Behind Trump’s Tariffs: How U.S Policies Enabled China’s Rise

Imagine a time when the Romans believed in “Roma Aeterna”, an empire eternal, invincible and destined to last forever. Today, what remains of that grandeur is a viral TikTok trend. The British Empire, once so vast that the sun never set, is now reduced to nostalgic relics like the royal family, gilded castles, and colonial territorial disputes.

Illustration by The Geostrata

This is history’s brutal lesson: Power is Transient. According to Modelski and Thompson’s Long Cycle Theory, global leadership by a dominant state rarely lasts beyond a century. So the question is not “if” today’s superpowers will face the same fate, but “when”. 

If both Pax Romana and Pax Britannica declined, which global power is now entering its twilight? The answer appears to be the United States of America. Pax Americana, built on the ruins of 1945, with its unrivalled military strength, economic centrality, and a rules-based order backed by U.S. guarantees, appears to be unravelling. Unlike the earlier hegemonies that ended with wars, this era is being challenged by a gradual, deliberate abdication by America. Francis Fukuyama, who once declared America’s Cold War triumph as the “end of history,” today calls it a story of “self-defeating hegemony”. 

AMERICA’S STUMBLING MOMENT?

In 2001, it launched the “Global War on Terror” in Afghanistan, convinced it would avenge 9/11. But it soon found itself entangled in a greater mission of championing democracy in Iraq and Syria. Two decades later came a chaotic retreat which highlighted the limits of U.S power and led many experts to point to military overstretch as a key factor. America overestimated the military’s power to reshape societies and underestimated the region’s deep-rooted complexities.

Or maybe it was simply blind to Afghanistan’s grim prophecy as the “Graveyard of Empires”. 

Surprisingly, despite these misadventures, Joseph Nye notes that America still holds some of the longest-lasting alliances and institutions that the modern world has ever seen. To understand this paradox, one must see where U.S. power truly lies in the 21st century: its military and navy. 

The U.S controls the world’s oceans through sea lines of communication, a global surveillance system, alliances spanning continents, and nuclear supremacy. Add to this a sprawling network of over 750 military installations across 80 territories. Its military has the highest expenditure, and ranks first in the Global Firepower Index.

UNINTENDED CONSEQUENCE

What if the fundamental reason for America’s decline lies less in its military misadventures and more in its economic weakness? Scholars like Shivshankar Menon and Samir Saran observe that the world today is militarily unipolar but economically multipolar. While the US remains the sole military superpower, it is China that has emerged as the world’s sole manufacturing superpower. 

As Washington was projecting its unipolar moment abroad, the very globalisation it midwifed turned ungrateful, nurturing others while leaving America weaker. The very system America created left its economy grappling with contradictions, while it launched China’s economy into the stratosphere. Ironical, isn't it? 

“THE BEST OF TIMES, THE WORST OF TIMES”

Let's rewind to the 1970s, when this economic saga began.

With the Cold War at its peak, Richard Nixon put his frontman, Henry Kissinger, in charge of orchestrating one of the most dramatic geopolitical divorces of that era, prying Communist China away from the USSR. 

Though economics was an afterthought, Nixon lifted a 21-year-old trade embargo on China in 1971. Back then, US-China trade was valued at less than $5 million. Who could have thought that it would be the turning point that would make China ground zero for manufacturing outsourcing? 

By the 1980s, trade, technology transfer, and investment flows surged. American policymakers envisioned that integrating China into the global system would drive it towards democratic and liberal market reforms. To make this happen, firstly, in 2000, Congress granted Beijing Permanent Normal Trade Relations (PNTR) status. Secondly, in 2001, China was admitted into the WTO with a U.S. push.

Bill Clinton, then U.S. president, called it “one of the most important decisions America has made in years”. He further insisted, “It is in our larger national interest. For the first time, our companies will be able to sell products in China made by workers here in America without being forced to relocate manufacturing to China or transfer valuable technology. We'll be able to export products without exporting jobs”. 

CHINA SHOCK

He spoke too soon. What followed was exactly the opposite. The American economy spiraled into what economists call the “China Shock”. Cheaper Chinese imports hollowed out manufacturing communities, especially in former industrial areas, like the Midwest. Over the ensuing two decades, the U.S. lost some 6 million manufacturing jobs. Its trade deficit boomed while foreign debt reached unprecedented levels.

The example of Apple demonstrates this impact. In the early 2000s, the company began shifting its manufacturing to Foxconn in China, drawn by cheap labour and weak regulations. By 2019, almost half of Apple’s suppliers were in China.

