Is China Winning?

Previously, this newsletter has discussed the potential that China may actually be in decline, but as is often the case in geopolitics, the image of a country and its relative position vis a vis other great powers is convoluted. There are significant data points indicating that while China is facing numerous domestic problems that does not mean China is not winning the geopolitical competition with the United States and Europe. President Trump began an overt trade war with China, and hawks within his administration have hoped to contain the peer competitor. However, there is strong evidence that China is winning on several fronts in this competition because of missteps by the United States and a strong strategy by China.

Trade War and Economics

At first glance, President Trump appears to be winning his trade war. Trump has dramatically raised tariffs from around 2.5% to an estimated 17–19%, the highest level in a century, and he has successfully narrowed the trade deficit (especially with China), collected tens of billions in monthly tariff revenues, and extracted concessions from major trading partners without triggering widespread retaliatory tariffs. However, substantial challenges persist. Most importantly, the commitments from trading partners may prove hollow, such as promised investments or purchasing agreements. Tariffs risk fostering inflation, stifling consumer demand, or slowing growth, and the legality of many of Trump's unilateral tariff actions is under judicial scrutiny and may ultimately be overturned. Furthermore, economist Dean Baker argues that perceiving US–China relations through the lens of a Cold War-like competition oversimplifies reality, yet, if such a rivalry is to be taken seriously, the data shows the United States is falling far behind. China’s economy has grown significantly faster than America's. In just the first half of 2025, China’s GDP expanded at an annualized rate exceeding 5%, compared to only about 1.2% for the U.S., translating into roughly $1 trillion in Chinese economic growth versus $180 billion for the US.

Chinese exporters have wielded remarkable leverage amid the latest U.S. tariffs, as an analysis by China International Capital Corporation (CICC) estimates that they bore only about 9% of the added cost burden, significantly less than commonly expected. Using regression analysis that compared shipment sizes, tariff increases, and price changes, CICC found that between April and July, despite a 27-point tariff hike, the average US-imported Chinese goods actually decreased in price by 2.4%. CICC analysts interpret this as a sign of strong competitive advantages and bargaining power for Chinese exporters, who appear able to absorb or offset tariff pressure more effectively than US importers who instead are forced to compress their own profit margins

This is not jut a problem for the United States. China is quietly outpacing Europe in a complex trade contest, not through tariffs, but via aggressive industrial policy and a weakened yuan that bolster its export competitiveness. Despite US tariffs under Trump and the EU’s decision not to retaliate, China’s expansive manufacturing push has eroded European export sectors with autos being particularly hard hit. European exports to China have dropped significantly, and the EU’s trade deficit with China has doubled between 2020 and 2025, inflicting serious macroeconomic damage. Meanwhile, China's capacity surge reinforced by multi-level government subsidies and unrelenting investment has flooded global markets with EVs, construction equipment, industrial robots, chemicals, batteries, solar panels, high-speed rail components, and more. The result is that China dominates myriad strategic industries, while Europe struggles to mount an effective counterstrategy. Even accounting for skepticism about the accuracy of China’s official data, there’s little dispute that its long-term trajectory is real and dramatic.

Security and Geopolitics

While China is seeking the military capabilities to rival the US, China is winning the cyber war because it has combined offensive sophistication, strategic intent, and structural advantages while the United States remains fragmented and reactive. Through operations like “Salt Typhoon,” Chinese state-backed hackers infiltrated US telecommunications networks, gaining deep, persistent access to sensitive communications and tracking US intelligence and law enforcement movements, part of a broader campaign targeting global telecoms. China has expanded beyond espionage, embedding malware across US energy grids, water systems, pipelines, and transportation infrastructure, pre-positioning tools designed for sabotage that could disrupt daily life, delay US military mobilization, and degrade command and control in a crisis. Unlike China’s centralized and tightly integrated cyberdefense model, the US relies on thousands of privately owned infrastructure systems with inconsistent cybersecurity standards, outdated technology, and limited government oversight, creating a patchwork of vulnerabilities Beijing can exploit. China treats offensive cyber-operations as strategic deterrence, embedding itself in US civilian infrastructure to hold both civilian life and military readiness at risk without crossing traditional escalation thresholds, giving it leverage in potential flashpoints like Taiwan. Meanwhile, US policy has failed to keep pace. Diplomatic agreements have collapsed, regulations rely on voluntary compliance, and even Biden’s cybersecurity mandates were undone. This asymmetry between China’s unified offensive posture versus America’s fragmented defense has left Beijing with the initiative, positioning it to shape the digital battlespace and constrain US decision-making in future conflicts.

China is also rapidly outpacing the United States in the global race for critical minerals and strategic resources, leveraging aggressive state-backed investments, infrastructure-for-resources deals, and long-term partnerships while Washington struggles with policy inertia and disengagement. Control over minerals like lithium, cobalt, rare earth elements, and copper is increasingly defining geopolitical and technological competition, shaping supply chains essential for AI, EVs, advanced manufacturing, and defense systems. While US officials regularly emphasize the importance of resource security, China is moving faster, more strategically, and with far greater influence in both Central Asia and Africa.

