US vs China: Partners and Rivals

In 1949, the Chinese Communist Party won the civil war on the mainland. On 1 October, it proclaimed the People's Republic of China. The Nationalist government of the Republic of China withdrew to the island of Taiwan.¹

Washington chose a side. It went on recognising the Republic of China, now based on Taiwan, as the government of all China, while the new Communist government ruled the mainland. For American policymakers, the civil war had become part of a wider Cold War argument about the spread of communism and the limits of American influence.¹

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It also left a practical problem that would last for a generation. The government that actually ran the mainland, and most of China's people, had no recognition from the United States. The government Washington did recognise sat on an island off the coast.¹

Recognition is not a courtesy. It decides which government another state treats as its official counterpart: whose embassy it keeps, whose agreements it signs, who speaks for a country in international institutions. But recognising a government does not, by itself, endorse every territory that government claims. That distinction would sit at the heart of everything that followed.⁵

For more than two decades, Washington and Beijing had no formal diplomatic relations. They kept only intermittent contact, including talks between ambassadors.⁴

Then the communist world split. China and the Soviet Union, once allies, became serious rivals. For Washington, a Beijing at odds with Moscow was worth talking to, whatever it thought of its politics. Taiwan was still in the way. It could not simply be removed from the conversation.⁴

In 1971, Henry Kissinger travelled secretly to China to prepare the way. In February 1972, President Richard Nixon followed. He met Mao Zedong and Premier Zhou Enlai, and the visit ended with the Shanghai Communiqué.⁴

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The document was unusual. Instead of pretending the two governments agreed, it set out their positions side by side, on Taiwan and on a range of international questions, recording where they differed as well as where they could cooperate. Disagreement was on the page, in writing, for both sides to see. Its sentence on Taiwan was chosen with great care:⁸

"The United States acknowledges that all Chinese on either side of the Taiwan Strait maintain there is but one China and that Taiwan is a part of China."

Acknowledged, not adopted. The United States recorded what Chinese on both sides of the Strait maintained. It did not declare that position as its own. It reaffirmed its interest in "a peaceful settlement of the Taiwan question by the Chinese themselves", and set the ultimate objective of withdrawing its forces from the island.⁸

It was an opening, not an alliance.⁸

Full relations took another seven years. In December 1978, the two governments announced that diplomatic relations would begin on 1 January 1979. Washington recognised the People's Republic as the sole legal government of China and ended its recognition of the Republic of China. It said it would keep unofficial cultural and commercial ties with the people of Taiwan.⁵

Congress added its own framework. The Taiwan Relations Act, signed on 10 April 1979, provided for continuing unofficial relations and the supply of defensive arms, and made it US policy to maintain the capacity to resist force or coercion against Taiwan. Beijing objected.⁹

The result was a policy with two halves: engagement with Beijing, and support for Taiwan. It was not an unconditional promise that American forces would fight in every scenario. And the switch in recognition did not make Taiwan's government, or the people living under it, disappear. Later leaders would invoke the same history, and draw opposite conclusions from it.⁹⁵

In 1978, China began its period of reform and opening-up. Over the following decades, changes in farming, industry, investment and trade transformed the country.¹⁰

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To put that into context: over 40 years, the number of people in China living on less than $1.90 a day fell by close to 800 million, according to the World Bank. That was close to three-quarters of the fall in extreme poverty worldwide. The World Bank's account credits a broad economic transformation, from agriculture to cities, infrastructure and migration, not exports alone.¹⁰

Diplomatic relations made academic, scientific and commercial exchange easier through the 1980s. Some supporters of engagement abroad expected closer economic ties to bring political change with them.¹¹

In the spring of 1989, crowds gathered in Beijing to mourn Hu Yaobang, a reform-minded former leader. The mourning grew into wider demands, including action on corruption and political reform.¹¹

In June, the authorities sent in the army.¹¹

The crackdown ruptured relations with Washington. President George H. W. Bush denounced the violence and suspended military sales and high-level exchanges. The argument over sanctions, and over China's trading status, ran on into the next administration.¹¹

