US-China Decoupling Is Happening, But Slowly

Written by Jack Elbaum

What’s happening: New research from the Center for Economic Policy Research highlights the complexity of U.S.-China economic decoupling. While U.S. imports of Chinese goods declined from 21.6 percent to 16.3 percent between 2017 and 2022, there is little reason to believe American dependence on China will end any time soon.

What’s behind decoupling? China’s declining share of U.S. imports has been driven by tariffs under former President Donald Trump and President Joe Biden. We know this because while imports of Chinese tariffed goods declined by 12 percent between 2017 and 2022, imports of Chinese non-tariffed goods have increased — although at a slower pace than imports from the rest of the world have increased.

Zoom in: But the U.S. remains dependent on China. The data show this decoupling has not led to the re-shoring of jobs or production, nor has it led the U.S. to diversify import sources. Additionally, the countries that the U.S. is now relying on instead of China, “friendshoring” — particularly when it comes to electronics — are, at the same time, increasing trade with China as well.

• What does this mean? Even when it comes to the goods the U.S. is now trading less with China, the U.S. remains dependent through proxy because its new partners are dependent on China.

• The consequence: Ending dependence on China would require a drastic change in global supply chains. The CEPR notes this “is not only a long-term process, it is also costly” and would involve “prolonged government intervention.”

Why it matters: Politicians are quick to use the rhetoric of “ending our dependence on China” or having a “hard break” with China. But this new research suggests they should be pressed on how realistic their ideas actually are.