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After President Nixon lifted the trade embargo on goods from China in 1972, trade between the two countries took off. With this momentum, more policies and opportunities were formulated which helped China's economy grow at great speed. These important events and policies include:
1980: Congress confers Most Favored Nation status on China
1989: Tiananmen Square protests and President Bush places economic sanctions as punishment
1992: Deng Xiaoping's Southern Tour of China and major economic reforms
2001: China becomes a member of the World Trade Organization (WTO)
2018: President Trump declares a trade war on China
Ultimately, the factors that led President Trump to start to implement tariffs and strong-arm China are complicated and much disputed. During his campaign he emphasized that millions of jobs in the U.S. were lost to China, which bolstered his support from American voters who have lost manufacturing jobs.
At a rally in Indiana during his Presidential campaign, Trump proudly claimed, "We can't continue to allow China to rape our country, and that's what they're doing. It's the greatest theft in the history of the world." These sorts of general statements and fear-mongering are uneducated and distract from the economic and political debates required to create smart and effective foreign policy.
Check out the data visualizations.
Check out the data visualizations.
Timeline of important events
Timeline of important events
1980: Congress confers Most Favored Nation (MFN) status on China
- Most Favored Nation (MFN) status means that exports from China were exempted from paying high tariffs from the Smoot-Hawley Act. It is a foreign policy tool used to demonstrate who were friends and who were enemies of the United States.
- MFN status for China was required to be annually renewed by Congress up until 2001, when China joined the WTO and additional policies such as these are barred.
- Annual renewal was spurred by the Jackson-Vanik Amendment which links trade benefits, such as receiving MFN, with human rights policies. Therefore, the PRC, a Communist country, needed to be annually argued for in order to receive preferential trade relations with the U.S.
- In 1981, a year after China received MFN status, is the first congressional hearing to renew MFN status for China. At the hearing, this was the outlook on China:
A stable and expanding trade and investment relationship between the U.S. and China contributes to strong cooperative ties across the board. Such ties are a key component in China's plans to modernize its economy with the help of Western goods and ideas. And, in the long run, a secure, stable and economically healthy China is an essential element for peace and stability in Asia. (Most favored nation status for Romania, Hungary, and China: hearing before the Subcommittee on International Trade of the Committee on Finance, United States Senate, Ninety-seventh Congress, first session, July 27, 1981)
The graph below demonstrates that imports from China surpassed the amount of exports to China in the early 1980s. This was due to China's MFN status and China's domestic reforms.
Graphic created by Liz Schilling
1989: Tiananmen Square protests and President Bush places economic sanctions as punishment
- When Chinese university and high school students protested in the public city square of Beijing for 7 weeks, the CCP responded with immense violence. It was an event that was witnessed by the entire world because it was televised and distributed.
- Americans were deeply disturbed by what they saw of the events. One American, Charles Krauthammer, remembers that it was "the first time [his] generation – too young to remember Budapest 1956, too distracted to notice Prague 1968, too far removed to fully absorb the Vietnamese gulag and the Cambodian genocide of the 1970s – has been directly exposed to the meaning of Marxism-Leninism" (Brick 1990).
- "We deplore the decision to use force and I now call on the Chinese leadership publicly as I have in private channels to avoid violence and return to its previous policy of restraint" – President George H.W. Bush on June 5th, 1989
- President George H.W. Bush, in addition to denouncing the actions of the Chinese government, responded to the events by suspending military sales and diplomatic exchanges with Chinese officials. (U.S. Office of the Historian)
1992: Deng Xiaoping's Southern Tour of China and major economic reforms
- In the aftermath of the violence at Tiananmen Square, Deng's economic reform policies were not well supported across China, so he decided to get on the ground and give speeches and directly address and prop up his strategies. He traveled to Southern China visiting Guangzhou, Shenzhen, Zhuhai, and Shanghai.
- Southern China was a strategic location for Deng to visit because of its heavy emphasis on shipping and ports.
2001: China becomes a member of the World Trade Organization (WTO)
- WTO policies require that there are no barriers to export, so China needed to implement further reforms.
- Capital and labor shifted from smaller, "less productive, state-owned companies to privately owned manufacturing plants, raising productivity and output in the sector" (Autor, Dorn, and Hanson 2016, 214).
2018: President Trump declares a trade war on China
- The Trade War has consisted of both the U.S. and China raising tariffs and changing quotas on imported. The intention is that higher tariffs (a tax on imported goods) will make foreign goods more expensive and less attractive for consumers to buy. Instead, they will turn to locally made products which will boost the local economy.
- Diminishing foreign involvement and focusing on domestic investment is a protectionist practice. Incentivizing Americans to buy and support American goods means shifting away from global trade networks and free trade policies.
- Free trade gives consumers the freedom to and facilitates purchases of cheaper and/or higher quality products from around the world.
- The Trade War is ongoing and conclusions cannot be made, but understanding the history and details of Sino-American relations will help you understand updates in the news.
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