Noah Berger/AP Photo
Flags representing China and Hong Kong fly from a ship at the Port of Oakland, April 15, 2025, in Oakland, California.
This article appears in the June 2025 issue of The American Prospect magazine. Subscribe here.
China is America’s main global economic rival, growing more powerful every year. While a dictatorship, China’s leadership is also far more competent and strategic than Donald Trump.
Looking back over the past half-century, there are three possible basic approaches for dealing with China. None of them is ideal.
The U.S. can pursue a close connection with China, ignoring its predatory practices and taking advantage of its cheap labor, cheap exports, and opportunities for partnerships that benefit U.S. corporations and investment bankers. This was the approach of several administrations before Trump and Biden. It resulted in escalating trade deficits, job losses, and the theft or coercive transfer of intellectual property. The strategy benefited some American elites but mainly served China.
Alternatively, the U.S. can try to contain China militarily and geopolitically, while keeping some economic relationships that are mutually beneficial and working to make them more symmetrical. This was basically the approach of the Biden administration, and it was a partial success. Our bilateral trade deficit dropped; we avoided war; China did not invade Taiwan; and we reshored some production. But China’s lead in product after product kept growing, and the commercial dependence of much of the economy on China for supply chains was mostly undiminished.
A third approach is a more aggressive “decoupling” of the two economies. This is possible in theory, but because so many U.S. industries are so dependent on China for so many consumer products and industrial inputs, some of which the U.S. just doesn’t produce, a viable decoupling would have to be carefully planned and staged.
Which of these is Donald Trump pursuing? None of them.
Trump’s China tariffs, 145 percent until temporarily reduced, amounted to a China boycott. No importer can afford to pay a tax that equals more than 100 percent of the price of the product, even if some of it is absorbed by the exporter or passed along to the consumer. This is the opposite of a carefully considered strategy of decoupling, and it hurts American companies reliant on Chinese products and intermediate inputs at least as much as it hurts China.
The incoherence of Trump’s China policy reflects Trump’s impulsivity.
To the extent that Trump wants to limit China’s wider global influence, the tariff policy is self-defeating. As Trump’s tariffs deter Chinese exports to the U.S., China is increasing exports to other regions. China is making tighter economic alliances with Europe and countries of the Global South. Not surprisingly, it has imposed retaliatory tariffs of its own and is buying a lot less from the U.S. Meanwhile, much of the supposed diversification of sources of supply away from China turns out to depend on Chinese companies operating outside China.
Nations such as Vietnam, historically highly suspicious of Chinese influence, have been eager to make economic deals with American companies. Trump’s tariffs shove them into the arms of Beijing.
Meanwhile, Trump’s other policies are completely at odds with his ostensible goal of containing China. One of China’s key strategies for increasing its global political and economic influence is its Belt and Road Initiative, building infrastructure for Third World countries, notably in Africa, and binding them to China. If you were serious about countering that strategy, would you shut down USAID? Voice of America? The State Department’s Africa operations? Trump did all three.
One prime worry is China’s advanced capacity for spying, both on U.S. industry and on the U.S. government. Trump’s Pentagon has just done its best to wreck the Cyber Command.
THE INCOHERENCE OF TRUMP’S CHINA POLICY reflects Trump’s impulsivity. His tariffs are based on the desire for quick retribution, the opposite of strategic thinking. China’s economic policies have taken a long view, measured in decades and centuries, as China works systematically to capture leadership in the entire range of advanced technologies and products.
And Trump’s goals keep shifting. Are the tariffs bargaining leverage in service of deals? Punishment? Revenue-raisers? They can’t be all three, except in Trump’s clouded fantasies.
Nor does it work for Trump to suspend tariffs on specific goods, products, or one company at a time, as he has done with iPhones, because there are too many players to make ad hoc deals on the basis of special pleading. This is beyond the capacity of even a dealmaker like Trump. To the extent that deals do get made, they will favor large corporations with access to Mar-a-Lago at the expense of small businesses.
As an aspiring dictator, Trump’s story is that Americans will have to suffer short-term pain to get long-term gain. But as a well-run dictatorship facing a blatant foreign threat, China has far more capacity to absorb pain in service of goals that are far more coherent and strategic than Trump’s.
Trump’s signature technique is to inflict punishment first and then announce a deal that pulls a rabbit out of a hat and suspends the punishment. The deal may be that Mexico announces a crackdown on gangs, or that India agrees to import more U.S. products; or that so many countries are lined up to “kiss my ass” that Trump can cut tariffs across the board.
But no such quickie deal is possible with China, because what needs to change is China’s entire mercantilist system. The weekend of May 10-11, Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer negotiated a 90-day reprieve in which the U.S. cuts its tariffs to 30 percent and China cuts retaliatory tariffs to 10 percent. A joint task force will address deeper issues.