Today, Foxconn is the world's most profitable smartphone vendor, produces 70% of iPhones globally, and employs over 900,000 workers, far more than Apple’s U.S. workforce. 

Thousands of other firms followed. By transferring manufacturing, technology, and jobs overseas, it was U.S corporations that financed and enabled China’s transformation into the factory of the world, a stark contrast to what the American architects intended.

CHINA’S METEORIC RISE

While the American economy was facing deindustrialization, how was the Chinese economy faring? In 1990, its economy ranked 11th globally at just $384 billion. Now, it has surged to $18.74 trillion, a 49-fold leap, becoming the second-largest economy. This rapid growth reduced China's gap with the US; the China/US GDP ratio rose from 5.5% to 79% from 1979 to 2023. Its share in global manufacturing output hit 29% in 2023, nearly 12% points ahead of the U.S. In the same four decades, it lifted 800 million people out of poverty.

China’s role in global trade also increased, from 3% in 1995 to 20% in 2024, worth $6.1 trillion. Its current-account balance swung from a deficit of 4% of GDP in the mid-1980s to a peak surplus of nearly 10% before the GFC of 2008. Rising current-account surpluses also boosted foreign exchange reserves, peaking at $4 trillion, from a record low of $3.7 billion in 1989.

Infographic by The Geostrata

A GAME OF THRONES

This deeply alarmed the Americans. The very same Bill Clinton acknowledged that globalisation has not turned out as expected, remarking, “Each aspect of globalisation – trade, finance, technology, ideas, and people - raised difficult questions that Washington struggled to answer.”

This disillusionment set the stage for Donald Trump, who positioned himself as the most vocal critic of America’s globalisation experiment. In 2018, he launched a trade war with China, imposing broad tariffs. Congress followed with the Export Control Reform Act, empowering the president to block exports with dual-use potential. Chinese giants like Huawei and ZTE were hit with export controls to curb Beijing’s access to advanced semiconductors and telecom equipment. Concerns over China’s misuse of WTO rules led to bipartisan efforts to render it defunct. 

Under the Phase One trade deal, China agreed to purchase $200 billion in U.S. goods, but the strategic rivalry was far from over. Opposition to China led to bipartisan action with President Biden institutionalizing many of Trump’s measures through legislation, such as the CHIPS and Science Act and the Inflation Reduction Act, to onshore manufacturing and restrict China’s access to cutting-edge technologies. 

TRUMP’S “AMERICAN WAY” TRADE PLAYBOOK

Trump's second presidency has doubled down on such measures. He has cast globalisation as the villain, hailing tariffs as “the greatest thing ever invented”, weaponising it against allies and adversaries alike. Any nation with a bilateral trade surplus is considered an enemy. Economic coercion tools such as tariffs, sanctions, supply chain strikes, visa curbs, and export bans have become the central lever of power. 

The much-anticipated “Liberation Day” tariffs on April 2, teased as the climax of Washington’s trade war, ended as a cliffhanger. China, instead of folding under U.S threats, retaliated with its own export controls on rare earths critical to American manufacturers. This pressurised Washington to soften its stance, granting tariff extensions, reversing Nvidia’s H20 chip ban, and sidelining China hawks in Trump’s administration. 

Now, just ahead of a proposed Trump-Xi summit, both countries have again raised tariffs and export controls. Each side seems to be borrowing the other’s tactics to gain a negotiating edge, with the U.S often appearing to react to Beijing’s moves, appearing as if U.S. actions are at Beijing’s whims, with China now determining the time, place, and nature of U.S. trade policy. 

A FRACTURED FUTURE

Analysts note that a clear China strategy is hard to discern, with decisions depending largely on presidential whim, which can quickly change. But one thing is clear: the era of unrestrained U.S.-led globalisation is over. Politics, rather than markets, will determine how the global economy continues to evolve. 

The real question for policymakers is not whether the old order can be restored but what will replace it. There are three possible scenarios: a total collapse (“Deglobalization”), a Chinese-led global system, or the emergence of partially closed trading blocs (“Regional blocs” or “Value-based Blocs”).  The first two remain unlikely, at least for the foreseeable future. The last one is more probable and desirable, even from an American perspective. 

Having abandoned the dream of a fully integrated world economy, the U.S. now faces a pivotal choice: reconstruct a partial liberal trading system rooted in Pax American values, or retreat further from the global stage and cede influence to rising powers like China. The path chosen will decide whether America can break free from history’s cycle and reclaim leadership or whether it will watch its own legacy fade, much like the Romans and the Brits before it.

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BY GARIMA ARORA

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