US shifts trade strategy toward China through managed trade

The United States is shifting its economic strategy toward China, moving away from a 25-year effort to reform Beijing’s export-heavy model toward a policy of managed trade. US Trade Representative Jamieson Greer stated that previous attempts to encourage China to transition to a consumption-driven economy failed, noting, “We did that for 25 years with our best people, and everything got worse.”

The current administration is pursuing transactional deals through a US-China Board of Trade, aiming to identify specific goods for potential tariff reductions. One key component involves China committing to purchase 25 million metric tons of US soybeans annually; as of mid-August, Beijing had purchased between 4 and 5 million metric tons.

Concurrently, discussions regarding the undervaluation of the yuan remain a significant macro theme. Analysts suggest that if Washington shifts from tariff-based measures to direct currency pressure or uses Section 301 tools to address China’s trade surplus, it could create significant volatility for USD/CNH, the Australian dollar, and various emerging-market currencies.