Aug 21, 2024
Addressing the Gap
The United States faces increasing tensions with China due to multiple geopolitical, economic, and ideological factors. For over 40 years, U.S. policy aimed to engage China strategically and peacefully, beginning with President Nixon’s visit in 1972. The goal was to integrate China into the global economy, hoping that economic ties would lead to political openness. But this approach has been challenged, especially as China’s influence has expanded under President Xi Jinping since 2013.
China’s actions have raised global concerns. In 2018, the U.S. imposed tariffs on $250 billion worth of Chinese goods, accusing China of unfair trade practices. China’s militarization of the South China Sea, where it has built military bases on artificial islands, has also increased regional tensions. Since 2013, China has reclaimed over 3,200 acres of land in the Spratly Islands, according to the Asia Maritime Transparency Initiative.
“Since 2013, China has reclaimed over 3,200 acres in the Spratly Islands, significantly increasing its military presence in the South China Sea.”
The U.S. response has included economic sanctions, military actions, and diplomatic efforts, but these measures often appear inconsistent. The Trump administration was known for its aggressive trade policies, while the Biden administration has focused more on alliances. This shift has created uncertainty, making it harder for allies and adversaries to rely on U.S. actions.
One of the key issues complicating U.S.-China relations is the deep economic ties between the two nations. China accounted for 18.6% of total U.S. imports in 2021, making it the largest supplier of goods to the U.S. In 2022, the two countries traded nearly $650 billion in goods, despite the ongoing trade war. The COVID-19 pandemic highlighted this dependence, as disruptions in Chinese manufacturing led to global shortages in medical supplies and electronics.
“China’s Belt and Road Initiative, now involving over 140 countries, continues to expand its global influence, challenging the U.S. to provide a viable alternative.”
China has also expanded its global influence through the Belt and Road Initiative (BRI), an infrastructure project launched in 2013. By 2023, over 140 countries had signed agreements with China under the BRI, involving investments exceeding $1 trillion. This project has positioned China as a key player in global infrastructure, while the U.S. has struggled to offer a viable alternative, raising concerns about losing ground in this strategic competition.
To regain credibility, the U.S. needs a consistent, long-term approach. Strengthening alliances in the Indo-Pacific and investing in domestic manufacturing are crucial steps. The CHIPS and Science Act, signed by President Biden in August 2022, provides $52.7 billion for semiconductor research, development, and manufacturing in the U.S., aiming to reduce reliance on Chinese imports.
International cooperation is essential. The U.S. cannot counter China alone and needs support from global allies. Strengthening ties with nations like Japan, South Korea, and the European Union is necessary. In 2022, the U.S. and EU launched the Trade and Technology Council (TTC) to coordinate on issues such as export controls and 5G technology, presenting a united front against China’s ambitions.
Restoring trust in U.S. leadership requires more than just policy shifts; it demands consistent actions. For example, the U.S. must follow through on its commitments to defend Taiwan. The Taiwan Relations Act of 1979 obligates the U.S. to provide Taiwan with the means to defend itself, and recent arms sales, including $1.8 billion worth of missiles and artillery in October 2020, demonstrate this commitment. However, inconsistent messaging has created uncertainty.
Shifts in U.S.-China Relations in 2024
As 2024 unfolds, the dynamic between the United States and China continues to evolve amid new challenges and opportunities. The Biden administration, now in its fourth year, has sharpened its focus on containing China’s influence while reinforcing alliances across the Indo-Pacific region. This year has seen a series of pivotal developments that could shape the trajectory of U.S.-China relations for years to come.
Economic Decoupling Accelerates
One of the most notable shifts in 2024 has been the acceleration of economic decoupling between the U.S. and China. The U.S. has implemented stricter export controls on advanced technologies, particularly in the semiconductor and AI sectors, aimed at curbing China’s technological advancements. In February 2024, the U.S. Commerce Department expanded its Entity List to include several Chinese tech firms accused of aiding China’s military modernization efforts. This move has further strained economic ties, pushing China to double down on its self-sufficiency goals outlined in the Made in China 2025 plan.
“In 2024, the U.S. passed the Resilient Supply Chains Act, incentivizing companies to relocate production out of China to reduce dependency.”
