Council on Foreign Relations. The U.S.-China Trade Relationship: What’s Behind the Competition?
The backgrounder The U.S.-China Trade Relationship: What’s Behind the Competition? analyzes the dynamics shaping the U.S.-China trade relationship competition and its implications for the global economy.
The article explains how trade tensions, technological rivalry, and structural economic differences have transformed what was once a mutually beneficial relationship into a more complex and competitive one.
Origins of the U.S.-China trade relationship competition
The U.S.-China trade relationship competition has evolved over several decades, particularly since China joined the World Trade Organization in 2001. This integration accelerated trade flows, lowering consumer prices in the United States and contributing to China’s rapid economic growth.
However, these benefits came with costs. Increased import competition contributed to job losses in certain U.S. industries, while concerns grew over China’s state-led economic model and its adherence to global trade rules.
As noted in the timeline and data presented in the report (page 3), trade expanded significantly in the early 2000s but has begun to decline amid rising tensions.
Tariffs, trade deficits, and economic tensions
A central feature of the U.S.-China trade relationship competition is the ongoing trade war that began in 2018. Tariffs imposed by the United States and retaliatory measures by China have reshaped trade patterns.
The report highlights that the United States maintains a large goods trade deficit with China—around $202 billion—while also running a smaller surplus in services (page 2).
Although tariffs were intended to reduce dependence on Chinese imports and bring manufacturing back to the United States, their impact has been mixed. In many cases, supply chains have simply shifted to third countries rather than returning domestically.
Technology and supply chain competition
Technology plays a central role in the U.S.-China trade relationship competition, particularly in areas such as artificial intelligence, semiconductors, and digital platforms.
The United States has implemented export controls to limit China’s access to advanced semiconductor technology, while China has responded with restrictions on rare earth minerals critical to global manufacturing.
In addition, both countries are competing for leadership in AI development and deployment. While U.S. firms lead in advanced models, China has focused on scaling applications across its economy.
Supply chain dependencies further complicate the relationship. For example, Taiwan produces the majority of the world’s semiconductors, making it a critical node in global technology production (page 5).
Global implications and limits of decoupling
The U.S.-China trade relationship competition has far-reaching implications beyond the two countries. Together, they account for a significant share of global GDP and manufacturing output, meaning disruptions affect global markets and supply chains.
Despite growing tensions, full economic decoupling is unlikely. The two economies remain deeply interconnected, with strong mutual incentives to maintain parts of their relationship.
At the same time, fragmented policies, export controls, and geopolitical rivalries continue to reshape the global trading system. This creates uncertainty for businesses and governments navigating an increasingly complex economic environment.
Reference
Liu, Z. Z., Manak, I., & Fong, C. (2026). The U.S.-China trade relationship: What’s behind the competition? Council on Foreign Relations. https://www.cfr.org/backgrounders/contentious-us-china-trade-relationship