“Americans mistakenly believe that China operates as a rational economic actor and that economics is their highest priority. It’s not and it never has been. Their highest priority is whatever is good for the Chinese Communist Party.”

“Chinese companies view American and EU companies as very risky, in large part because so many American and EU companies are looking to move their manufacturing out of China.” 

A major potential avalanche of risks are those that would shake the business world  should – as some expect it will –  trade relations between China, and America and EU, come to an end.

China is America’s largest trading partner, a relationship responsible for $600B a year in commerce, according to the Office of the U.S. Trade Representative. By comparison, U.S. / European Union trade exceeds $1T. The trade deficit with China for goods is more than $300 billion, while the U.S. has a trade surplus for services of $25B. China is America’s largest supplier of imported goods, while China is America’s third largest export market. U.S. invests roughly $125B in China, compared to China’s investment of $38B in the U.S. The figures vary wildly depending on who you ask, but the Trade Representative puts the U.S. GDP at $21B and China’s at more than $14B.

In case you missed it, U.S./China relations have been strained. President Trump cast a spotlight on the downsides of the relationship for the U.S., and China’s response to the sanctions imposed on Russia by President Biden and the West for invading Ukraine have made the relationship even rockier. The U.S./China marriage needs some serious counseling. Eventually, experts say, the couple is headed for divorce. How that breakup plays out, especially if or when China takes custody of Taiwan – peacefully or otherwise – is something the business world needs to brace for.  No; seriously. For example, should the West impose sanctions on China similar to those on Russia, the shift in the business world would be tectonic.

Joining me on this episode is Dan Harris, a leading authority on the legal and strategic aspects of conducting business in emerging markets. Dan is co-founder of the international practice of Seattle-based HarrisBricken, which has offices across the U.S., as well as in China, Spain, Mexico, and Brazil. His China Law Blog was named, and with good reason, to the ABA Journal’s “Blawg Hall of Fame.”

This podcast is the audio companion to the Journal on Emerging Issues in Litigation. The Journal is a collaborative project between HB Litigation Conferences and the Fastcase legal research family, which includes Full Court Press, Law Street Media, and Docket Alarm. The podcast itself is a joint effort between HB and our friends at Law Street Media. If you have comments or wish to participate in one our projects, or want to tell me how much  you learned from Dan,  please drop me a note at Editor@LitigationConferences.com.

Tom Hagy
Host and Litigation Enthusiast

P.S. It’s possible I should stay away from forcing metaphors on my guests. The U.S. / China relationship is nothing like a marriage. We do, however, always forget our anniversary. We’re more like neighbors who have to deal with each other. Our “good mornings” and “have a nice days” are, at best, phony. There are lingering hurt feelings (“You always park in front of my house,” “You never invite us to parties”) and suspicions (“I’m pretty sure it’s you who doesn’t pick up after their dog”), but civility is a must when you share friends and a fence. Oh, man, and now our kids are playing together.