Meanwhile, the U.S. has intensified efforts to diversify its supply chains. In March 2024, a new initiative called the Resilient Supply Chains Act was passed, offering tax incentives and subsidies to American companies that relocate production out of China to other countries in Asia, such as Vietnam, India, and Indonesia. This policy aims to reduce U.S. dependence on Chinese manufacturing, which has been a central concern since the COVID-19 pandemic exposed vulnerabilities in global supply chains.
Military Posturing and Strategic Alliances
On the military front, 2024 has seen a heightened U.S. presence in the Indo-Pacific region. In response to China’s continued military build-up, particularly around Taiwan, the U.S. has conducted more frequent joint military exercises with allies such as Japan, Australia, and the Philippines. In April 2024, the U.S. and Japan signed a new defense agreement, allowing for the permanent stationing of U.S. troops on Okinawa, a strategic location close to Taiwan and the disputed Senkaku Islands.
Taiwan remains a flashpoint in U.S.-China relations. Early in 2024, China conducted large-scale military drills around Taiwan, simulating a blockade, which Beijing claimed was in response to increased U.S. arms sales to the island. The Biden administration has reiterated its commitment to Taiwan’s defense, as evidenced by the $2 billion arms package approved in January 2024, which includes advanced missile systems and anti-ship weapons designed to counter a potential Chinese invasion.
Human Rights and International Diplomacy
In 2024, the U.S. has also placed greater emphasis on human rights issues in its dealings with China. The Biden administration has expanded sanctions on Chinese officials responsible for human rights abuses in Xinjiang, Hong Kong, and Tibet. The Uyghur Forced Labor Prevention Act, which took effect in January 2024, bans the import of goods made with forced labor from Xinjiang, impacting China’s cotton and solar industries.
The U.S. has sought to rally international support against China’s human rights record. In June 2024, at the G7 summit in Italy, President Biden secured commitments from allied nations to impose coordinated sanctions on Chinese entities involved in human rights violations. This diplomatic effort aims to isolate China on the global stage, pressuring Beijing to reform its practices.
Technological Rivalry Intensifies
2024 has witnessed an intensification of the technological rivalry between the U.S. and China. The U.S. has pushed forward with its National Quantum Initiative, investing $3 billion in quantum computing research to maintain a technological edge over China, which has made significant strides in this field. In response, China has accelerated its own quantum computing and AI development programs, with Beijing announcing in May 2024 a $10 billion investment in these technologies over the next five years.
Cybersecurity has also become a critical battleground. In July 2024, the U.S. accused China of orchestrating a massive cyber-attack on U.S. government agencies, leading to the theft of sensitive data. This incident has led to calls for a more robust cybersecurity strategy, with the Biden administration proposing the Cybersecurity Enhancement Act of 2024, which includes provisions for greater cooperation with allies on cyber defense and increased funding for cybersecurity infrastructure.
Takeaways
As the U.S. and China continue to lock horns across multiple fronts, 2024 is shaping up to be a pivotal year in their relationship. The actions taken by both nations this year will have far-reaching consequences, not just for their bilateral ties but for the broader global order. The U.S. strategy of containment, coupled with efforts to strengthen alliances and diversify supply chains, reflects a long-term approach to counter China’s rise. Whether this approach will lead to a more stable international environment or further escalate tensions remains to be seen.
As global tensions increase, it’s crucial to be aware of where U.S. technology is being sent, particularly advanced computer chips and other tech that could be used in conflicts against the U.S. and its allies. Reports suggest that some of this technology may be making its way to adversaries, including Russia and certain regions in Europe, where it could support military operations.
Call to action
If you’re involved in exporting or trading goods, it’s important to know and follow the regulations that govern these transactions. Treasury’s Office of Foreign Assets Control (OFAC) and the Department of Commerce’s Bureau of Industry and Security (BIS) are key agencies that monitor and enforce licenses and exports. Businesses must carefully review their operations to avoid unintentionally aiding hostile activities.
If you are in a compliance role and need to monitor transactions, keep a close watch on transactions involving goods that could be repurposed for military use. For instance, if you see a company sending high volumes of money for computer chips that are delivered to countries bordering Russia, you should probably dig a little further. If you come across any suspicious activities, report them to the appropriate authorities. Compliance and following the law will protect both your business and national security. So together, let’s work to ensure that U.S. technology is used for peaceful and constructive purposes and never for conflict.