China and the United States officially established diplomatic relations on January 1, 1979. At the same time, the U.S. government announced that it was severing diplomatic relations with the Taiwan authorities, terminating the U.S.-Taiwan Joint Defense Treaty and withdrawing American troops from Taiwan. The Taiwan Relations Act was adopted by Congress the following March and came into force on April 10, 1979, when it was signed by President Jimmy Carter.

The Act declares that ``the United States' decision to establish diplomatic relations with the People's Republic of China rests upon the expectation that the future of Taiwan will be determined by peaceful means'' and that the United States will ``consider any effort to determine the future of Taiwan by other than peaceful means ... a threat to the peace and security of the western Pacific area and of grave concern to the United States.'' It also states that the United States will ``provide Taiwan with arms of a defensive character'' and ``maintain the capacity of the United States to resist any resort to force or other forms of coercion that would jeopardize the security, or the social or economic system, of the people on Taiwan.'' The terms of the Act treat Taiwan as a ``country'', in contravention to the principles agreed upon by the United States and China and of the commitment made by the United States when it established diplomatic relations with China.