U.S.-China Trade Relations
Changes from September 9, 2025 to March 4, 2026
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The People's Republic of China (PRC or China) is the second-largest global economy and has been a top U.S. trading partner since joiningChina joined the World Trade Organization (WTO) in 2001. China is a keymajor export market for U.S. aircraft, agriculture, semiconductor equipment/chips, gas turbines, and medical devices, and a top source of U.S. consumer goods and manufacturing intermediates (e.g., auto parts and active pharmaceutical ingredients)inputs. At the same time, challenges that U.S. firms face from China include a lack of market access reciprocity, trade barriers in key areas, a growingstrong PRC state role in commercial activity, and expanding industrial policies, and rules governingexport controls, and economic security and data rules. Trade concernsissues raised by U.S. officials and executives since the 1990s have broadened into a U.S. government focus on strategic competition with the PRC. The executive branch and Congress have debated approaches and acted to counter PRC practices that challenge U.S. economic leadership, distort markets, and hinder fair competitionand adopted approaches, such as tariffs and restrictions on investment and market access, to counter PRC practices they say distort markets, hinder fair competition, and challenge U.S. economic leadership.
PRC Trade and Investment Terms
The PRC government controls or influences the purchase, financing, and price of the top U.S. exports to China—aircraft, semiconductors, medical equipment, agriculture, and energy. It has sought to enhanceincrease control of this trade and reduce its reliance on U.S. imports by diversifying trade with other countries and advancing industrial policies that exploit foreign commercial ties to develop PRC capabilities in top import sectors. The PRC government also funds some PRC firms in strategic areas and foreign acquisitions in priority areas with preferential lending and state-funded venture capital to gain capabilities. While foreign firms may initially fill PRC gaps with their products, services, and capabilities, PRC plans set targets to displace foreign firms once China gains competencies. Examples include
Aerospace: ToFor example, in aerospace, to meet PRC terms, some U.S. firms have partnered with and transferred advanced U.S. technology to PRC state firms to jointly develop a PRC single-aisle aircraft (C-919).
Semiconductors: The PRC government funds imports of U.S. semiconductor manufacturing equipment to support the development of China's semiconductor industry.
Electric vehicles (EV): Some PRC government policies require firms to localize supply chains for EV batteries.
Medical devices and pharmaceuticals: PRC procurement rules set fixed prices, which increase cost pressures and encouragePRC policies have required firms to localize supply chains. PRC procurement rules in pharmaceuticals and medical devices have set fixed prices, which has increased cost pressures and encouraged firms in these sectors to produce in China.
Biotechnology: Some PRC state firms have acquired foreign firms to enhance China's global position.
Critical minerals: China's dominant role in global extraction and processing supports PRC manufacturing.
Energy: Some PRC purchases of U.S. liquefied natural gas involved related PRC investment in U.S. export terminals.
Capital markets: China seeks U.S. financial investment in some strategic sectors in which it restricts U.S. competition.
Regarding U.S. investment in China, the
The PRC has selectively opened its market and controlled foreign firms' participation in ways that have capped the ability of such firms to compete. Foreign firms may initially fill PRC gaps with their products, services, and capabilities, but PRC plans set targets to displace such firms once China gains competencies. The PRC's economic system integrates state and corporate interests, enabling the government to use trade tools (e.g., antidumping, antitrust, export controls market approvals, technical standards, and procurement) as well as economic coercion and intellectual property (IP)IP theft activity to advantage itsPRC firms and economic development goals. goals. In strategic sectors, PRC policies have often required foreign firms to transfer technology and capabilities in order to operate in strategic sectors. In February 2025, the American Chamber of Commerce reported that over 80% of its members said a lack of market access was affecting their PRC operations.
