable, and will require constant

analysis of the economic relationship.


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Works Cited

*spoke with you in class about formatting error with endnotes after bibliography

"U.S.-China Trade Timeline: 1784-2008." Stratfor. N.p., 12 Dec. 2007. Web. 13 Feb. 2017.

Wang, Dong. "U.S.-China Trade, 19712012: Insights into the U.S.-China Relationship." The

Asia-Pacific Journal 4th ser. 11.24 (2013): n. pag. Asia Pacific Journal Japan Focus. 16

June 2013. Web. 13 Feb. 2017.

Baden, Ben. "40 Years of US-China Commercial Relations." China Business Review. N.p., 1 Jan.

2013. Web. 13 Feb. 2017.

Jakobson, Linda. "THE US AND CHINA: A MATURE AND INTERDEPENDENT

RELATIONSHIP." May 2016. Web. 13 Feb. 2017.

"Early American Trade with China." Teaching Resources. University of Illinois, 2006. Web. 13

Feb. 2017.

Nathan, Andrew J. "U.S.-China Relations Since 1949." U.S.-China Relations Since 1949 | Asia

for Educators | Columbia University. University of Columbia, 2009. Web. 13 Feb. 2017.

"The People's Republic Of China." People's Republic of China. N.p., n.d. Web. 13 Feb. 2017.

"Enforcement." US Trade. Office of the United States Trade Representative, n.d. Web. 13 Feb.

2017.

Anderson, Charlie. "President Obama on Enforcing Trade Rules: What You Need to Know."

National Archives and Records Administration. The White House, 13 Sept. 2016. Web.

13 Feb. 2017.

"China-U.S. Economic and Trade Relations under President Obama." Harvard University Asia

Center. Harvard University, 21 Nov. 2016. Web. 13 Feb. 2017.


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Jeffrey, Terence P. "$365,694,500,000: U.S. Merchandise Trade Deficit With China Hit Record in

2015." CNS News. Media Research Center, 09 Feb. 2016. Web. 13 Feb. 2017.

"China Notes Progress in Ties under US President Obama." The Big Story. AP, 19 Jan. 2017.

Web. 13 Feb. 2017.

Yu, Roger, and Paul Davidson. "Why China Matters in Trump's Economic Policy." USA Today.

Gannett Satellite Information Network, 20 Dec. 2016. Web. 13 Feb. 2017.


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1 The Peoples Republic of China, chaos.umd.edu
2 US-China Relations Since 1949, Columbia University, Columbia.edu
3 chaos.umd.edu
4 columbia.edu
5 40 Years of US-China Commercial Relations, Ben Baden, chinabusinessreview.com
6 chinabusinessreview.com
7 columbia.edu
8 chinabusinessreview.com
9 Insights into the US-China Relationship, Dong Wang, Asian Pacific Journal
10 chinabusinessreview.com
11 China-U.S. Economic and Trade Relations under President Obama, Harvard University Asia Center,
Harvard.edu
12 President Obama on Enforcing Trade Rules, Charlie Anderson, obamawhitehouse.archives.gov
13 obamawhitehouse.archives.gov
14 Enforcement, Office of the United States Trade Representative, ustr.gov
15 ustr.gov
16 ustr.gov
17 China notes progress in ties under US President Obama, bigstory.ap.org
18 Why China matters in Trump's economic policy, Roger Yu and Paul Davidson, usatoday.com
19 usatoday.com
20 usatoday.com