China-US not just a trade war, but a fight for the 21st century

Xi and Trump are now in a zero-sum contest for global supremacy.

By Matt Pottinger and Liza Tobin, The Free Press – April 9, 2025

As Donald Trump gave much of the world on Wednesday a 90-day reprieve from his global trade war, he singled out China for a knuckle sandwich. While he dropped “reciprocal” tariffs on dozens of trading partners, he hiked tariffs on Chinese imports to a sky-high 125 percent, “effective immediately.”

“At some point, hopefully in the near future, China will realize that the days of ripping off the U.S.A., and other countries, is no longer sustainable or acceptable,” Trump declared on Truth Social.

Welcome to the Great Divorce: a messy breakup between the world’s two largest economies—with the rest of the world up for grabs as part of the settlement. What began mainly as a trade beef for Trump is, for Xi Jinping—Chinese president and general secretary of the Chinese Communist Party—nothing less than a contest for mastery of the 21st century.

Xi is right. This is about much more than trade. And like it or not, the competition is pretty much zero-sum. While Trump has seized the upper hand in the trade war, Xi is gaining ground in areas that may be even more consequential: artificial intelligence, advanced manufacturing, and the military might required to seize the most important piece of real estate in the world—Taiwan.

The moment when China would be singled out from the rest of the world as the primary target of Trump’s ire was a long time coming—but it was always coming.

For much of his first term, Trump believed he could negotiate down China’s trade surplus with the United States, which today accounts for roughly one-third of America’s nearly $1 trillion overall trade deficit. We witnessed this firsthand as officials working on China policy in Trump’s White House. Things changed in 2020. With the global economy and his electoral prospects badly hurt by the pandemic, Trump told a small group of advisers that even “a hundred” trade deals with China wouldn’t make up for the losses the United States suffered from the Covid shock—which Trump rightly blamed on Beijing’s malfeasance.

“I’m not sure we can do business” with China anymore, he said in the Oval Office. One of us (Pottinger) was sitting on the sofa. “It may be time to decouple,” Trump said.

That thought has clearly stuck with him ever since. Here’s what he said Tuesday night: “Look, I get along with President Xi. I have over the years. But, you know. You just—when Covid came, that was the end. That was it. That was called the bridge too far.”

Might Trump’s dealmaking instinct reassert itself and overtake his decoupling instinct? Might he offer a temporary reprieve to China, or partial tariff relief in exchange for Xi’s blessing to sell Americans a larger stake in TikTok? It wouldn’t surprise us. But a comprehensive “grand bargain” that sets aside the U.S.-China archrivalry has never been more distant.

Why? Because there simply exists no deal that could plausibly fix the fundamental problem: Beijing’s economic model is designed as a means to political—not just economic—dominance around the globe.

Xi, more than Trump, led the world to this crossroads.

Beijing was already waging a one-sided trade war against the United States long before Trump first took office. Xi, when he came to power in late 2012, doubled down on systematic intellectual property theft, forced technology transfers, market-access barriers, and massive industrial subsidies, all designed to extract maximum advantage while giving minimal concessions. This asymmetric economic relationship helped decimate America’s manufacturing base, costing millions of jobs over two decades.

Beijing’s economic warfare stems from Xi’s broader ideological project: building what he calls a “community of common destiny for all mankind”—Xi’s blueprint for replacing America’s global preeminence with that of the Chinese Communist Party. It is a vision for normalizing authoritarian control, marginalizing democratic values, and maximizing Beijing’s leverage and prerogatives to call the shots on the international stage. Xi believes he is facing a once-in-a-century opportunity to remake the world order.

“[O]ur struggle and contest with Western countries is irreconcilable,” is how Xi put it, as quoted in a restricted official military textbook.

So while Trump has (again) become the protagonist in a trade war with China, Xi is focused on the broader battle for global power. For Xi, the means to victory isn’t merely dominating global trade but controlling critical technologies like AI that will transform society and underpin economic and military power.

It’s unclear whether Trump fully grasps the techno-economic stakes. Xi is controlling the tempo of the contests over technology and geopolitics (apart from trade). Beijing appears to be succeeding at weakening Washington’s restrictions on the export of high-end computer chips needed to power artificial intelligence; Chinese citizens have been identified fighting for Russia inside Ukraine; and Beijing is rehearsing for a blockade or invasion to capture Taiwan.

The Taiwan question is the most important of all: Trump can prevail in a trade war with Xi but still lose the century if Taiwan is forcibly annexed. That’s because the U.S. economy and its technological edge subsists on high-end semiconductors that are manufactured only in Taiwan. So long as Taiwan is a democracy, the United States, not China, has privileged access to those chips. A Chinese invasion would flip that dynamic.

The significance of economic decoupling cannot be overstated. By distancing the U.S. economy from China, Trump could be taking the first steps toward a broader China policy that strengthens U.S. resolve on key issues like tech and Taiwan.

Trump might improvise his way into success by isolating China rather than alienating most of the free world. Together, the U.S., the EU, Japan, the UK, and Australia represent around 56 percent of global consumption—a massive economic bloc compared to China’s 13 percent. India and other major economies are eager to cut deals with Trump. This collective purchasing power offers substantial geopolitical leverage, if it can be properly harnessed. The first step is trade deals resulting in much lower trade barriers with friendly countries relative to China.

Trump didn’t start this trade war. It began when China entered the WTO a quarter-century ago promising to open its markets but instead weaponizing state resources to dominate strategic industries and block fair competition. But Trump can finish it on favorable terms if he leverages the power of the world’s real market economies to isolate China rather than estranging the United States.

As Treasury Secretary Scott Bessent said Wednesday morning, “We can probably reach a deal with our allies. . . . And then we can approach China as a group.”

The current 90-day pause on “reciprocal” tariffs suggests Trump may stumble into this strategic imperative, even if it wasn’t planned this way. If Trump can pull this off, he has an excellent chance of winning the contest of the century.

PHOTO CREDIT: Goh Chai Hin/Afp Via Getty Images