Trade and Investment Trends
Services: In 2024, China accounted for 4.8% ($55 billion) of U.S. Sales: In 2023, sales in China by majority U.S.-owned affiliates were $475.2 billion Investment: In 2024, the U.S. foreign direct investment (FDI) stock in China was $122.9 billion, and China's FDI stock in the United States was $34.0 billion. (Figure 3.) In 2024, China accounted for 0.6% of total FDI stock in the United States; China accounted for 1.8% of U.S. FDI stock abroad. Investments in China by U.S. private equity (PE) funds fell from $140 billion in 2019 to under $1 billion in 2024. According to the Department of the Treasury, as of |
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Figure 1. U.S.-China Goods Trade (2001- |
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Source: CRS with data from the U.S. Bureau of Economic Analysis. |
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Figure 2. U.S.-China Services Trade (2001-2024) |
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Source: CRS with data from the U.S. Bureau of Economic Analysis. |
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Figure 3. U.S.-China FDI Position (2013-2024) |
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Source: CRS with data from the U.S. Bureau of Economic Analysis. |
Key Issues Facing Congress
Since 2017, U.S. national security policy has defined the PRC as a strategic competitor. In January 2025, President Trump issued the America First Trade Policy. It directed a review of trade issues that affect the PRC to include the U.S. trade deficit; foreign trade, currency, and tax practices; U.S. trade remedies; U.S. de minimis imports; and fentanyl trade. Specific to China, the memorandum directed a review of PRC adherence to the Phase One trade deal; the four-year review of Section 301 actions on China; legislation on most-favored nation (MFN) tariff treatment for China; export controls; and rulemaking on connected vehicle technologies and outbound investment to China. PRC industrial policies supported the development of emerging technology products, such as EVs, that are coming to market, and driving overcapacity in China as well as PRC exports.
Tariffs: The executive branch's use of tariffs as a tool to advance trade, foreign policy, and economic goals has prompted debates about congressional trade authorities and oversight over U.S. trade policy and the costs and benefits of using tariffs to address PRC practices of concern. H.R. 694/S. 206 would revoke MFN tariff treatment for the PRC.
The executive branch has taken several tariff actions on PRC imports. In 2018, under Section 301 of the Trade Act of 1974 (19 U.S.C. §2411), the USTR concluded that the PRC engaged in forced technology transfer, cyber-enabled theft of U.S. IP and trade secrets, discriminatory and non-market licensing practices, and state-funded strategic acquisitions of U.S. assets. In response, the USTR imposed tariffs at rates that ranged from 7.5% to 25% on about $370 billion worth of U.S. imports from China. The PRC countered with tariffs on $110 billion worth of U.S. trade. In 2020, the United States and the PRC signed a Phase One deal, which addressed some issues but did not resolve many of the issues USTR had raised. In May 2024, the USTR issued the results of its review of tariffs; it extended most tariffs and raised tariffs by 25% to 100% on some goods (e.g., EVs and batteries, medical products, semiconductors, ship-to-shore cranes, solar cells, and steel and aluminum). See CRS In Focus IF12125, Section 301 and China: The U.S.-China Phase One Trade Deal.
Two other Section 301 investigations and actions on China involve semiconductors and shipping and shipbuilding. See CRS In Focus IF12666, Section 301 and China: Shipping and Shipbuilding Issues, and CRS In Focus IF12958, Section 301 and China: Mature-Node Semiconductors.
In 2018, then-President Trump acted under Section 232 of the Trade Expansion Act of 1962 to impose tariffs on steel (25%) and aluminum (10%) from the PRC and other countries, citing national security concerns. In 2025, the President raised the tariffs to 50% and initiated ten other investigations likely to affect China trade. In February 2025, President Trump announced a 10% tariff, which he raised to 20% in March 2025, and withdrew de minimis treatment for PRC goods after declaring the PRC had not taken decisive actions to address China's role in fentanyl and synthetic opioid trade. (Section 321 of the Tariff Act of 1930 allows for U.S. imports under a de minimis threshold of $800 per shipment to enter free of tariffs, fees, and taxes. The President suspended de minimis treatment for all countries in August 2025. P.L. 119-21 repeals the statutory basis for the de minimis exemption as of July 2027.) The PRC retaliated with 10-15% tariffs on U.S. agricultural machinery, autos, coal, and liquefied natural gas; an investigation into U.S. firm Google; and export controls on some chemicals.
