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Weekend Reads
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, Thomas Duesterberg 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.
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.
Quotes may be edited for clarity and length.
Go Deeper
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 in the Wall Street Journal.
Mike Gallagher, Shyam Sankar, and Nadia Schadlow 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.
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 and Alexander Aibel lay out how these factors damage the Chinese people’s trust in their government.
