Currently, the US imports 92 percent of the most advanced chips from Taiwan, supplies that would be unavailable in the event of a conflict involving Taiwan. More specific detailed solutions involve working closely with US businesses to build robust and resilient supply chains that may be less dependent on one source (such as China), promoting US “friend-shoring” investment, focusing in particular on key economic inputs such as semiconductors and critical minerals, and taking steps to deter a Chinese invasion of Taiwan. The principal solution to the China challenge is to reassert US leadership, particularly in the Indo-Pacific region, through building stronger trade relations and better trade resilience in the region and deeper economic integration. And there are many areas-in particular, climate, global macroeconomic policy, global trade, and perhaps others-in which the US and China can and should cooperate to be a force for good, global economic growth, and geopolitical stability. More broadly, we would not want to decouple from China as there remain advantages both for US exporters and US companies to do business there. Last summer, Treasury Secretary Janet Yellen stated that “e cannot allow countries like China to use their market positions in key raw materials, technologies, or products to disrupt our economy or exercise unwanted geopolitical leverage.” 3īut all this does not mean abandoning a relationship with China-far from it. China remains central in a number of key areas, including semiconductors, critical minerals, batteries, solar panels, and pharmaceuticals. And both policy and private sector leaders are reconsidering the degree to which they want to be (or should remain) dependent on China for important components in supply chains. The US and its allies are considering further restrictions on investment in key technologies. The US is increasingly cautious in accepting Chinese investment in areas ranging from ports to agriculture to telecommunications and apps and has imposed restraints on advanced semiconductors, along with other advanced technology with military applications going to China. While a review of the tariffs has been underway since September 2022 and the inflationary impact of tariffs has opened the door for reconsideration, there has been no indication yet that lifting the tariffs is a probability in the near term. The US continues to impose tariffs worth several hundred billion dollars on Chinese goods. The war in Ukraine has accelerated China’s efforts, in concert with Russia, to shift the international order away from the dominance of the US and the US dollar and has compounded the already existing challenges in the economic arena. At the end of 2022, China held at least $867.1 billion of US debt, 2 a consequence of trade imbalances, making the US vulnerable to refinancing it at higher rates should China decide to sell this debt or reduce purchases of it.The trade deficit remains a major point of contention between the two nations, having become the most tangible representation of China’s continuing unfair trade practices. The US trade deficit with China reached $382.9 billion in 2022, above the prepandemic 2019 level of $344.1 billion, 1 despite China’s lockdowns in key manufacturing areas.Despite the growing tensions, the US trade in goods with China, the US’s third largest trading partner, hit a record in 2022 of $690.6 billion, topping the 2018 record of $658.8 billion, demonstrating the continuing demand on the part of business and consumers for trade with China and, consequently, the need for mutual cooperation.The Defense Department describes China as our “pacing challenge,” seeking to shift diplomatic, military, and trade patterns in its favor, even as our economies remain strongly interdependent.
It is our principal strategic competitor, with the capability to attempt to alter the international, rules-based order. China is more than our principal economic competitor.
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