In Central Asia, the US continues to signal interest in developing the region’s abundant resources (Kazakhstan alone holds nearly half of the minerals deemed critical by the US Geological Survey), but American initiatives remain mostly rhetorical. Trump administration officials have repeatedly pledged to boost U.S. investment and counter China’s influence, yet little substantive action has followed. Meanwhile, China is executing an aggressive strategy to consolidate control over Central Asia’s mineral ecosystem. In August, China National Gold Group signed a sweeping deal with Uzbekistan covering joint exploration, mining, technology transfers, and financing. Chinese entrepreneurs have also proposed a $500 million investment fund for Uzbekistan’s “green minerals” sector and are advancing plans for a metallurgical industrial park near Tashkent. In addition, Beijing-backed firms are securing footholds in adjacent sectors, including renewable energy and AI, demonstrated by a 300 MW data center agreement in Bukhara. The US, by contrast, faces structural challenges in accessing Central Asia’s resources, especially given the underdeveloped Middle Corridor transit network, which would require an estimated €18.5 billion in upgrades to support commercially viable exports. While Washington debates policy, Beijing is locking in contracts, infrastructure, and long-term supply chains.

In Africa, China’s dominance is even more pronounced. The continent holds roughly 30% of the world’s rare earth elements (REEs) and is projected to account for 10% of global REE exports by 2029, making it critical to future technological and defense needs. Yet the US has been retreating economically and politically. The Trump administration’s decision to end USAID and PEPFAR funding, cutting tens of billions of dollars in aid, has eroded relationships with African governments. Further strain came from Executive Order 10949, which imposed sweeping travel bans on multiple African countries, signaling disengagement at a time when competition for resources is accelerating. Meanwhile, China has expanded its role as Africa’s dominant partner, providing infrastructure financing, offering zero-tariff trade access to 53 of 54 African nations, and embedding itself in critical sectors like lithium, cobalt, and copper extraction. Under the Belt and Road Initiative, China now trades more with 52 of 54 African countries than the US does, giving it overwhelming leverage. This dominance extends beyond economics: a 2025 Afrobarometer poll found 60% of Africans view China’s influence positively, compared to 53% for the US, highlighting America’s declining soft power on the continent.

Analysis of the Competition

Taken together, the evidence assembled points to a coherent pattern of China converting scale, state capacity, and supply-chain control into durable geopolitical leverage faster than the US and Europe can counter. On the industrial/trade front, China’s overcapacity strategy and a weak renminbi have let it keep exporting aggressively even as barriers rise. Europe’s position is a useful bellwether as European exports to China have sagged while the EU’s goods deficit with China is on track to double versus 2020, a drag that mirrors China’s share gains across EVs, batteries, solar, chemicals, machinery, and more. Even US tariff escalation has not broken China’s momentum. On cyber power, China has moved beyond espionage into pre-positioned coercion. The “Salt Typhoon” campaign pierced major US telecoms, accessing call records and even systems logging court-ordered wiretaps. China’s centrally directed cyber defense/offense stack enables persistent access, but the US relies on fragmented, private systems and post-incident reporting. That combination hands Beijing a deterrence edge, the credible threat of domestic disruption that can shape U.S. decision-making (e.g., over Taiwan) before shots are fired.

In the resources and critical-minerals race, China’s advantage is even clearer because it sits at the choke points that matter most: refining and processing. Multiple independent datasets show China processes ~90% of rare earths, ~80% of cobalt, nearly all graphite, and a majority of lithium. That is leverage the US cannot quickly replicate. Beijing is also expanding upstream, not just in Africa but in Central Asia, with state-backed finance, turnkey industrial parks, and bundled technology transfers. Washington, by contrast, has paused/frozen significant foreign-aid pipelines and moved to dismantle USAID, with late-August “pocket rescission” moves canceling nearly $5 billion in approved international aid, steps that erode goodwill precisely where resource competition is heating up.

Put differently, China is winning because its coordinated state-industry playbook compounds advantages across domains. Industrial policy overwhelms rivals’ cost structures, cyber operations that blend espionage with latent sabotage, and supply-chain strategies that secure molecules and minerals before negotiations begin.

Despite China’s current advantages, the geopolitical competition is far from over, and the next decade will be defined by whether the United States and its allies can execute a coherent, coordinated strategy across trade, technology, resources, and cyber resilience. Europe’s new countervailing duties on Chinese EVs and its exploration of minimum price mechanisms show a willingness to defend market share, while the US has begun funding non-Chinese rare-earth processing, magnet production, and EV battery supply chains. Early steps, but strategically significant ones. If the West can synchronize industrial policy, supply-chain financing, technological safeguards, and cyber resilience, it still has the capacity to slow, and in some sectors reverse, China’s lead, but success will depend on successful execution.

Note: Please take a look at my podcast called Boardroom Statecraft, which looks at the intersection of geopolitics, security, and corporations. Take a listen on Apple or Spotify!