How Will the Next US President Tackle the China Economic Challenge?

Upon taking office in January 2021, many observers and analysts expected U.S. President Joe Biden and his administration to reverse course from the hardline China economic and trade policies put in place under his predecessor, Donald Trump. As the 2020 election neared, concerns about the negative impacts of the tariffs imposed on U.S. imports from China under Trump on U.S. businesses, consumers, and workers were growing. This was coupled with a rising fear that by “going it alone,” the United States was alienating its allies and partners, and forfeiting the opportunity to pursue common cause vis-a-vis China.

These expectations did not materialize. Three years later, many of the same folks have concluded that the Biden administration’s China economic and trade agenda looks very similar to the Trump policies. They argue that with the Trump tariffs remaining intact, and national security interests increasingly overriding economic considerations, it’s hard to discern major differences between the policies of the two administrations.

Drawing such a conclusion is misplaced, however. While there are important similarities between the Biden and Trump approaches to China, resulting in continuity in certain polices, there are stark and meaningful differences too. These differences are likely to become increasingly apparent during the 2024 presidential election campaign – as Biden and Trump are set for a rematch – and beyond.

Common Threads

In many respects, the tenets of Biden’s economic policy toward China echo Trump’s. Both administrations view China as an unfair trading partner that deploys excessive and distortive state support and subsidization to propel its industries up the value chain while protecting them from foreign competition. This has not only led to the loss of U.S. manufacturing jobs, but has paved the way for Chinese companies to become world-class leaders in a range of industries, including electric vehicles, batteries, artificial intelligence, and clean energy.

Moreover, both administrations concluded that a range of China’s policies and practices, including its “military-civil fusion” policy and repeated intellectual property theft, have necessitated a new, more assertive approach to export and investment controls, as well as stepped up enforcement measures.

Finally, both the Biden and Trump teams have been highly critical of approaches employed by previous administrations, including mega-dialogues between U.S. and Chinese officials, filing World Trade Organization (WTO) dispute settlement cases, and, most notably, pursuing regional trade deals such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to provide an alternative to China’s state-led system and dominance of regional trade. Trump withdrew the United States from the CPTPP’s precursor on his third day in office, while Biden never seriously considered rejoining despite many entreaties from Japan and other regional partners to do so.

The two administrations have pursued a different mix of policy responses to address the challenges posed by China. By far, Trump’s favorite policy tool was tariffs. From 2018-2019, his administration imposed duties on approximately $350 billion of Chinese imports in a number of different tranches.

While Biden kept these tariffs largely in place, he has not expanded the product categories covered under Trump. This is in contrast to technology export and investment restrictions, where the Biden team has built on the Trump approach in sanctioning ZTE and Huawei, along with many other Chinese entities. Based on national security concerns, the Biden team has issued many new and updated restrictions on exports, investments, and talent, notably including the October 6, 2022 decision restricting the sale of semiconductors and the equipment used to make them.

Just as Biden has kept the Trump tariffs in place, it’s almost certain that Trump, if elected, would maintain and build on these existing restrictions.

Key Differences

Despite these similarities, there are several important distinctions between the two administrations when it comes to their China policies.

First, while trade concerns were the driving force of Trump’s overall China policy, the Biden team has viewed the economic leg of the relationship as just one part of its broader China strategy. It has worked hard to ensure that all aspects of the United States’ China policy are aligned and coordinated.

For Trump, large and growing U.S. trade deficits with China brought to the forefront the asymmetries in the bilateral relationship, which urgently needed to be reversed. As a result, Trump’s U.S. Trade Representative (USTR) Robert Lighthizer and Treasury Secretary Steven Mnuchin were given the mandate to fix this problem.

They attempted to do so by self-initiating a Section 301 investigation of China’s unfair trade practices, imposing rounds of tariff hikes, and ultimately agreeing on a Phase One trade agreement, which included ambitious purchasing targets, as well as rules in such areas as technology transfer, intellectual property protection, and currency manipulation.

Moreover, meetings between Trump and Chinese President Xi Jinping were consumed with trade matters, often at the expense of in-depth discussions on pressing security, political, and human rights issues.

