COVID-19 Could Doom or Deliver US-China Commercial Relations

Originally published by the Women’s Foreign Policy Group.

When the United States and China reached a Phase One trade agreement in January, US companies with business in China breathed a measured sigh of relief. The agreement was hardly comprehensive, but it broke new ground in resolving old disputes. It also offered a chance at improved commercial and diplomatic engagement after many months of escalating tariffs and tension. But on the heels of the Phase One deal’s announcement, China’s coronavirus outbreak became an epidemic, bringing with it dramatic economic disruptions. COVID-19 has supplanted the trade truce as the relationship’s new destabilizing factor, one that is being leveraged more baldly and aggressively to pry our economies apart.

A popular cause for alarm over US-China trade right now is the specter of over-dependence on China for any number of goods that we need and don’t have enough of—from N95 masks and medical gloves to ventilators and hand sanitizer. In fact, as numerous experts have noted, China’s own COVID-19 response included a ramp-up in production of critical supplies it now has in surplus. Exporting some of this surplus to the United States would aid its own economic recovery and offers a near-immediate solution to some of the shortages we face. Yet many of these items remain subject to trade war tariffs that the US government continues to apply to roughly two-thirds of all imports from China. Scores of business associations signed onto a letter last week asking the president to suspend all China tariffs as an emergency economic measure, but so far, the administration has rejected this idea in favor of narrower tariff exemptions that require time-consuming reviews of formal submissions from companies.

The Defense Production Act invoked last week by the White House allows the government to jump to the front of the line to procure needed supplies from US companies, but it does nothing to facilitate sourcing of supplies from outside the United States. In fact, some officials in the White House and on the Hill would rather focus on obviating any need for imports, pushing legislation that would forbid federal sourcing of some critical items from China, and advocating for Buy America provisions that would require federal agencies to procure essential pharmaceutical ingredients, raw materials, medical equipment, and supplies here at home.

The rumble of rhetorical support for deeper disengagement from China has started to sound like a roar.

Despite the economic pressures China has faced, and skepticism of its ability to follow through with its Phase One commitments, China has yet to invoke the disaster clause in the agreement or otherwise formally request that the US relax the deal’s terms. Administration officials generally acknowledge that China has kept to a pretty tight schedule in meeting its obligations so far. Ensuring that the terms of the deal are fully implemented will require continuous government and private sector attention and engagement, but China’s resolve to date is the kind of show of good faith that can be built upon. Even so, in the last week, the rumble of rhetorical support for deeper disengagement from China has started to sound like a roar.

Irrespective of political discord, US companies with China operations were quick to contribute millions in aid to Chinese relief efforts last month, and offers of assistance from China have likewise been quick to materialize in our own hour of need. Last week, Chinese billionaire and Alibaba founder Jack Ma sent a million masks and half a million test kits to the United States Centers for Disease Control.

Pushing pause on tariffs and proactively pursuing sourcing opportunities with China offers the United States a smoother path through this crisis and a chance at a faster recovery. Steady progress toward full implementation of the Phase One deal and success restoring US companies’ China operations to profitability offer medium-and-long-term support weathering and recovering from the damage we are sustaining domestically. The United States and China are and will remain strategic competitors, but with so many lives and livelihoods under threat from a common enemy, offers and opportunities to work together should be honored as morally imperative and embraced as additional buttresses for the more stable and reciprocal relationship that both nations need now more than ever before.

Anna Ashton, senior director of government affairs at the US-China Business Council, has previously served as a China analyst for the Department of Defense, US Chamber of Commerce, and US-China Economic and Security Review Commission. 

Photo by Martin Sanchez on Unsplash