It exposed a question that American policy would never fully settle: how to respond to the Chinese state's conduct while keeping relations with an increasingly important country. A government could favour economic exchange and still condemn repression. And the fact that exchanges were growing did not mean China's leaders accepted the political hopes that some foreign supporters had attached to them. Trade could grow. That did not mean the politics would follow.¹¹

On 11 December 2001, China became the 143rd member of the World Trade Organization. It had first applied to join the world trading system in July 1986. To put that into context, the negotiations took fifteen years.²

Membership bound China to a system of negotiated trade rules, and gave other governments a forum for their disputes. It did not require China to become a multiparty democracy, and it did not settle Taiwan. It was a trade agreement, not a verdict on the whole relationship.²

The gains from trade were real, and so were the costs, but they did not fall in the same places.³

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The economists David Autor, David Dorn and Gordon Hanson studied what happened to American communities most exposed to rising imports from China. They found that the losses to jobs and wages lasted, and that places hit hard did not recover quickly. That challenged a long-held assumption that displaced workers would soon find their way to new jobs.³

Their research does not say that every lost factory job had the same cause, or that every American felt trade the same way. Its point is geography. A national economy can gain from trade while particular towns carry heavy costs. That is why national trade figures alone cannot explain the politics that followed.³

Washington's complaints widened, to technology transfer, intellectual property and China's industrial policies. In June 2018, after an investigation under Section 301 of US trade law, the US Trade Representative announced new tariffs. The first tranche took effect on 6 July, on about $34 billion of Chinese imports. Washington said it was responding to practices it considered unfair; those were its findings, not ones Beijing accepted, or that any international body had ruled on.¹²

The dispute pushed industrial policy and access to markets into a more confrontational phase. Tariff answered tariff, and trade itself became an instrument of pressure.¹²

In January 2020, the two governments signed a Phase One trade agreement. Its chapters covered intellectual property, technology transfer, agriculture, financial services and expanded trade, with a way to handle disputes over whether its commitments were being kept.¹³

It settled what it named. It did not touch Taiwan, military competition, or the two countries' political systems. The deal showed both what bargaining could achieve and where it stopped: a signed agreement on trade was not evidence that the wider strategic relationship had been repaired.¹³

Semiconductors sit inside a vast range of products, from phones to military systems. In October 2022, the US Bureau of Industry and Security announced restrictions on advanced computing chips and chipmaking related to China, and tied them explicitly to national security and possible military uses.⁷

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The rules reached further than a duty on a finished product. They covered certain chips, the equipment used to make them, and some work by Americans supporting specified chipmaking in China. They targeted the inputs and expertise needed to build advanced systems. It was a new kind of trade policy, aimed not at prices but at capability.⁷

A tariff and an export control work differently. A tariff charges a duty on goods coming in. An export control decides whether goods and know-how may go out at all. Their aims can overlap, but a deal that changes one leaves the other untouched.¹²⁷

And no country makes a modern chip alone. The OECD describes a production system spread across many economies and specialised stages: design, fabrication, and the equipment and materials behind them. A finished chip reflects that network, not only the country where a company has its headquarters.¹⁴

That makes claims of technological independence hard to judge from a single factory opening. The real question is which stages a country can supply, at what scale, and with what dependencies. The OECD points to both the benefits of specialisation and the risks of concentrated supply.¹⁴

In 2022, Beijing set out its position in a white paper. Taiwan, it said, is part of China, and unification is its goal. It described peaceful unification as the preferred way, while keeping the possibility of force. Those are the Chinese government's stated policies, not an agreed description of Taiwan's status.⁶

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Washington's position still rests on the foundations of the 1970s: recognition of the People's Republic, the carefully worded communiqués, and the Taiwan Relations Act. Questions of force, coercion and a peaceful settlement are written into the relationship's diplomatic and legal foundations.⁸⁹

Cutting a tariff does not decide Taiwan's future. And tension over Taiwan does not stop American and Chinese businesses from trading. The disagreements run at different levels, which is why the relationship has so many different channels and tools.¹³⁹

That layered structure is the legacy of 1972. The communiqué did not resolve the question of Taiwan; it wrote down each side's position and left room for both. Every American administration since has worked within that room, and every Chinese government has pressed against its edges.⁸⁶