Updated March 28, 2024
U.S.-China Trade Relations
The People’s Republic of China (PRC or China) is the
Figure 1. U.S.-China Goods Trade (2001-2023)
second-largest global economy and has been a top U.S. and
global trading partner since joining the World Trade
Organization in 2001. China is a key export market for U.S.
aircraft, agriculture, semiconductor equipment/chips, gas
turbines, and medical devices, and a key source of some
U.S. consumer goods and intermediates (e.g., active
pharmaceutical ingredients and auto parts).China’s system
integrates state and corporate interests, enabling the
government to use trade tools—antidumping, antitrust,
technical standards, and procurement—economic coercion,
and PRC intellectual property (IP) theft activity to
advantage its firms and economic development goals. PRC
government policies in many cases have required firms to
transfer technology and capabilities in order to operate in

strategic sectors. U.S. firms have faced a lack of
Source: CRS with data from the U.S. Bureau of Economic Analysis.
reciprocity, trade barriers in some key areas, a growing
Services: China in 2022 accounted for 4.5% ($41.5 billion)
PRC state role in commercial activity, expanding industrial
of U.S. services exports and 3.8% ($26.6 billion) of U.S.
policies, and rules governing economic security and data. In
services imports. (Figure 2.) Top U.S. exports to China are
February 2024, the American Chamber of Commerce said
travel, technology and intellectual property (IP) licensing,
57% of its firms lack confidence in PRC market opening.
and transport. In 2021, sales in China by majority U.S.-
owned affiliates were $471.6 billion. U.S. sales by majority
Longstanding trade concerns raised by U.S. officials and
PRC-owned firms were $65.5 billion. A 2021 Bank of
executives have broadened into a U.S. government focus on
America study found that 16% of U.S. Fortune 500 firms
strategic competition with China. The executive branch and
depend on China for 5% to 20% of their revenue.
Congress have acted to address PRC practices that
Figure 2. U.S.-China Services Trade (2001-2022)
challenge U.S. economic leadership, distort markets, and
hinder fair competition. Congress continues to deliberate on
approaches and the use of U.S. authorities. H.Res. 11
established in 2023 a Select Committee on the Strategic
Competition between the United States and the Chinese
Communist Party to develop options on a bipartisan basis.
Trade and Investment
Goods: In 2023, China was the fourth-largest U.S. goods
trading partner (with total trade at $575 billion), the fourth-
largest U.S. export market ($147.8 billion), and the second
largest source of U.S. imports ($427.2 billion). Total 2023
U.S.-China goods trade fell by 17% over 2022: U.S. exports

Source: CRS with data from the U.S. Bureau of Economic Analysis.
fell by 5.1% and U.S. imports fell by 20.4% due to China’s
slowdown and supply chain shifts out of China. (Figure 1.)
Investment: In 2022, the U.S. foreign direct investment
(FDI) position in China was $126.1 billion, a 9% rise over
2021. China’s FDI stock in the United States was $28.7
billion, a 7% drop from 2021. (Figure 3.) In 2022, China
accounted for 0.5% of total FDI stock in the United States,
while China accounted for 1.9% of U.S. FDI stock abroad.
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U.S.-China Trade Relations
Figure 3. U.S.-China FDI Position (2013-2022)
Key Issues Facing Congress
The Biden Administration’s National Security Strategy
defines the United States and China as being engaged in
strategic competition. The Administration’s trade approach
calls for the United States to “out-compete” China by
investing in U.S. innovation and working with allies and
partners to strengthen and diversify supply chains and to
counter and constrain PRC practices of concern. The Biden
Administration has sustained communication lines, and, in
2023, created bilateral working groups under the Secretaries
of the Treasury and Commerce on financial, commercial,

