Beijing’s commitment to step up purchases of U.S. goods and services under a 2020 trade pact expires Friday with China expected to miss its targets by a wide margin, creating a dilemma for the Biden administration as it calibrates a response.

The White House could potentially reinstate certain tariffs that were cut as part of the trade deal, but that could backfire if China cut back U.S. purchases or took measures against American companies doing business there.

Alternatively, the U.S. could ignore the shortfall, which could send a signal to Beijing that it won’t face consequences.

How the U.S. responds is being watched closely by U.S. businesses, many of which want smooth relations with China to ensure continued access to its giant market. Others including some domestic manufacturers take a harder line, citing Chinese government support for favored industries and saying the U.S. needs to nurture its own supply chains.

Falling ShortChina’s purchases of U.S. goods since 2020​have yet to meet the targets set in the Phase​One trade agreement.Percent of Phase One target, 2020-21Source: Peterson Institute for International​EconomicsNote: Purchases of goods from January 2020​through November 2021; based on U.S. export data
AgriculturalAll goodsManufacturedEnergy0%100255075

Trade analysts say it’s unlikely President Biden would escalate tensions with China as he seeks to tame inflation and advance his domestic agenda. But they also point out that President Biden has yet to articulate a clear strategy for dealing with Beijing.

“The Biden administration is tied in knots by their own lack of clarity about how they evaluate the problem and the potential solutions,” said Scott Kennedy, a senior adviser at the Center for Strategic and International Studies. He noted that similar conflicts have arisen in other policy areas, including the administration’s worker-centric trade policy and climate goals.

Adam Hodge, a spokesman for the U.S. Trade Representative’s office, said conversations with China about its performance under the deal are still ongoing. China “made clear commitments and they should live up to them,” he said. He added that the Biden administration still has “fundamental concerns [with China’s] nonmarket trade policies and practices and their harmful impacts on the U.S. economy,” including issues that weren’t part of the January 2020 trade deal.

In a meeting with reporters in November, U.S. Trade Representative Katherine Tai said her team was discussing the shortfalls with its Chinese counterparts.

“We are optimistic in our work that the effort we are putting into this particular exercise will lead to an outcome that is better than if we hadn’t put the effort in,” Ms. Tai said.

A spokesman for the Chinese embassy in Washington said China’s purchases of U.S. goods were hindered by the economic downturn triggered by the Covid-19 pandemic in 2020.

“China has worked hard to overcome the multiple negative impacts of the pandemic, global economic recession and disrupted supply chains, and promoted the joint implementation of the agreement,” spokesman Liu Pengyu said.