China-U.S. trade totaled $644.4 billion in 2023, down by 12 percent year on year, according to statistics from the General Administration of Customs of China. China’s exports to the U.S. stood at $500.29 billion, a decline of 13.1 percent, while its imports from the U.S. dropped by 6.8 percent to $164.16 billion.

These figures have led to growing speculation that the two countries are in a state of decoupling.

China-U.S. trade today indeed faces its fair share of challenges. After the U.S. embarked on a trade war against China in 2018, bilateral trade plummeted, from $630 billion that same year to $541.4 billion in 2019, marking a 14-percent drop. However, China-U.S. trade continued to grow during the COVID-19 pandemic, reaching $759.4 billion in 2022.

China’s trade with the rest of the world recovered after the country lifted pandemic restrictions in early 2023. China’s trade with the U.S., which was expected to follow the trend, however, fell sharply. Is this decrease a blip or does it signal a decoupling of trade between the two countries?

Opinions on the latest trade figures vary.

Some U.S. economists are trumpeting a decoupling, or a radical separation, between the two countries’ economies, using the shrinking trade as evidence. But this noisy handful is opposed by most Americans, who do not want a decoupling.

Both U.S. President Joe Biden and Secretary of State Antony Blinken have previously and publicly denied that the two economies are decoupling, stressing the significance of China-U.S. economic relations.

Several factors are responsible for the downturn of China-U.S. trade in 2023. A sluggish global economy and the trade protectionism practiced by some countries are dealing a heavy blow to the world’s commercial environment.

Mounting trade frictions between China and the U.S. have further exacerbated their economic relations. More importantly, Chinese companies are increasing their investments overseas, leading to a change in the global supply chain.

The fact that the manufacturing industry is slowly moving away from China, fueled by Chinese investment abroad, to countries such as Viet Nam, India, Canada and Mexico, had a significant impact on China-U.S. trade in 2023.

In the year, imports from Mexico, Viet Nam and Canada to the U.S. saw the fastest growth.

Mexico, for example, in 2022 doubled its imports to the U.S. since 2010. And last year, the country surpassed China as the nation’s biggest supplier of foreign-made goods and services.

What’s happening in the background is a rush of Chinese investments in Mexico in the past two years, which amounted to $386 million in 2021 alone.

Products manufactured by Mexico-based Chinese companies are naturally flowing into the U.S. market, and a similar scenario is unfolding in Viet Nam and Canada.

From this perspective, a decrease in exports from China to the U.S. is the natural result of an adjustment in the global supply chain.

The decline, at best, proves that China’s reliance on its conventional export destination, the U.S., is waning, and the international market is becoming more diversified in terms of imports and exports. But it can never provide evidence of a China-U.S. decoupling.

Given their economies are heavily intertwined, the two countries can never sever all ties. Moreover, it is exactly because of this close connection that a huge potential for bilateral trade remains. Even if they do encounter disputes and obstacles in their trade relations, breaking up will never be the right thing to do.

Dialogue and negotiation on equal and mutually respectful footing are the only means that can, and hopefully will, lead to win-win economic cooperation between the two.