When it comes to national GDP, the U.S. still leads the way. This figure topped $23 trillion last year with China coming in second at nearly $18 trillion. Likewise, the U.S. controls about 24% of the global economy compared to China’s 18.5%. But trends suggest these roles may reverse if recent economic growth rates continue. Even amidst China’s mishandling of its own COVID policies, the nation’s growth rate still exceeds 8%. These developments are causing many to rethink precisely what the U.S. strategy against China should be in the coming years. Policymakers have begun a U.S.-China decoupling economically, but it remains unclear how far this should go. Many are pleased with current approaches while others believe a much more aggressive approach is needed.
In order to determine how a U.S.-China decoupling might proceed, it’s worth exploring current and recent landscapes. This not only involves an assessment of global economics but national security interests as well. It’s become evident that China has no intentions of pursuing policies that provide a fair playing field. Instead, China has adopted strategies that can easily be viewed as opportunistic, unethical, and at times, criminal. Such a landscape is not one where the U.S. can succeed over time, which is why a U.S.-China decoupling is required. But how this approached, and how quickly, are key issues when considering a new U.S. strategy against China. This is where a deeper look into existing economic and security issues can serve as a guide.
China’s Existing Economic Strategies
China enjoys a $300 billion trade surplus with the U.S. As a key component of international supply chains, China has established a clear competitive advantage. But this advantage didn’t simply occur because of inexpensive skilled labor. China’s specific economic policies have also played a tremendous role. Once a nation controlled by consensus authoritarian rule, China has evolved more into a dictatorship. And President Xi Jinping has perpetually prevented fair U.S. access to its markets and goods. Only recently has the U.S. strategy against China shifted to impose similar barriers. But even with import tariffs, the U.S. trade deficit remains substantial. Further U.S.-China decoupling from an economic standpoint is therefore still needed.
It’s evident that the U.S. does not benefit from a level playing field in dealing with China. But to make matters worse, China is leveraging its trade advantages to advance its economic position further. For one, China barely limits investments in U.S. companies, enabling it to have notable influence in the U.S. According to some reports, Chinese investors have a controlling interest in over 2,400 U.S. companies. Many of these companies are involved in technology and agriculture, which raises additional concerns. China has been known to be actively involved in technology theft and espionage, which is more readily achieved through ownership. These practices should not be allowed, again supporting the need for U.S.-China decoupling.
Recent U.S. Decoupling Efforts
Within the last few years, the move toward a U.S.-China decoupling has occurred. Major import tariffs imposed on China triggered an immediate trade war and was labelled by China as unfair. But this occurred in the face of longstanding barriers within China against U.S. companies that prevented their ability to thrive. More recently additional measures have been pursued that prevent U.S. companies from exporting certain goods to China. And some specific Chinese technology firms have been banned on selling their products in the U.S. All of these new policies reflect a more invigorated U.S. strategy against China in light of the current economic environment. And much more is needed.
One of the more assertive moves by the U.S. involves the CHIPS Act, which was recently passed this year. The legislation provides $52 billion in funding to support domestic semiconductor chip manufacturing in the U.S. This reflect continued efforts related to U.S.-China decoupling since 90% of all chips are now made in Taiwan. And with China constantly threatening military force against Taiwan to ensure their presumed ownership, this represents a serious concern. The CHIPS Act is a direct reflection of how the U.S. strategy against China is shifting. But rather than pursuing more obvious and dramatic actions, the U.S. is being a bit more subtle.
Leveraging Economic Decoupling for National Security
While China’s economic threats are formidable, their political rhetoric and military moves are also concerning. In the last few years, China has quietly built up sizable military reserves in the South China Sea with outposts in Africa. It has also advanced territorial claims not only over Taiwan but portions of India, the Philippines, and Vietnam. China also has continued friendly relations with Russia even amidst the unprovoked invasion of Ukraine. All of this suggests that China’s intentions are not ones of peace and complacency. Instead, such actions suggest an aggressive pursuit for dominance.
Understanding this, it is important that the U.S. strategy against China appreciate the link between economics and military threats. Economic leadership and independence are inherently important when pursuing non-military actions during conflict resolution. Thus, as U.S.-China decoupling grows, the better position the U.S. will be in which to avoid military confrontation. By balancing trade exchanges, protecting domestic industries, and incentivizing U.S. businesses to invest at home, the nation’s bargaining strength grows. And at the same time, it undermines China’s capacity to build up its own forces or to acquire further U.S. assets. This should be the long-term U.S. strategy against China enhance its own national security.
(Intel and Mobileye are going big here in the U.S.–read more in this Bold story.)
The Need for an Evolving Strategy
The policy changes made in recent years related to the U.S. strategy against China is headed in the right direction. But the efforts to date are far from enough, and a more strategic U.S.-China decoupling will be needed moving forward. This means additional measures should be pursued to tighten import and export barriers. Likewise, additional incentives and investments will be required to support domestic manufacturing and production. And safeguards will be needed to protect the American public from potential data farming and propaganda from Chinese-supported social media. This doesn’t mean all trade with China should halt, especially as it relates to agricultural goods, medicines, and consumer goods. But it does mean the U.S. needs to pick and choose areas of trade where it will succeed. For too long, China has enjoyed a trade relationship that greatly favors their needs. It’s time that ended, and that’s why a U.S.-China decoupling is essential.
