The U.S. and Chinese economies have become deeply intertwined in the last two decades. That interconnectedness has raised alarm bells in both Washington and Beijing in the wake of the COVID-19 pandemic and as competition accelerates between the two countries on strategic matters and advanced, innovative technology. Understanding both the fault lines and the benefits to the United States of our economic relationship with China as it stands now is critical to preparing for the relationship with China we want—and can live with—in the future.

The U.S. Chamber of Commerce’s China Center has for the better part of two decades documented both the growth of the U.S.-China economic relationship and the challenges posed by China’s trade and investment regime for U.S. competitiveness and market access. We have long advocated for a balanced and rational approach to commercial relations with China, one that recognizes the importance of a market of 1.4 billion people, while managing the realities of China’s political and economic models.

This approach included both patience and enthusiasm for the progress toward opening in the years after World Trade Organization (WTO) accession, and, more recently, calling Beijing to account for policies that reversed course from the promises embodied by its entry, and which have put the state and Chinese Communist Party (CCP), rather than market forces, back in the driver’s seat. Indeed, as China’s international ambitions of becoming a global technology powerhouse have continued to rise—supported by the increasingly coercive use of economic statecraft globally—its commitment to open-economy, market-based norms has flagged in critical areas.

The two countries have attempted to disentangle aspects of our economies in recent years. As the U.S. Chamber of Commerce documented first in our 2010 report China’s Drive for Indigenous Innovation: A Web of Industrial Policies, which focused on the policies and implementation tools Beijing deployed to reduce reliance on foreign technology, and subsequently in our September 2016 report Preventing Deglobalization: An Economic and Security Argument for Free Trade and Investment in ICT, the initial moves emanated from China. China’s efforts accelerated in the later stages of Barack Obama’s presidency with Made in China 2025 and continued throughout the Trump Administration. These and other reports from the Chamber provided the analytical foundation for the Trump Administration’s 2017 Section 301 investigation into China’s forced technology transfer policies, as well as other efforts to address China’s industrial policies.

The United States responded in a measured way in the Obama years, and with increasing vigor under the Trump Administration, as we documented in our March 2019 report Assessing the Costs of Tariffs on the U.S. ICT Industry: Modeling U.S.-China Tariffs. Notwithstanding those efforts, the two economies remain deeply intertwined.

A new administration under President Joe Biden faces a difficult challenge in defining the next stage of economic engagement (or disengagement) with China. Deciding which areas do not pose a threat to national security—and should therefore be left open—is a complex task. Some argue that disengagement from China, through reshoring and investment in homegrown innovation, can boost economic activity in the United States. However, without an objective, fact-based examination of the costs and benefits of the U.S.- China economic relationship—and the economic impact of disentangling that relationship—that argument is purely speculative.

    With this study, the U.S. Chamber of Commerce China Center seeks to educate policymakers, businesses, and other stakeholders to make informed decisions about serious challenges embodying difficult tradeoffs. By analyzing the economic impact of the scenario of a fully decoupled relationship, at least in certain key sectors, we hope to better illuminate the choices that policymakers will have to make to identify the optimal degree of economic engagement with China. In so doing, the U.S. Chamber of Commerce will continue to be a vocal proponent of open markets and free trade that is mutually beneficial, safe, and secure, while also remaining a vocal critic of trade and commercial practices that present challenges to the rules-based global economic order or are unfair to American businesses.