BEIJING, Jan. 6 (Xinhua) -- Many economists, multinationals and ordinary consumers may share a common New Year's wish for 2025: stable and positive interactions between the world's two largest economies.
In 2024, China and the United States celebrated the 45th anniversary of establishing diplomatic ties. In 2025 and the years ahead, the bilateral relationship will continue to attract the global spotlight following the conclusion of the U.S. presidential election.
While projections on future China-U.S. ties vary, both worry and optimism underscore one reality: the two countries' engagement matters to all.
"History has proven that China and the United States stand to gain from cooperation and lose from confrontation," Chinese Ambassador to the United States Xie Feng said at an event in early December.
"At this new crossroads, we cannot backpedal or take one step forward but then two backward," Xie said. "Mutual benefit is the most beautiful vocabulary in China's dictionary, and win-win cooperation is the best choice for our two countries."
INTERTWINED INTERESTS
Over the past decades, the economic interests of China and the United States have become deeply intertwined. During the 1979-2023 period, trade between the two countries surged by over 200-fold, with the total volume of two-way investment surpassing 260 billion U.S. dollars.
According to an April report by the U.S.-China Business Council (USCBC), China was the United States' third-largest goods export market in 2023 and the sixth-largest services export market in 2022. In 2022, exports to China supported over 930,000 jobs in the United States.
China has been a land of opportunity for U.S. firms. More than 70,000 American companies have established businesses in the country. Notably, American companies comprised the largest foreign exhibitors contingent at the inaugural and second China International Supply Chain Expo. Among Apple's 200 key suppliers, 80 percent of them produce their products in China.
On the other hand, Chinese firms' investment in the United States has boosted local employment. Chinese member companies of the China General Chamber of Commerce-USA have invested over 144 billion U.S. dollars in the United States, directly creating more than 230,000 jobs.
Despite challenges and strains in their bilateral relationship, trade value between the two countries reached 4.44 trillion yuan (about 617.73 billion U.S. dollars) in the first 11 months of 2024, up 4.2 percent year on year.
"It is important for us to remind U.S. lawmakers and those in influential positions that every state and congressional district in the United States maintains its own economic and trade relationship with China, and changes in U.S.-China trade policy should be considered very carefully," former USCBC President Craig Allen said.
CONFRONTATION MAKES NO WINNER
Given the strong interconnectedness between the two economies, raising tariffs on Chinese products and other trade and investment restrictive measures against China will surely backfire, fueling inflation and hindering innovation, among others, history and research have shown.
A joint U.S. study released in 2023 assessed the impact of the Section 301 tariffs imposed on U.S. imports of apparel, footwear, travel goods and furniture from China since 2018. For footwear alone, the tariffs imposed an annual direct cost on importers of at least 250 million U.S. dollars, which escalated each year to exceed 450 million dollars in 2022.
The study found that the higher costs and higher prices brought by such tariffs eventually fell on American companies and families.
Meanwhile, the Section 301 tariffs increased the price of semiconductors in the United States by 4.1 percent from 2018 to 2021, according to the U.S. International Trade Commission.
Defaults on U.S. credit card loans have hit the highest level since the wake of the 2008 financial crisis, indicating the financial distress facing lower-income consumers after years of elevated inflation, according to a Financial Times report. The situation could worsen if more tariffs are introduced, which will further fuel inflation.
Moves to isolate Chinese firms also come with potential costs, according to U.S. think tank the Peterson Institute for International Economics (PIIE), citing hobbling innovation for the United States and allied business and encouraging circumvention of sanctions.
"American firms earn revenue through sales to Chinese customers. Export controls reduce these earnings if U.S. firms are not able to find alternative buyers. Such costs should not be viewed as only a private loss for companies, however: Sales revenue is the most important source of funding for research and development by U.S. technology companies," the PIIE noted.
"Reducing certain tariffs, enhancing technological and investment cooperation, and strengthening economic ties could pave the way for a more stable trade relationship and foster long-term economic growth for both countries," said Wang Huiyao, president of the Center for China and Globalization.
FOR THE WORLD'S SAKE
Graham Allison, a professor at Harvard University known for his concept of the "Thucydides Trap," said on his visit to China in December that the United States and China should avoid falling into the trap and finding the right way for them to get along with each other is important for both countries and the world at large.
Together, China and the United States account for over one-third of the world's total economic output, with their combined trade volume representing about one-fifth of the global total. "Any decoupling between us would only make the world poorer," said Xie Feng.
When meeting Chinese leaders in early December, heads of major global economic organizations expressed widespread concern over the potential damage to global economic development caused by decoupling practices. They called for the facilitation of trade and investment liberalization.
In December, the Organization for Economic Co-operation and Development warned that higher uncertainty and continued increases in trade-restrictive measures could "raise costs and prices, deter investment, weaken innovation and ultimately lower growth."
"The 2025 trade outlook is clouded by potential U.S. policy shifts, including broader tariffs that could disrupt global value chains and impact key trading partners," the United Nations Conference on Trade and Development (UNCTAD) said in its latest Global Trade Update.
Such measures risk triggering retaliation and ripple effects, affecting industries and economies along entire supply chains, UNCTAD said. "Even the mere threat of tariffs creates unpredictability, weakening trade, investment and economic growth." ■