Early on in his tenure, Biden took a more holistic view of the bilateral relationship, initiating a so-called China review in an effort to develop a more coherent China policy. While economic and trade matters were part of the review, these matters did not dominate the internal discussions. Ultimately, the review was never made public.

Secretary of State Antony Blinken’s May 2022 speech articulated the Biden approach toward China, comprised of three core elements: “invest, align, and compete.” Importantly, he noted that China had the intent and means to challenge the United States, and instead of devoting time trying to reform China, Washington’s time was better spent “shaping the environment around Beijing” to be more in line with U.S. values and vision.

In describing the “align’”part of the policy, Blinken highlighted the second important difference between the Biden and Trump approaches to China. While Trump was largely comfortable with a unilateral approach, the Biden team has put a premium on working with allies and partners as a more effective way to address the China challenge. In their view, acting collectively is an important force multiplier, bringing more pressure to bear on China, while also working to ensure that U.S. restrictions would not be undermined by others.

Under Biden, multiple dialogues and initiatives have been launched with allies and partners, including the U.S.-EU Trade and Technology Council, the 14-member Indo-Pacific Economic Framework (IPEF), the U.S.-Japan Economic “2+2” (a dialogue between the foreign and economic ministers from both countries), the “Quad” (Australia, India, Japan, and the U.S.), and the Minerals Security Partnership comprised of 13 countries plus the European Union. Certain multilateral fora, such as the G-7, were also re-oriented to devote more of their bandwidth to developing collective responses to challenges presented by China.

Progress has been made under these new and existing mechanisms, including coordinating on defensive measures, such as export controls and investment restrictions, but also on charting affirmative steps, such as developing standards for new technologies, building resilient supply chains, and boosting decarbonization efforts. That said, the difficulties in coordinating with allies and partners cannot be overstated. It takes arduous efforts to work through differences in approaches and tensions between onshoring and friendshoring; the scope and reach of U.S. export and investment restrictions; the robustness of human rights measures; and the role of the WTO.

A third key difference between Trump and Biden is whether, how, and under what circumstances to engage with China. Trump chose to pursue comprehensive trade negotiations with China in an attempt to reverse the bilateral trade deficit and level the playing field. Importantly, he wanted to do this from a position of strength and maximum leverage, which for him meant the imposition of tariffs and the threat of more to come. This engagement culminated in the January 2020 signing of the Phase One trade agreement at a high-profile event at the White House. Trump himself put pen to paper on the deal, which he heralded as “righting the wrongs of the past.”

Within two years, however, it became apparent that China would not fulfill its obligations – not only on the ambitious purchasing targets, but also on some of the incremental structural reforms that were also featured in the agreement.

The Biden team deliberately chose not to engage with China initially, but instead first focused on domestic measures to strengthen U.S. competitiveness, as well as rebuilding ties with allies and partners, including by resolving a number of key disputes surrounding steel and other sectors.

And even when Washington under Biden was ready to engage with China after successfully working domestically and internationally, it chose to do so in a much more modest manner than the high-profile trade negotiations pursued during the Trump years. Specifically, as a result of separate trips to China by Treasury Secretary Janet Yellen and Commerce Secretary Gina Raimondo in 2023, China-U.S. economic, financial, and commercial working groups were established, paving the way for more targeted engagement on economic matters.

Consistent with its “worker centric” trade policy and in contrast to the Trump approach, the Biden administration has also underscored the importance of worker and human rights in its China policy. Importantly, it has pursued policies to prohibit the use of forced labor. In 2021, Biden signed into law the Uyghur Forced Labor Prevention Act (UFLPA), which prohibits the import of goods from Xinjiang or created by an entity on the UFLPA entity list. The law presumes the use of forced labor was involved in making such goods, shifting the burden to importers to prove otherwise. Moreover, the Biden team has worked with allies and partners bilaterally and through the G-7 to urge them to take steps in the same direction, albeit with mixed results.

