Tensions in the Taiwan Straits are prompting American policymakers to consider a range of measures that would demonstrate U.S. interests in Taiwan's security. President Clinton has ordered two U.S. carrier battle groups into the South China Sea, and Congress is considering legislation that would more forcefully express U.S. defense commitments to Taiwan.

Recent political and military tensions between China and Taiwan have focused new attention on U.S. economic interests in the region. The volume of trade and investment between the United States and Taiwan and China has soared during the last 10 years. This trend has helped forge closer ties between the United States and the two economies, but has also been the source of friction. U.S. economic relations with China and Taiwan are likely to be of concern to Congress during the annual debate over U.S. renewal of China's most-favored-nation (MFN) status. This report analyzes U.S. economic ties with China and Taiwan, including trends, the major issues, and future prospects. It also examines the growing economic ties between China and Taiwan