This was exactly the approach of Trump’s China policy in his first administration, when the chief trade negotiator was Robert Lighthizer, who was far more knowledgeable and strategic than Trump or any of his current trade officials. But Lighthizer’s efforts at structural reforms failed. In the end, in Trump’s third year, Lighthizer resorted to across-the-board tariffs as a fallback. The rate was 25 percent, a sweet spot that offset China’s illegal subsides but still allowed plenty of trade.
FOR NOW, TRUMP’S CHINA POLICY hurts American producers and consumers far more than it hurts China. Take the case of agricultural exports. The largest U.S. export to China is soybeans, which totaled 27 million metric tons last year—valued at $12.8 billion, or about 9 percent of all U.S. exports to China. That is half of all U.S. soybean exports.
China has levied a retaliatory tariff of 125 percent on U.S. exports, which will more than double the effective price of U.S. soybeans in China and kill that export market. Brazil and Argentina, which together produce 52 percent of the world’s soybeans, are happy to make up the loss. That in turn will bind China more closely to South America’s largest economy.
It’s the same pattern with other farm exports to China, which totaled about $26 billion in 2024. In his first term, Trump offered cash grants to American farmers to make up for the losses they incurred during his far milder tariff war with the Chinese. That policy would be far more costly this time. Most farmers want to grow crops, not to be paid for being idle.
You can tell a similar story when it comes to a broad range of consumer products and inputs. Either the U.S. doesn’t make the stuff, or the product is now prohibitively expensive. China has suspended exports of many rare earth minerals and magnets essential to vehicle, battery, and semiconductor manufacturing. China supplies 90 percent of the world’s rare earth materials.
Trump has picked the one country with substantial capacity to outlast the U.S.
About 80 percent of all toys sold in the U.S. are made in China. Their retail price will now more than double, or they will vanish from store shelves. Alternative sources of supply are not available on short notice. This is playing havoc with business plans for Christmas; stocks of major toy companies such as Hasbro and Mattel have fallen faster than the market as a whole.
Since the U.S. relies heavily on China for both textiles and apparel, clothing prices will take a big hit. The Yale Budget Lab calculates that consumers will face 64 percent higher apparel prices in the short run.
The fact that Trump has ordered different tariff levels on different products, depending on both their nature and their country of origin, has caused vast confusion with ability of industries to plan. All by itself, that depresses economic growth.
In the case of auto parts, mass confusion reigns. The Automotive Service Association in a bulletin recently explained to its members that “a windshield wiper manufactured in China will face a 45 percent import tariff starting on May 3. A microwave made in China will be subject to a 54 percent rate starting on April 9. Meanwhile, a tail light produced entirely in Mexico will not face any tariff.”
TRUMP’S APPROACH TO CHINA stands in bizarre contrast to China’s policy toward Putin’s Russia, America’s other major geopolitical adversary. Unlike China, Russia has no significant economic ties to the U.S. and is the more direct military threat. But Trump coddles Putin, while demonizing China.
You would think that the tariff war with China is so perverse that both Trump and President Xi will have to find a way to end it. But that is by no means guaranteed.
In late April, Trump began suggesting that he was close to a deal for mutual tariff cuts. But several Chinese senior officials made a liar out of him, denying that there had been any contacts or negotiations.
At this writing, there are reports that the U.S. and China may use a redoubled commitment by the Chinese to crack down on fentanyl smuggling, in exchange for substantial tariff mutual relief. Sooner or later, that or some other fig leaf may give Trump a face-saving excuse to relent, but it doesn’t address the larger problem of the U.S.-China relationship or China’s own predatory system.
For his most extreme tariff war, Trump has picked the one country with substantial capacity to outlast the U.S. For several decades, China’s economic development strategy has been to avoid imports and learn to make products at home. Trump, by setting off a trade war that drastically reduces both exports and imports, has just supercharged that strategy.
In the past, China has relied on exports to absorb its prodigious production machine. This has come at the expense of domestic consumption and living standards. Critics, both in and outside China, have argued that China’s economy is now sufficiently mature that it can and should absorb more of its production at home, so that 1.4 billion Chinese can start living better.
Trump has just given that overdue adjustment a nice push. Better domestic living standards in turn will increase the popularity of the regime. So China may be in no hurry to make a deal on Trump’s terms.
Trump attempted a classic maneuver: create a crisis, then pull back from it and announce that the crisis is solved. But in this case, the ploy didn’t work, because the Chinese refused to play on Trump’s terms. In terms of a long-run China strategy, Trump’s ploy made the U.S. worse off than it was before. All the genuine challenges of dealing with China remain.
