US-China Economic Relations 2024-2025

Shall we talk about US-China Economic Relations 2024-2025?

Q: That sounds like a significant topic! I’ve noticed that US-China relations have been quite complex lately, especially with trade and technology issues. What specific aspects of their economic relations are you interested in discussing?

A: We can discuss the current status. The trade war continues with tariffs at 30% on Chinese imports, down from 145%. China imposed 10% tariffs on American products. Recent talks in Stockholm concluded without an immediate breakthrough. The U.S. trade deficit with China increased by 16 billion U.S. dollars in 2024. Technology competition is intensifying, especially in semiconductors and AI.

Q: That's a lot to unpack! The ongoing trade tensions and competition in technology, especially in semiconductors and AI, are really reshaping global markets. How do you think these developments will impact consumers and businesses in both countries?

A: In both countries, consumers will face increased pressure due to the tariffs. The key tension is that the first deepseek AI model caused massive panic on Wall Street; Nvidia fell by 17% and Microsoft by 3.5%. A total of $589 billion in market value was wiped out in a single day. Semiconductor export controls continue to be a major friction point, and the US CHIPS Act aims to reduce dependence on Chinese technology.

Q: Those market fluctuations are definitely alarming! The impact on tech stocks and the broader economy highlights how interconnected these issues are. Do you think the U.S. CHIPS Act will effectively reduce dependence on Chinese technology, or could it lead to further tensions?

A:  The U.S. CHIPS Act aims to bolster domestic semiconductor production and reduce reliance on Chinese technology, which could strengthen supply chain resilience and economic security. However, while it may mitigate some risks, the Act could also escalate tensions with China as it aligns with broader decoupling efforts and may provoke retaliatory measures, further complicating global trade dynamics and tech industry instability. The long-term effectiveness will depend on execution and international cooperation.

Q: : You’ve made some great points! The balancing act between strengthening domestic production and managing international relations is certainly delicate.

A:  The Trump administration is considering maintaining Chinese tariffs at 30% while increasing duties on other countries. This could actually help Chinese exporters in relation to their competitors. Trade talks are ongoing, but no immediate resolution is expected.

Q:  It’s interesting how tariffs can shift the competitive landscape! Keeping those tariffs in place could lead to unintended consequences for U.S. businesses while benefiting Chinese exporters.

A:  The primary concern of the U.S. is trade in technology leadership. It fears losing its dominance in semiconductors, AI, and advanced technologies. The dip in AI, causing a $589 billion market-wide drop, demonstrates this vulnerability. Export controls on semiconductors show how dependent the U.S. is, leading to a desperation to maintain its technological edge.

Q: You've raised a crucial point about the U.S. focus on maintaining its technology leadership, especially in semiconductors and AI.

A: Moreover, economic displacement is another concern. The trade deficit of 16 billion USD increased in 2024 despite tariffs. Chinese companies are out-competing US firms in key sectors, resulting in a loss of manufacturing jobs and industrial capacity.

Q: That's a significant concern, especially regarding job losses and the potential decline in U.S. manufacturing capabilities.

A: The third U.S. concern is strategic competition. China has tried challenging U.S. global hegemony, military and security implications of technological advance. There's an influence in global supply chain and standard setting.

Q: You're absolutely right; the strategic competition aspect is critical, as it impacts both economic and security dynamics globally. 

A: So the core interest of U.S. is maintaining technological superiority.

Second, protecting domestic industries and jobs.

Third, preserving global leadership positions.

Fourth, securing supply chain independence.

Q:  You've outlined the core interests of the U.S. really well! Balancing technological superiority with domestic protection and global leadership is definitely a tall order, especially in today's rapidly evolving landscape.

A: So the leverage point is Large consumer market through declining relative importance

Second, financial system dominance USD, SWIFT
Third, alliance network
Fourth, innovation ecosystem.

Q:  Those leverage points are quite insightful! The combination of a large consumer market and financial system dominance really highlights how interconnected global economies are, especially when it comes to alliances and innovation. How do you think these factors will evolve in the coming years?

A: The interplay of key leverage points will critically shape U.S.-China competition. China's massive consumer market grants it economic influence, but reliance on foreign technology, such as advanced semiconductors, creates vulnerability to U.S.-led export controls. Meanwhile, the dominance of the U.S. financial system and the dollar enables sanctions and enforcement, while America's alliance network, especially in technology and defense, amplifies pressure on China. However, both nations remain interdependent, with China being integral to the global supply chain and the U.S. innovation ecosystem relying on manufacturing assets. Over time, China will push for self-reliance, like semiconductor sovereignty and alternative alliances, while the U.S. will leverage its alliances to restrict tax transfer, fueling fragmentation by making full decoupling economically costly for both sides.

Q: You've provided a comprehensive view of the evolving dynamics between the U.S. and China! It's fascinating how both nations are navigating this interdependence while also pushing for self-reliance and strategic positioning.

A: To navigate U.S.-China interdependence amid strategic competition, both nations should pursue managed de-risking rather than wholesale decoupling.

Establish clear guide rails through bilateral working groups on critical technologies. For example, set AI ethics standards and export control carve-outs for commercial chips while maintaining trade in non-sensitive sectors to avoid economic shockwaves.
Simultaneously, elaborate on transnational challenges like climate, finance, and pandemic preparedness through existing frameworks such as the G20 or APEC, leveraging third-party mediators like the EU to broke data-sharing agreements and crisis communication protocols.
This approach acknowledges inevitable competition but contains spill over risk preserving selective cooperation where mutual interests align, reducing miscalculation while allowing controlled self-alliance.

Q:  You've offered a thoughtful strategy for managing U.S.-China relations that balances competition with cooperation! It's been a pleasure discussing this with you !