Finally, the Trump approach was largely characterized by a doctrine of act first, then pick up the pieces. Presidential tweets often announced new policy measures, including new tranches of tariffs, with little, if any, advance notice. These unvetted policy decisions sometimes turned out to be problematic and not in line with U.S. legal authorities, as in the case of proposed bans on TikTok and WeChat.

In contrast, the Biden team has pursued a more deliberate approach in policy development and execution, featuring extensive consultations with a broad group of domestic stakeholders, Congress, and allies and partners. In many instances, this has been time well spent, particularly in securing the agreement of Japan and the Netherlands to impose export controls on semiconductor equipment and materials.

In other cases, however, this plodding approach has resulted in long delays in the announcement of new policies, such as the long-anticipated Executive Order governing outbound investment by U.S .companies. To give another example, in 2022 there were numerous reports that the Biden team was seriously considering the initiation of a new Section 301 investigation into Chinese subsidies, establishment of a tariff exclusions process, and the rebalancing of certain tariffs. This package never saw the light of day. And now, the Biden team is approaching the end of the second year of the four-year statutorily-mandated Section 301 review of the Trump tariffs, with target deadlines for its conclusion put off time and time again.

What’s Next?

These policy distinctions matter all the more because this year’s presidential election will pit Biden and Trump against each other yet again. Based on what we’ve seen to date regarding China-U.S. economic and trade policy by both the Trump and Biden administrations, what can we expect from each if elected for a second term?

Clearly, for both, China-U.S. relations will require major and sustained attention and resources. This major power competition will continue to go beyond a bilateral lens, being played out in all corners of the world, including in the economic realm.

At the same time, the next president will be faced with the implications of a slowing Chinese economy that is increasingly state run and driven by security interests, while exports from China spiral in key sectors due to domestic overcapacity and weak consumer demand. They will also have to face some of the knock-on effects of existing policies, including increasing Chinese investment in third countries to avoid U.S. restrictions; a China that is not shy about acquiring Western technology by all means possible; and one that is more than willing to impose countermeasures in response to U.S. restrictions.

The next U.S. administration will also be dealing with Chinese interlocutors who are increasingly constrained and risk-adverse, pending guidance from top Chinese leadership. Domestically, they may find their policy space constrained by a Congress dominated by China hardliners and increasingly negative U.S. public sentiment toward China. According to a Pew survey in 2023, 83 percent of Americans hold an unfavorable view of China.

While efforts are now underway in Washington and Beijing to stabilize the relationship, there is no guarantee that this fragile détente will last, particularly given the vast array of security, economic, and political tensions in the relationship and the prospects of any of these heating up at any moment, spilling over to other areas of the relationship,

A Second Biden Term

Absent unanticipated developments in the relationship, we can expect the Biden team to continue its China economic policies if re-elected. That will include strengthening U.S. competitiveness at home as it doles out funds under recent legislation to build infrastructure, semiconductor fabrication plants, and a clean energy ecosystem; bolstering work with allies and partners to establish resilient supply chains, particularly in strategic industries like critical minerals; responding to Chinese economic coercion; promoting new and clean technologies; and seeking further cooperation on export and investment restrictions on Chinese access to Western technologies.

Recent targeted efforts to engage with China on economic matters would likely continue regardless of who fills the key cabinet positions in a second Biden term. The economic, financial, and commercial working groups established last year would serve as important venues to help manage the economic relationship by explaining respective policies and avoiding surprises; resolving bilateral irritants and market access barriers; and identifying areas where Beijing and Washington can work together on common global challenges, such as developing country debt relief and climate financing. The test for these venues will be whether they can go beyond dialogue and produce tangible outcomes. If not, the Biden administration could come under increasing criticism for pursuing engagement for engagement’s sake.

There will likely be no letup in efforts to broaden and deepen technology restrictions, particularly as new technologies come into play and restrictions on existing technologies need updating. Biotechnology, clean energy, cloud computing, advanced and foundational semiconductors, quantum computing, and AI are key sectors that would likely be the focus of a second Biden term.

