Fwd: How Trump Is Making China Great
John Clark
From: Paul Krugman from Paul Krugman <paulk...@substack.com>
Date: Mon, Oct 13, 2025 at 6:34 AM
Subject: How Trump Is Making China Great
To: <johnk...@gmail.com>
How Trump Is Making China GreatWhy we’re going to lose the trade war, and much more besides
Six months ago Donald Trump announced his Liberation Day tariffs — huge tariffs imposed on just about every nation. As everyone noted, this announcement suddenly brought average tariffs back to 1934 levels. Less widely noted was the fact that the long decline in tariff rates over the previous 90 years had been achieved through many rounds of international negotiations, in which the U.S. and other nations solemnly agreed not to backtrack on past tariff reductions. So Liberation Day was, among other things, a massive betrayal of the world’s trust. Now Trump is learning, to his obvious shock, that other nations can also play trade hardball. His reaction to China’s new export controls on rare earths, which are crucial to digital technology, would be comical if the stakes weren’t so high:
Gosh. Aggressive unilateral trade action is a “moral disgrace.” Who knew? There is, however, one big difference between Trump’s trade policy and China’s. Namely, the Chinese appear to know what they’re doing. It should have been obvious from the beginning that if America were to get into a full-scale trade war with China, the Chinese would have the upper hand. For one thing, in real terms China has the bigger economy:
Furthermore, while our economies are interdependent, America is more vulnerable to a rupture than China is. True, Chinese industry has relied to an important degree on sales to the United States. But the U.S. economy is dependent on China for critical inputs, above all those rare earths. And here’s the thing: China can quickly compensate, at least in part, for the loss of the U.S. export market by stimulating domestic demand. Given time, America could wean itself from dependence on Chinese inputs — but doing so would take years. That said, a year ago the United States still had some important advantages over China. Although China has made great strides in science and technology, America still had a commanding position, thanks in large part to our unmatched research establishment, our great research universities, and our ability — thanks in large part to the openness of our society — to recruit talent from all over the world. Furthermore, America had allies — which, as Phillips O’Brien emphasizes, are a vastly underrated source of national power. China may sometimes make alliances of convenience, but no more than that. The U.S. could and did build a powerful alliance system, because America was more than a nation: It was an idea and a set of values, values we shared with the rest of the democratic world. And you should always bear in mind that Europe, in particular, while it sometimes acts weak, is an economic superpower in the same league as China and America. OK, you know what’s coming: Since taking office, Trump and his minions have been systematically demolishing each of these pillars of U.S. strength. Start with science. The Trump administration is imposing huge cuts in funding for scientific research, as well as firing many researchers who were employed directly by government agencies. These aren’t projected cuts sometime in the future; they’re cuts for fiscal 2026, which has already started. Furthermore, just looking at the overall numbers, drastic as they are, understates the severity of the assault on science, for two reasons. First, the process of slashing research support is chaotic. For example, as the Times reports:
If you were a scientist, would you be willing to commit yourself to a major research project, given the chance that support might suddenly disappear because of a “procedural lapse”? Second, it’s obvious that Trump’s people aren’t just unwilling to pay for scientific research, they want to dictate the conclusions of much of the research that remains. Scientists had better “discover” that climate change isn’t real, that vaccines don’t work, etc., or else. The attack on universities should be seen in a similar light. All the talk about free speech, antisemitism and so on is obviously insincere. What MAGA wants is for universities to become engines of indoctrination, which will destroy their purpose and their contribution to U.S. strength. Given all this, is America still the world’s scientific leader? If so, not for long. And even if Trump’s push to establish authoritarian rule is defeated, it will take many years to recover what we’ve lost. The attempt to dictate conclusions extends beyond science to technology. Most of the world has decided that renewables — which have experienced astonishing technological progress over the past 15 years — are the future of energy. China, in particular, is investing in renewables on a huge scale. But the Trump administration is doing its best to kill wind and solar projects while forcing us to go back to burning coal. Meanwhile, America’s system of alliances is in tatters. Trump sees other democratic nations not as brothers in arms, bound to us by shared values, but in effect as vassal states he expects to pay tribute. In any case, with Trump doing his best to establish authoritarian rule, it’s unclear what values if any we share with our erstwhile allies. So we may be entering into an all-out trade war with China having destroyed the non-trade advantages America used to have in the form of scientific leadership and major allies. As a result, it’s just a question of which nation can do the most damage to the other. And if those are the terms on which a trade war is fought, it’s clear who is in the stronger position. China wants access to the U.S. market, but America needs Chinese rare earths and other inputs. America is going to lose this conflict. You might ask why, if China has this much economic leverage, it hasn’t exploited it in the past. My answer would be in part that America used to have important strengths that Trump has now thrown away. But perhaps even more important, nobody really wins a trade war. Even if the United States ends up crying uncle and making humiliating concessions — which seems the most likely outcome — China will end up poorer than it would have been if there had never been a trade war in the first place. But Trump decided to start a trade war, and now that it’s happening, America will take a bigger hit than China, both to its economy and to its reputation. It’s bad when the world sees you as a bully; it’s worse when the world also sees you as weak. The man who promised to make America great again has probably ended our position of global leadership for the foreseeable future. MUSICAL CODA  You’re currently a free subscriber to Paul Krugman. For the full experience, upgrade your subscription.
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