The United States appears to be on the ropes in trade negotiations with China. After taking office, the Trump administration threw down the gauntlet with Beijing, briefly imposing 145 percent tariffs in April 2025 and more than doubling its effective tariff rate on China to around 40 percent for much of the past year. Washington’s theory was that depriving China of the U.S. consumer would force Beijing to concede on market access and bringing down the bilateral trade deficit. At one point, Treasury Secretary Scott Bessent crowed that China was “playing with a pair of twos” given its dependence on exports to the United States, which clocked in around $500 billion in 2024.

However, unlike most of President Donald Trump’s hapless trade war victims, Beijing punched back hard. It raised equivalent tariff barriers and leveraged China’s overwhelming dominance in the production of rare-earth minerals to choke off supply of these critical industrial inputs, threatening U.S. production of everything from autos to aircraft and weaponry. The United States then, in effect, cried uncle, backing down from its most severe tariff threats. This week, Washington limped into trade discussions with Beijing on May 14 seeking an extended reprieve on China’s rare-earth export controls and headline pledges to buy more U.S. agricultural goods and energy.

The United States appears to be on the ropes in trade negotiations with China. After taking office, the Trump administration threw down the gauntlet with Beijing, briefly imposing 145 percent tariffs in April 2025 and more than doubling its effective tariff rate on China to around 40 percent for much of the past year. Washington’s theory was that depriving China of the U.S. consumer would force Beijing to concede on market access and bringing down the bilateral trade deficit. At one point, Treasury Secretary Scott Bessent crowed that China was “playing with a pair of twos” given its dependence on exports to the United States, which clocked in around $500 billion in 2024.

However, unlike most of President Donald Trump’s hapless trade war victims, Beijing punched back hard. It raised equivalent tariff barriers and leveraged China’s overwhelming dominance in the production of rare-earth minerals to choke off supply of these critical industrial inputs, threatening U.S. production of everything from autos to aircraft and weaponry. The United States then, in effect, cried uncle, backing down from its most severe tariff threats. This week, Washington limped into trade discussions with Beijing on May 14 seeking an extended reprieve on China’s rare-earth export controls and headline pledges to buy more U.S. agricultural goods and energy.

In return, the administration may have to give on dismantling some export controls on advanced technology or even diluting U.S. support to Taiwan. Privately, members of the U.S. administration may admit—perhaps in sotto voce—that, for now, China has economic escalation dominance.

The Fractured Age: How the Return of Geopolitics Will Splinter the Global Economy, Neil Shearing, John Murray Business, 320 pp., $29.99, September 2025

If competition between the United States and China is the most consequential geoeconomic storyline of the 21st century, then this episode doesn’t bode well for Washington. As the economist Neil Shearing incisively argues in The Fractured Age, the global economy is inevitably, albeit gradually and unevenly, splitting into two blocs: one centered around the United States and another around China. You can see the beginnings of this fracturing in global trade and foreign direct investment patterns, which—as the International Monetary Fund has —increasingly flow between . And in this more competitive environment, economic warfare will be a central battlefront between the two blocs as both sides seek leverage over one another to pursue their own policy interests and push back against coercion.

Does China have the upper hand in this new, fractured world? The past year’s showdown would tell you yes, but the numbers tell a different story. In their thought-provoking analysis Command of Commerce, former U.S. Treasury Department official Ben A. Vagle and Dartmouth University Professor Stephen G. Brooks argue that the United States holds the high cards. The world’s most important, profitable, and sophisticated companies sit largely in the United States and the Western bloc, and China’s own export machine is dependent upon their investments. In a sudden all-out decoupling between China and the West, the short-run impact would hurt China’s economy between five to 11 times more than the United States, according to their research, and China would face worse long-term economic scarring.

Command of Commerce: America’s Enduring Economic Power Advantage Over China, Ben A. Vagle and Stephen G. Brooks, Oxford University........

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