How Maverick American Entrepreneurs Built the US-China Trade Empire from Scratch

Elizabeth Engleson reveals how small-scale importers and fashion pioneers in the 1970s laid the groundwork for today's massive US-China economic relationship through cultural diplomacy and business innovation.

Key Takeaways

• US-China trade relationship began with maverick American entrepreneurs, not government policy or large corporations
• Veronica Yap and other small importers introduced Chinese goods to American consumers through fashion and cultural appeal
• Both countries were undergoing major economic transitions in the 1970s that created convergence opportunities
• China initially viewed trade as diplomatic tool while US saw business as pathway to better relations
• Early Chinese exports started with culturally distinctive items before evolving into generic manufactured goods
• JC Penney planned to increase overseas manufacturing from 10% to much higher levels by 1973 in response to economic pressures
• The 1974 Trade Act transferred tariff-making power from Congress to president, enabling modern trade policy flexibility
• American labor unions recognized potential job displacement risks from the beginning but were politically marginalized

Timeline Overview

• 00:00–08:42 — Introduction and Context Setting: Discussion of current US-China trade tensions and questioning the inevitability narrative of the economic relationship between the two superpowers
• 08:42–16:58 — Historical Background and Book Genesis: Elizabeth Engleson explains her research motivation to understand economic interdependence origins and challenge assumptions about China's unilateral opening
• 16:58–25:31 — First American Entrepreneurs in China: Introduction of Veronica Yap and other maverick importers who led early trade relationships through fashion and cultural goods
• 25:31–33:47 — Cultural Transformation Through Trade: How early importers facilitated American consumer acceptance of Chinese goods, moving from culturally specific items to generic manufactured products
• 33:47–42:15 — Diplomacy Versus Business Priorities: Contrasting approaches where China used trade as diplomatic leverage while US viewed economic relations as pathway to political normalization
• 42:15–50:38 — US Economic Transformation Context: Impact of Nixon shocks, end of Bretton Woods system, and deliberate policy decisions enabling offshore manufacturing expansion
• 50:38–58:51 — Corporate Strategy Evolution: JC Penney and other retailers' strategic pivot toward overseas sourcing as response to 1970s economic pressures and legislative changes
• 58:51–67:24 — Trade Act of 1974 and Legislative Framework: Congressional decision to transfer trade policy powers to executive branch during Watergate era, enabling modern tariff flexibility
• 67:24–75:35 — Modern Implications and Current Politics: Analysis of how early trade dynamics persist in contemporary US-China relations and political rhetoric about manufacturing
• 75:35–83:17 — Made in Labels and Global Supply Chains: Historical origins of country-of-origin labeling from 19th century Britain and inadequacy for modern manufacturing networks
• 83:17–91:46 — China Hands and Business Expertise Development: Role of early importers in creating knowledge networks and expectations about Chinese trade relationships
• 91:46–99:52 — Corporate Learning and Loss Acceptance: How major American companies were advised to import from China first before attempting to sell products in Chinese markets

Maverick Entrepreneurs as Trade Pioneers

The US-China trade relationship began not with government initiatives or corporate titans, but with adventurous small-scale entrepreneurs who recognized opportunities during the early 1970s diplomatic opening.

• Veronica Yap exemplified these pioneers as "an architect in the early 1970s who was born in Shanghai had family in Hong Kong but had grown up in the United States" who quit her day job after successfully importing Chinese goods including "chap pals and Mao coats."
• These early importers operated as cultural ambassadors who "were helping the larger diplomatic effort by easing American consumers and therefore American voters into engaging with China in a very new way" through fashionable and appealing products.
• The transition from culturally specific goods to generic manufacturing began when importers like Yap started bringing in "really amazing 1970s high healed men's shoes" that "had no connection to China other than the label saying made in China."
• Small-scale operations often outpaced large corporations in establishing trade relationships because they could move quickly and take risks that major companies couldn't justify to shareholders or boards of directors.
• These entrepreneurs created the foundational consumer acceptance that enabled later massive expansion of Chinese manufacturing by demonstrating American appetite for goods regardless of their country of origin when priced competitively.
• Geographic and family connections through Hong Kong and other overseas Chinese networks provided crucial logistical and cultural bridges that enabled these early trade relationships to develop despite political barriers.

Converging Economic Transformations

Both the United States and China underwent fundamental economic restructuring during the 1970s that created unprecedented opportunities for trade relationship development.