A key challenge will be whether China will continue to be interested in engaging on the non-national security related aspects of the economic relationship if it believes that the technology restrictions have gone too far. Terms like “small yard, high fences” are already met with skepticism in Beijing.

In a second term, Biden, not facing re-election, may have more leeway to adjust the Trump tariffs. This could result in a long-awaited and needed rebalancing in existing tariff rates, potentially raising those on products of strategic importance to the United States, while lowering tariff rates on certain consumer goods.

Robust engagement with allies and partners will build on efforts to date by ironing out details of collective work to deepen and expand trusted supply chains; coordinate on new tools to rein in Chinese unfair trade practices, including in third countries; keep products created using forced labor out of supply chains; and collectively respond to economic coercion.

Finally, Biden may be somewhat more willing to pursue a limited market-opening trade agenda in a second term. This could include initiating or concluding a few selected bilateral FTA negotiations, pursuing sectoral agreements to promote supply chain resiliency, and bolstering the Indo-Pacific Economic Framework (IPEF) agenda by deepening and expanding commitments in existing and perhaps new pillars. Such policies would be welcomed by U.S. regional partners as a counterweight to Chinese economic influence.

A Second Trump Term

Perhaps much like the first, a second Trump term will likely be punctuated by erratic actions and a general climate of uncertainty. There is little doubt that, if re-elected, Trump would once again elevate to the forefront the trade component of the United States’ overall bilateral relationship with China. With large bilateral trade deficits with China remaining, despite high tariffs and diversification efforts, Trump and his trusted adviser Lighthizer will likely pursue more drastic ways to bring bilateral trade into balance.

During campaign appearances, Trump has already made it clear that he remains the “tariff man.” He and his advisers have recently floated a number of tariff-related proposals, including: a 10 percentage point tariff on all imports, not just those from China; a 60 percentage point (or higher) tariff on Chinese imports; a 100 percent tariff on Chinese electric vehicle imports; a reciprocal tariff approach whereby the U.S. would increase its tariff rates to match those of trade partners; and removal of China’s Permanent Normal Trade Relations status (PNTR), moving it to more restrictive column two rates of the U.S. tariff schedule. How many of these proposals would be implemented, and whether the executive branch has the legal authority to do so, is an open question.

We can fully expect China and other trading partners to retaliate, leading to new trade wars and further raising the costs for U.S. business and workers, as well as prices for U.S. consumers.

The imposition of tariffs against U.S. allies and partners would quickly dampen their interest and willingness to cooperate with the United States on a China agenda. Tariff hikes, which would likely be viewed as violations of WTO obligations, would also endanger the continued relevance of the World Trade Organization, at a time when it is already under serious stress. We may see an effort to renegotiate existing trade agreements to, among other things, strengthen rules of origin and limit Chinese content for any products benefitting from preferential market access.

With regard to technology-based restrictions, a Trump team is likely to impose more controls on exports and investments, both inbound and outbound, with the aim of “decoupling” the two economies. In his recent testimony to the China Select Committee, Lighthizer called Biden’s actions is this area “excellent” but said “more work needs to be done.”

There is always the wild card that Trump may change his mind at any time, as he showed recently when he reversed his view on TikTok. In terms of China trade policy, Trump’s “transactional” side emerging could lead him to try to negotiate “the deal of all trade deals” with China, in an effort to reduce the U.S. trade deficit with China through a combination of managed trade arrangements and more tariffs. It’s difficult to see how such an effort would succeed, however, given China’s poor track record in implementing agreements, and an inherent lack of trust between the two parties.

Conclusion

China-U.S. relations, including on trade and economic matters, will dominate the policy agenda for whoever is in the White House come 2025. Trade and economic ties, once the ballast of the bilateral relationship, have now become a net contributor to overall tensions.

Importantly, the next U.S. president will not be calling all of the shots on the direction of the China-U.S. trade and economic relationship. Beijing will have its own views, particularly if it perceives that the United States is pursuing escalatory actions. To date, China has largely chosen to respond to U.S. actions in a proportional manner, but there is no guarantee that this will continue.

A complex terrain on China-U.S. economic and trade relations awaits the next president.