A Shift in Trade: The Future of US-China Relations

20th February 2024

Trade tensions between the US and China have reached a critical juncture. This article looks at the evolving trade dynamics and their implications for the global economy in 2024.

In 2024, the trade relationship between the United States and China is at a crossroads. What was once a booming partnership of mutual benefit has become a battleground of economic policies, tariffs, and strategic manoeuvres. As the two largest economies in the world face off, the global economic order is undergoing a profound transformation. The stakes are high, not just for the two nations involved but for every economy connected to the intricate web of global trade.

The roots of the current tensions go back several decades. However, in the last few years, there has been a significant escalation, particularly since the onset of the US-China trade war in 2018. Throughout the war, both sides imposed tariffs on hundreds of billions of dollars’ worth of goods, with China’s retaliation creating a ripple effect across global markets. The US, under the leadership of former President Trump, pursued a policy of economic nationalism, attempting to bring manufacturing jobs back to America and curtail China's growing dominance in key sectors, such as technology and trade. The situation was further exacerbated by concerns over intellectual property theft, trade imbalances, and China's state-driven economic model.

In 2024, the tone of this dispute remains heated, albeit with new dynamics emerging. The Biden administration has opted for a more multilateral approach, seeking to align with allies in Europe and Asia to create a unified front against China’s economic practices. This includes promoting "free, fair, and open" trade while ensuring that China abides by international trade rules, especially concerning intellectual property and market access.

However, while the rhetoric has shifted, the underlying issues persist. Trade imbalances remain a significant point of contention. In 2023, the US had a trade deficit of over $350 billion with China, a gap that continues to challenge the US’s economic structure. Critics argue that China's policies of forced technology transfers and subsidies to state-owned enterprises create an uneven playing field, disadvantaging US companies in the global marketplace. Moreover, China's growing technological prowess, particularly in areas like artificial intelligence and telecommunications, has raised alarms in Washington, leading to more stringent restrictions on Chinese companies like Huawei.

The US response to these challenges has been twofold. On one hand, the government has sought to counteract China's influence through tariffs and trade restrictions. On the other hand, it has aimed to strengthen its own domestic manufacturing capacity, particularly in high-tech sectors like semiconductors and electric vehicles, which are seen as critical to maintaining global competitiveness. These efforts are designed to reduce the US's dependence on Chinese goods and technological infrastructure, creating a more resilient supply chain in the face of global disruptions.

China, for its part, has taken a defensive stance. In 2024, the Chinese government is increasingly focused on "self-reliance" in key sectors, including technology, energy, and agriculture. Under President Xi Jinping’s leadership, China has placed a strong emphasis on boosting domestic innovation and reducing dependence on foreign technologies. The Chinese Communist Party (CCP) has outlined its vision in the "Made in China 2025" initiative, which aims to transform China into a global leader in industries such as robotics, electric vehicles, and advanced manufacturing. However, China faces significant challenges in achieving this vision, particularly in its attempts to develop a world-class semiconductor industry. While China has made strides in some areas, it still lags behind the US and its allies in terms of cutting-edge technology, which limits its ability to completely decouple from the global supply chain.

The battle for technological supremacy has become one of the most significant fronts in the US-China trade war. In this context, the ongoing competition in the semiconductor industry is of particular importance. Semiconductors are the backbone of modern technology, powering everything from smartphones to military equipment. The US has been actively using its leverage to restrict China's access to advanced semiconductor technologies, particularly through export controls on high-end chips. The aim is to prevent China from gaining access to the tools needed to advance its technological ambitions, particularly in the realm of artificial intelligence and quantum computing.

On the global stage, the US and China’s rivalry has prompted reactions from other nations, many of which are caught between the two superpowers. The European Union, for instance, has taken a cautious approach, aiming to preserve its economic relationship with China while simultaneously deepening its strategic ties with the US. The EU’s efforts to create its own framework for trade relations with China, focusing on human rights and environmental sustainability, have added another layer of complexity to the US-China trade tensions. For smaller economies in Asia, Africa, and Latin America, the trade conflict between the US and China has created an uncertain environment. While some countries have benefited from the trade war, such as those that have gained market share as a result of the US’s tariff policies, others have found themselves caught in the crossfire, with trade routes and supply chains disrupted.

The geopolitical implications of the US-China trade conflict are far-reaching. In addition to economic consequences, the rivalry has also led to a realignment of global alliances. China has been working to deepen its ties with emerging markets in Africa, Latin America, and Southeast Asia, while the US has sought to bolster its partnerships with traditional allies in Europe and Asia. This shift is exemplified by initiatives like China’s Belt and Road Initiative (BRI), which aims to create a new global trade network that strengthens China’s economic influence. The BRI has been met with mixed reactions, with some nations welcoming investment and infrastructure development, while others are wary of China’s growing influence.

The global economy, in this sense, is increasingly divided into spheres of influence, with the US and China as the primary players. The rise of protectionist policies, particularly in the wake of the COVID-19 pandemic, has led to a retreat from globalisation and a shift towards a more fragmented international trade system. The question remains whether this fragmentation will lead to a new, more stable global order or whether it will simply perpetuate economic uncertainty and volatility.

This development brings to mind the tragic figure of Steerforth from David Copperfield, whose ambition and desire for dominance ultimately lead him down a path of destruction. Steerforth, though a charismatic and powerful figure, fails to understand the limits of his control, leading to his downfall.

Similarly, the trade conflict between the US and China may ultimately prove to be a case of overreach on both sides. The quest for supremacy could have unintended consequences, not just for the two nations but for the broader global economy. Just as Steerforth’s actions rippled outward, so too will the economic and political repercussions of the US-China rivalry affect the world far beyond the immediate sphere of influence.

The future of US-China trade relations, then, is a matter of both economic strategy and geopolitical positioning. The evolving dynamics of the global economy will depend on the actions taken by both superpowers in the coming years. While both countries face considerable challenges—be it in terms of technological development, supply chains, or political stability—the path they choose will have profound implications for the global balance of power. As we move into 2024, the world watches with bated breath, hoping that the rhetoric of trade wars will give way to more cooperative efforts that benefit all nations involved.

In conclusion, the trade tensions between the US and China in 2024 are indicative of a broader shift in global economic relations. The rivalry between these two superpowers has already reshaped global trade and geopolitics, and its effects will continue to reverberate for years to come. Whether this conflict will lead to a new era of economic cooperation or further fragmentation remains to be seen. What is certain, however, is that the future of global trade will be deeply influenced by the ongoing evolution of US-China relations. The world now waits to see whether this great rivalry will result in mutual prosperity or mutual destruction.