• The Nixon shocks of 1971 - ending the Bretton Woods system and announcing the China opening - "actually worked together" to enable American corporations to invest overseas and pursue offshore manufacturing strategies for the first time.
• American businesses faced significant domestic pressures including "significant inflation" and very active labor unions that pushed companies to seek cost advantages through overseas production rather than domestic wage increases.
• JC Penney's corporate planning documents from 1973 showed deliberate strategy "to increase the amount of goods that we sell in our stores that's manufactured overseas" with China specifically listed as a potential source despite minimal trade history.
• The end of Bretton Woods "freeing up therefore of capital was crucial to the capacity eventually of US corporations to invest their money overseas and have offshore manufacturing" creating the financial infrastructure for globalization.
• Chinese economic experimentation during the 1970s preceded Deng Xiaoping's famous reforms, with significant groundwork laid during the Mao era that enabled the later dramatic policy shifts toward market mechanisms.
• Both countries' economic instability created mutual incentives for trade relationship development as businesses and governments sought new sources of growth and stability during turbulent domestic conditions.

Diplomatic Strategy Versus Business Pragmatism

The early US-China trade relationship revealed fundamental differences in how each country viewed the relationship between economic and political objectives.

• Chinese leaders maintained that "you only get trade benefits with us after we have improvements in those diplomatic conversations" prioritizing political normalization before expanding economic relationships.
• American policymakers assumed "that the trade relationship that they had reopened with China would assist the larger diplomatic aims" treating commerce as a tool for achieving broader political objectives.
• The exception to Chinese diplomatic conditionality was "Chinese sales of goods to the United States" which provided hard currency for purchasing goods from other countries, creating the foundation for export-oriented growth.
• US diplomats from Nixon through Carter believed trade would "ease what really mattered to them which was full normalization" and viewed commercial relationships as secondary to political breakthroughs.
• This asymmetry enabled rapid growth in Chinese exports to America while American exports to China remained constrained by political considerations, establishing the trade pattern that persists today.
• The low trade volumes during the 1970s masked the qualitative importance of establishing precedents and expectations that would shape much larger future economic relationships between the superpowers.

Legislative Framework for Offshore Manufacturing

Deliberate congressional and executive decisions during the 1970s created the legal and regulatory framework that enabled the massive expansion of overseas manufacturing by American companies.

• The 1974 Trade Act represented a crucial turning point where "Congress voted and passed this trade legislation that increased the capacity of the president to impose restrictions" on trade policy during the height of Watergate scandal.
• Congress deliberately "chose to limit their own legislative powers" after earlier attempts to constrain multinational corporations through proposed Mills bills and Burke-Hartke bill that would have restricted overseas investment.
• The trade act transferred tariff-making authority from Congress to the executive branch based on assumptions that "the capacity to uphold the liberal international trading order would be far more protected" with presidential rather than congressional control.
• This legislative change enabled both Trump's aggressive tariff policies and Biden's continuation of trade restrictions because "it's precisely that increase in power" from the 1974 act that allows modern presidents such flexibility.
• The assumption that presidents would consistently support free trade and international economic integration proved incorrect decades later as executive branch became venue for protectionist policies rather than trade liberalization.
• Corporate lobbying successfully convinced Congress that legislative constraints on overseas investment threatened American competitiveness, leading to regulatory environment that actively encouraged offshore manufacturing development.

Corporate Strategy and Cultural Adaptation

Major American retailers and manufacturers developed sophisticated strategies for engaging with Chinese suppliers and markets that went far beyond simple cost arbitrage.

• JC Penney's archives reveal systematic planning to increase non-US sourcing from "only about 10% of their entire stock" in 1973 as part of strategic response to domestic economic pressures and new opportunities.
• The company specifically identified multiple countries including China as potential sources for "cheap labor" despite minimal existing trade relationships, showing forward-thinking strategic planning.
• Corporate America developed extensive literature about "doing business with China" that became "a genre of writing" with "huge number of pamphlets and books" providing practical guidance for trade relationships.
• The consistent advice to major corporations was paradoxical: "you want to sell to China...but in order to get there you need to buy from China first" requiring imports before exports became possible.
• Companies like Coca-Cola initially focused on "buying tea from China not selling its Cokes or setting up its bottling plants that came later" following expert recommendations about market entry strategies.
• Most early corporate ventures into Chinese trade "very very few business people and corporations made much of a profit" but larger companies could "absorb the loss" as long-term strategic investment.

Labor Union Resistance and Political Marginalization

American organized labor recognized the potential employment consequences of expanded Chinese trade from the beginning but lacked political influence to shape policy outcomes.