and export control issues. Some Members have promoted
Source: CRS with data from the U.S. Bureau of Economic Analysis.
such efforts as a chance to express concerns and manage
In 2022, U.S. net portfolio investment flows to China fell
tensions. Other Members have said such fora should not
sharply, followed by over $30 billion in net outflows in
replace U.S actions to counter PRC practices of concern.
2023 due to concerns about China’s growth prospects.
During the 118th Congress, some Members have proposed
Investments in China by U.S. private equity (PE) funds fell
restricting PRC digital platforms (e.g., TikTok), addressing
from $140 billion in 2019, to $93 billion in 2021, to $4
data security, and overseeing foreign investment reviews
billion in 2023, according to the data firm Preqin. As of
and export control licensing decisions. Congress has passed
December 2023, U.S. investors held $322 billion in PRC
measures that support the U.S. semiconductor and electric
(mainland China and Hong Kong) long-term securities (a
vehicle sectors and counter PRC industrial policies, and is
13.4% drop over 2022). PRC holdings of U.S. securities
debating whether and to what degree to restrict PRC ties to
were $1.87 trillion (a 4.5% rise over 2022), according to the
these sectors. Some Members have proposed restricting
Treasury Department. As of January 2024, the PRC was the
PRC purchases of U.S. land and U.S. research ties with
second-largest foreign holder of Treasuries ($1.05 trillion)
China’s military. P.L. 117-336 directed the imposition of
after Japan. (This does not include PRC offshore holdings.)
penalties for PRC IP theft.
Terms of Trade
Tariffs. In 2018, as part of an investigation under Section
The PRC government controls or influences the purchase,
301 of the Trade Act of 1974 (19 U.S.C. §2411), the U.S.
financing, and price of some top U.S. exports to China—
Trade Representative (USTR) concluded that China
aircraft, semiconductors, medical equipment, agriculture,
engaged in forced technology transfer, cyber-enabled theft
and energy. It has sought to enhance its control of this trade
of U.S. IP and trade secrets, discriminatory and nonmarket
and reduce reliance on U.S. imports by diversifying trade
licensing practices, and state-funded strategic acquisitions
and relying on industrial policies that seek to use U.S.
of U.S. assets. USTR imposed tariffs on an estimated $370
commercial ties to develop China’s capabilities. Some U.S.
billion worth of U.S. imports from China. The PRC
firms may initially benefit from China’s need for foreign
countered with tariffs on $110 billion worth of U.S. trade.
products, services, and capabilities to fill gaps while PRC
China’s commitments in a 2020 “Phase One” deal did not
policies set targets to displace foreign firms once China
resolve many of the concerns USTR had raised. In 2018,
gains competencies. The government funds some PRC
President Donald J. Trump acted under Section 232 of the
firms and acquisitions of foreign firms through preferential
Trade Expansion Act of 1962 to impose tariffs on PRC steel
lending and state-funded venture capital. Efforts include:
(25%) and aluminum (10%) over national security concerns
about subsidies. Most Section 301 and 232 tariffs are still in
Aerospace: To meet PRC terms, some U.S. firms have
effect. Congress has been examining the costs and benefits
partnered with and transferred advanced U.S. technology to
of using tariffs to address PRC practices of concern. In May
PRC state firms to jointly develop a PRC aircraft (C-919).
2022, USTR initiated a tariff review and is to issue results
Semiconductors: The PRC government funds imports of
in 2024. A March 2024 Section 301 petition seeks to
U.S. equipment to support China’s semiconductor industry.
address PRC shipping and shipbuilding practices.
Electric vehicles (EV). Some PRC government policies
Overcapacity: Emerging technology products made under
require firms to localize supply chains for EV batteries.
PRC industrial policies are coming to market and driving
PRC overcapacity and exports in sectors such as EVs.
Medical devices and pharmaceuticals. PRC procurement
USTR has a 25% tariff on PRC EVs which may be
rules set fixed prices which increase cost pressures and
shielding the U.S. market from PRC EV import surges that
encourage firms in these sectors to produce in China.
Europe faces. Some Members have called for a return to an
annual review of China’s most
Biotechnology. Some PRC state firms have acquired
-favored nation status to
foreign firms to enhance China’s global position.
enhance oversight of PRC trade practices. Others have said
this could invite trade volatility and retaliation.
Critical minerals. China’s dominant role in global
extraction and processing supports PRC manufacturing.
De Minimis Trade. Section 321 of the Tariff Act of 1930
allows for U.S. imports under a de minimis threshold to
Energy. Some PRC purchases of U.S. liquefied natural gas
enter free of tariffs and taxes and with minimal inspection.
involved related PRC investment in U.S. export terminals.
In 2016, Congress raised the threshold from $200 to $800.
Capital markets. China seeks U.S. financial investment in
The surge in U.S. de minimis imports from China since
some strategic sectors in which it restricts U.S. competition.
2018 has prompted legislation proposing to raise the
threshold (e.g., S. 2004, S. 1969). U.S. Customs and Border
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U.S.-China Trade Relations
Protection reports that between FY2018-2021, 64% ($149
China and U.S. investment in some PRC technologies, and
billion) of U.S. de minimis imports were from the PRC.
has moved to restrict bulk data transfers to China. Congress
is debating the adequacy of U.S. export controls. A 2023
Forced Labor. Section 307 of the Tariff Act of 1930
report released by House Foreign Affairs Committee Chair
prohibits U.S. imports of products mined, manufactured, or
McCaul issued recommendations to address the report’s
produced with forced labor. P.L. 117-78 prohibits imports
findings that Commerce is approving a large number of
from Xinjiang, China, under a rebuttable presumption that
items that it controls for national security reasons to China
they are made with forced labor. Congress is focused on
and that “sensitive, militarily useful items” are “not subject
enforcement of this provision (e.g., H.R. 4567).
to any licensing requirement for transfers to China.”
Technology. The U.S. government has restricted certain
PRC entities to address its concerns that the PRC is using
Karen M. Sutter, Specialist in Asian Trade and Finance
U.S. technology to boost the PRC’s strategic capabilities.
Since 2022, the Biden Administration has adopted sectoral
IF11284
controls on advanced semiconductor technology exports to


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https://crsreports.congress.gov | IF11284 · VERSION 19 · UPDATED

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