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Weekend Reads

America’s Strengths and Vulnerabilities as It Puts Tariffs on China [[link removed]]

President Donald Trump’s goals of rebalancing trade and defense burdens face a new set of challenges in 2025, namely a more powerful China and changing alliance structures with Europe and Russia.

In Aspenia Online [[link removed]], Thomas Duesterberg [[link removed]] evaluates the relative economic strengths between the United States and China, examining how US trade policies and alliances shape the Trump administration’s efforts to counter Chinese mercantilism and Beijing’s attempt to create an alternative global system. His key insights are below.

Read the full article. [[link removed]]

Key Insights

1. Despite certain advantages, China’s economy is vulnerable.

The most important development since 2017 is the weakening of the Chinese economic model. China was expected to surpass the United States in gross domestic product by 2020. But by 2025 its GDP had only reached 64 percent of the US level. Per capita GDP in China is around 15 percent that in the US, and Chinese firms are already reeling from the new 20 percent tariffs. China’s economy is weak and dependent on exports for growth, while US exports to China are relatively small. So the US is less vulnerable to tariff retaliation. However, China still enjoys around a $300 billion trade surplus with the United States and has gained dominance in some industries crucial to technology and defense industries, including processing facilities of rare earths and other minerals, legacy semiconductors, and advanced telecommunications equipment.

2. The Trump administration needs to address runaway US spending and avoid harming allies.

One vulnerability of the Trump administration is its evident indifference or lack of political will to address the challenges the US economy inherited from the Biden administration’s fiscal policies. Another potential problem with the Trump administration’s go-it-alone industrial and trade policy is the impact on traditional allies. To counter China effectively, President Trump will need support so that Xi Jinping cannot easily replace his lost exports to third countries, especially nations in Europe but increasingly in the developing world.

3. To compete with China, the Trump administration should double down on pressuring Beijing’s economy, move to shore up help from allies, and avoid reviving inflation.

The Trump administration will want to avoid peace agreements that look more like capitulation to Russia or Iran while making progress on the economic issues raised since its first term. The administration should also be wary of alienating key allies who can help combat the Chinese Communist Party’s narrative that China can outlast the US. European leaders’ reactions and how they decide to use their economic weight in the confrontation will be important to both sides. If the administration can succeed in these areas, President Trump will have the ability to do considerable damage to the “China Dream.”

Read the full article. [[link removed]]

Quotes may be edited for clarity and length.

Go Deeper

China Watches as Russia’s Economy Teeters [[link removed]]

By applying more sanctions, the United States could push Moscow’s ravaged economy over the edge and deter Beijing from offering further support, writes Thomas Duesterberg [[link removed]] in the Wall Street Journal [[link removed]].

Read here. [[link removed]]

Big Ideas for America’s New National Security Team [[link removed]]

Mike Gallagher [[link removed]], Shyam Sankar [[link removed]], and Nadia Schadlow [[link removed]] discussed how the Trump administration can scale innovation and manufacturing to restore American dominance.

Watch the event, read the transcript, or listen to the podcast here. [[link removed]]

How Weakness in the Social Safety Net Undermines the Political Compact in China [[link removed]]

High debt levels burden Chinese local governments, and shrinking revenues, declining birthrates, falling marriage rates, and aging populations further fuel the deterioration of government finances. Thomas Duesterberg [[link removed]] and Alexander Aibel [[link removed]] lay out how these factors [[link removed]] damage the Chinese people’s trust in their government.

Read here. [[link removed]]

More from Hudson Institute [[link removed]]

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