Reviews | Can the United States and China decouple their economies?

Since President Donald Trump launched his trade war against China, with tariffs mostly maintained by President Biden, U.S. leaders have adopted rhetoric and policies aimed at cutting the United States off from Chinese markets, products low prices and supply chains. The desire to separate the world's two largest economies is called decoupling; others use the terms “harm reduction” or “friendshoring” to mean much the same thing. Will it work? Should Americans want it? Testing your knowledge by taking our quiz could help you make a decision.

U.S. merchandise exports to China grew just 1.2% in 2022, a year-over-year growth rate much lower than other U.S. export markets. Trade growth with Canada increased by 15 percent and with Mexico by 17 percent. Yet the roughly $150 billion in goods shipped to China still represents a record level. Analysts say the low growth rate, compared to other countries, could also be attributed to inflation, which is, for the most part, only theoretical.

The Americans therefore continue to sell a lot to China. What is all this, anyway?

you would have been right for 2020, 2021 and 2022. In 2022, sales of oilseeds and grains reached a record high of $25.4 billion, up from $21.7 billion in 2021. But in 2023, oilseeds and grains were eliminated from the top place of exports by fuels, oils and distillation products which jumped to 19.7 dollars. billion dollars, compared to 13.5 billion dollars the previous year. US agricultural products hit in 2023 China slowing down its purchases.” class=”wpds-c-hcZlgz wpds-c-hcZlgz-bkfjoi-font-georgia wpds-c-hcZlgz-jDmrXh-width-mdCenter wpds-c-hcZlgz-ibdLmgo-css”>If you guessed the oilseeds and soybeans, wheat and corn you would have been right for 2020, 2021 and 2022. In 2022, sales of oilseeds and grains reached a record high of $25.4 billion, up from $21.7 billion in 2021. But in 2023, oilseeds and grains were eliminated from the top place of exports by fuels, oils and distillation products which jumped to 19.7 dollars. billion dollars, compared to 13.5 billion dollars the previous year. US agricultural products hit in 2023 China slowing down its purchases.

Not all states benefit equally from trade with China, some do much more than others.

The Lone Star State is consistently the top exporter of goods to China, worth approximately $21.8 billion in 2022. Topping this list of exports is oil and gas, followed by commodity chemicals. China accounted for 5% of Texas' global goods exports in 2022, and 2023 appears to be similar. mdCenter wpds-c-hcZlgz-ibdLmgo-css”>The Lone Star State is consistently the top exporter of goods to China, worth approximately $21.8 billion in 2022. Topping this list of exports is oil and gas, followed by commodity chemicals. China accounted for 5% of Texas' global goods exports in 2022, and 2023 appears to be similar.

But in addition to selling products, the United States is also a huge service provider and China is a key market. Services can include everything from business consulting to financial services, from education to travel services to air cargo and port services.

Yes, all those Chinese students spending money on tuition, rent, and general expenses for American schools count as an American export to China. This sector was hit during the coronavirus pandemic, when travel largely dried up between the two countries. But Chinese students remain the largest category of international students coming to study in the United States. And the states that benefit the most are California, New York and Massachusetts.

Trade with China therefore remains important, even if this country is behind Mexico and Canada in the ranking of the United States' trading partners. But does all this trade really create jobs in this country?

The U.S.-China Business Council says California has more jobs supported by exports to China than any other state. California exports everything from industrial machinery to fruits and nuts to pharmaceuticals. Additionally, California is a large beneficiary of service exports to China. But exports to China also support a large number of agriculture and ranching jobs in the heartland of the United States, including in places like Kansas, Nebraska, North Dakota and South Dakota, as well as in Texas.

Of course, this analysis doesn't even mention the benefits that low-cost Chinese products bring to American consumers.

The U.S. and Chinese economies, the world's largest and second largest, are closely linked and interdependent and are destined to remain so for some time. China needs access to the vast US market for its exports; it could even increase as China seeks to send more goods abroad as it struggles with weak domestic demand. Likewise, China remains a critical market for U.S. exports, and this is particularly true in the agricultural sector. China also holds about $1 trillion in U.S. Treasury securities. Talk of trying to decouple or dissociate the two is a mistake. Even if the two economies could be separated, the result would be disastrous for both.

This doesn't mean the relationship doesn't change. It is. Both countries are trying to reduce the risk of excessive dependence on each other in areas deemed critical to their national security. China is reportedly attempting to replace American software with indigenous technology at state-owned companies, as part of President Xi Jinping's push for self-reliance (and a directive called Take America Out). Mr. Xi also wants to reduce China's dependence on foreign food sources, particularly from the United States. Mr. Biden, meanwhile, has restricted the sale of sensitive U.S. technology to China, including advanced computer chips and chipmaking equipment. And U.S. companies are buying fewer Chinese products, although the true extent of that decline is unclear.

Reducing risk for specific national security reasons is reasonable, provided it does no more than necessary to limit real security vulnerabilities; U.S. leaders should not use this opportunity to insulate the U.S. economy from competition, raising prices for U.S. consumers to benefit select groups of domestic companies and launching a trade war that would punish U.S. exporters.

American leaders and Americans in general should forget about a complete divorce. It's impossible. Both sides need each other.