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Biden on China: decoupling or competitive re-coupling?

The Trump presidency somewhat decoupled the US and Chinese economies: relations have been damaged by tariff wars, the closing of consulates, the blacklisting of technology companies and the delisting of companies. The future of US–China relations under the Biden administration is still highly uncertain. Biden has promised to ‘be tough’ on China and his cabinet picks reflect this, but it is not yet clear what ‘being tough’ entails and what end it intends to serve.

The Biden administration is unlikely to escalate decoupling and instead steer US–China relations in a more positive direction.

The trade war has done more harm than good for the United States. Heightened tariffs did not reduce the US trade deficits. The deficit with China was US$276 billion in 2017, rose to US$296 billion in 2019 and further to US$317 billion in 2020. US trade deficits with other countries also grew: the average annual trade deficit in Trump’s first three years was US$556.9 billion, a 17 per cent increase from the four-year average of Obama’s second term.

Imposing tariffs also failed to sway China on fundamental interests. China did make some structural reforms on the demands of the Phase One trade deal. For example, it has met 50 out of 57 technical commitments to ease agricultural trade barriers and passed a new Foreign Investment Law to ban forced technology transfers. But these adjustments aligned with its own long-term interests of market reform. The trade deal may only have accelerated the reform process.


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