Separately, in April 2025, the President announced a 34% tariff on U.S. imports from China in response to the "large and persistent" U.S. trade deficit. The PRC met U.S. tariffs, and a two-way tariff escalation raised tariffs to 125%. U.S. exemptions include electronics and goods subject to Section 232 actions. The PRC exempted some strategic goods while it restricted rare earth exports, initiated antidumping and antitrust actions, delayed some U.S. aircraft and agricultural purchases, and added some U.S. firms to export control and "unreliable entity" lists. In May 2025, both sides reduced the rate to 10% for 90 days (extended through November 10, 2025). China agreed to lift some nontariff retaliatory actions. See CRS In Focus IF12990, U.S.-China Tariff Actions Since 2018: An Overview.
Forced Labor. Section 307 of the Tariff Act of 1930 prohibits U.S. imports of products mined, manufactured, or produced with forced labor. P.L. 117-78 prohibits imports from Xinjiang, China, under a rebuttable presumption that they are made with forced labor. Enforcement of the provision remains a key oversight issue for Congress.
Tariffs: The executive branch's use of tariffs as a tool to advance trade, foreign policy, and economic goals has prompted debates about congressional trade authorities and oversight over U.S. trade policy and the costs and benefits of using tariffs to address PRC practices of concern. Since spring 2025, U.S. and PRC officials have engaged in talks but have not reached a deal over tariffs related to the U.S. trade deficit and illicit fentanyl flows that President Trump imposed on China in February and March of 2025 under the International Emergency Economic Powers Act (IEEPA, 50 U.S.C. §§1701 et seq.). On February 20, 2026, the Supreme Court ruled that the President cannot use IEEPA to impose tariffs. President Trump lifted such tariffs and imposed a 10% global tariff for 150 days under Section 122 of the Trade Act of 1974 (19 U.S.C. § 2132). Tariffs that the United States has imposed on China since 2018 under other authorities remain in effect. In October 2025, the U.S. Trade Representative (USTR) initiated a Section 301 investigation of China's implementation of the 2020 U.S.-China Phase One deal. See CRS In Focus IF12990, U.S.-China Tariff Actions Since 2018: An Overview; CRS In Focus IF12125, Section 301 and China: The U.S.-China Phase One Trade Deal; CRS In Focus IF12666, Section 301 and China: Shipping and Shipbuilding Issues; and CRS In Focus IF12958, Section 301 and China: Mature-Node Semiconductors. In February 2026, the International Trade Commission (ITC)—acting under requirements in P.L. 119-74—opened an investigation to examine the impact of a revocation of China's permanent normal trade relations (PNTR) status on the U.S. economy. That same month, the ITC opened an investigation into PRC state support and pricing practices in biotechnology. H.R. 694/S. 206 would revoke PNTR tariff treatment for the PRC. See CRS In Focus IF12980, Permanent Normal Trade Relations and U.S.-China Tariffs. PRC Approaches. Since 2025, most PRC retaliation to U.S. tariffs has involved non-tariff actions as the PRC ran out of U.S. products to effectively tariff given the trade imbalance. The PRC has canceled orders, imposed market restrictions, and enacted export controls on U.S. production inputs. It expanded export controls to cover more trade and require disclosure about the end-use of PRC inputs, likely increasing PRC visibility and leverage over U.S. firms. The Administration's decision to allow Nvidia to export its H200 chips to the PRC (and set terms by which the U.S. government is to collect 25% of the sale's proceeds) prompted debate in Congress in light of U.S. policies to restrict semiconductor trade with China. Former U.S. officials criticized negotiating national security decisions in exchange for trade concessions, saying that such actions contradict past U.S. practice. See CRS Report R48642, U.S. Export Controls and China: Advanced Semiconductors. Technology. P.L. 118-50 (Div. H and Div. I) restricts PRC-tied digital platforms (e.g., TikTok) in the U.S. market. The President has thrice directed a 75-day stay in enforcing the law. For the Administration's China-related export control actions on artificial intelligence and semiconductors, see CRS Report R48642, U.S. Export Controls and China: Advanced Semiconductors. The Administration is reviewing China-related restrictions on bulk data transfers, outbound investment, and drone and connected vehicle technology and U.S. economic policies have focused on reducing U.S. dependence on China. The Trump Administration's national security strategy, issued in November 2025, does not name China as a competitor. It discusses "win[ning] the economic future" in Asia by rebalancing trade and countering "[p]redatory, state-directed subsidies and industrial strategies" and "[u]nfair trading practices" while "maintaining a genuinely mutually advantageous economic relationship with Beijing."