The "economic divorce" between the two countries is proceeding slowly, but it is proceeding.

Donald Trump is headed to China with a whole bunch of top U.S. CEOs in tow to talk about trade. There is probably a post to be written here about how Trump is creating a new kind of “America, Inc.” centered around his own person, using a combination of tariffs, export controls, federal government equity stakes, and personal bullying. But this is not that post. Instead, this is a post about decoupling. Trump was elected in 2016, and again in 2024, on promises to reduce American economic dependence on China. How well has he succeeded?

First, some background. In the mid-2010s, when Trump came to power, the U.S. and China had a pretty well-understood economic relationship. America did R&D and designed products, then shipped the designs to China where they were manufactured — often using components from Japan/Korea/Taiwan, but sometimes using Chinese components. China would then ship the products back to America, where they were marketed and sold and serviced by the American companies.

Both countries chafed at this arrangement. Americans complained that the relocation of labor-intensive assembly to China put American factory workers out of a job (which was true) and worried that outsourcing assembly would eventually lead to the outsourcing of more valuable activities (which was probably true), while Chinese leaders were annoyed at being stuck in the low-value-added middle of the production chain. So both countries implemented policies to break up this arrangement and create a new trading system.

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