• "Organized American labor" immediately understood the implications and "said we're looking at what's going on here and we can see the writing on the wall" regarding potential job displacement from increased imports.
• Labor concerns were systematically marginalized because policymakers viewed unions as "an impediment or sometimes an irritant to larger geopolitical concerns" rather than legitimate stakeholder voices.
• The complex dynamics weren't simply "workers versus corporations or workers versus the government" but reflected prioritization of certain economic interests over others in pursuit of broader strategic objectives.
• Early labor warnings about manufacturing job losses proved prescient as "US imports of goods from China has continued to grow for the rest of the 20th century" with minimal interruption.
• Political assumptions that trade would primarily benefit diplomacy rather than create domestic economic disruption led to systematic exclusion of labor perspectives from policy development processes.
• The suppression of labor concerns during the foundational period of US-China trade established patterns of political marginalization that continued through subsequent decades of economic relationship expansion.

Cultural Diplomacy Through Fashion and Style

The introduction of Chinese goods to American consumers began with fashion and culturally distinctive products that served as effective cultural diplomacy tools.

• Fashion industry leaders like Veronica Yap were featured in major publications including a "1972 New York Times fashion writer Bernardine Morris" story about Chinese styles "sold at Saks Fifth Avenue and Bloomingdale's."
• The term "China hand" emerged to describe individuals with cultural and business expertise who could "facilitate trade and dialogue" between the two countries through their unique knowledge and connections.
• Early Chinese exports emphasized cultural distinctiveness through "Mao coats" and other products that celebrated rather than disguised their Chinese origins, creating positive associations with Chinese manufacturing.
• The transition from culturally specific to generic manufacturing happened gradually as American consumers became comfortable with "made in China" labels regardless of whether products had any connection to Chinese culture or traditions.
• Fashion provided an ideal vehicle for cultural acceptance because style choices allowed individual expression while normalizing economic relationships with a former Cold War adversary.
• The success of culturally distinctive Chinese goods in upscale American retail environments demonstrated market demand that encouraged broader business community engagement with Chinese suppliers and manufacturers.

Modern Legacy and Contemporary Relevance

The foundational patterns established during the 1970s continue to shape contemporary US-China economic and political relationships despite dramatically changed circumstances.

• Current political rhetoric from both Biden and Trump relies on "very early 20th century notions of made in China represents China" that ignore complex global supply chain realities.
• The "made in" labeling system originated with "late 19th century" British efforts to discriminate against German manufactured goods, showing how antiquated frameworks persist in modern trade policy.
• Modern supply chains make country-of-origin designations meaningless as "a good labeled made in China has involved many other countries along the way" through complex manufacturing networks.
• Political conversations remain "very bound by the nation state" despite economic realities where "central power and central space of profit moves far more fluidly between and amongst nation states."
• Contemporary tariff policies represent "very very 19th century way of thinking" that fails to address how multinational corporations organize production across multiple jurisdictions.
• The challenge of "going back to a different kind of trade order" requires acknowledging that both countries and global capitalism have been fundamentally transformed since the relationship's origins.

Common Questions and Answers

Q: Why did small entrepreneurs succeed in opening Chinese trade when large corporations struggled?

A: Small importers like Veronica Yap could take risks and move quickly without board approval or shareholder concerns. They also served as cultural ambassadors, introducing Chinese goods through fashion and style rather than competing directly with established American manufacturers.

Q: How did the end of Bretton Woods enable US-China trade expansion?

A: Ending the gold standard freed up capital for overseas investment and offshore manufacturing. This coincided with Nixon's China opening, creating financial and political conditions for American companies to pursue Chinese sourcing strategies for the first time.

Q: Why didn't American labor unions successfully prevent the expansion of Chinese imports?

A: Labor concerns were marginalized because policymakers prioritized geopolitical objectives over domestic employment effects. Trade was viewed as a diplomatic tool, making union opposition seem like an obstacle to larger strategic goals.

Q: How did the 1974 Trade Act change American trade policy permanently?

A: It transferred tariff-making power from Congress to the executive branch, enabling presidents to impose trade restrictions quickly. This shift made possible both Trump's aggressive tariffs and Biden's continuation of trade wars.

Q: Could the US-China relationship have developed differently if different decisions were made?

A: Yes, the relationship wasn't inevitable. India or other countries could have become major trade partners instead. The specific convergence of US economic pressures and Chinese opening created unique conditions that enabled this particular outcome.

Q: Why do "made in" labels persist despite global supply chain complexity?

A: Political rhetoric and trade policy remain stuck in 19th and early 20th century frameworks that assume simple country-of-origin manufacturing. Modern reality of multi-country production networks challenges these outdated but persistent categories.

Conclusion

Elizabeth Engleson's research reveals that today's US-China economic relationship emerged from specific historical circumstances rather than inevitable economic forces. The convergence of American entrepreneurial initiative, Chinese economic experimentation, and broader transformations in global capitalism during the 1970s created patterns that continue to shape contemporary trade dynamics and political tensions between the world's two largest economies.