Most economic and strategic experts agree that the kind of “trade war” initiated by steep tariffs leads to short‐term pain on both sides. However, in the long run, China’s deep-seated structural advantages and long-term resilience tend to tip the balance in its favor. Several factors contribute to this perspective:
China’s Structural Edge: A Manufacturing Juggernaut
China has built an enormous and efficient manufacturing ecosystem over the past few decades. It has become a manufacturing juggernaut, producing everything from electronics to textiles for the global market. Its domestic supply chains are highly integrated, making it possible to absorb tariff shocks by shifting production, finding new sourcing routes, and leveraging massive economies of scale. This efficiency has allowed China to withstand—even sometimes benefit from—a turbulent trade environment.
The Chinese government uses a combination of industrial policy, targeted subsidies, and strategic investments (as seen in initiatives like “Made in China 2025”) to upgrade domestic industries and gradually move from imitation to innovation. Policies like “Made in China 2025” push for high-tech dominance (AI, EVs, semiconductors) .This model has proven resilient over time, permitting China to adjust its policies as needed and remain competitive even when confronted with external pressures.
While the U.S. trade policies have focused on reducing dependence on China, Beijing has diversified its trade partnerships and expanded its domestic market. Even if Western tariffs are maintained or increased, China can often find alternative markets, thereby reducing the leverage of any one country.
In summary, while no trade conflict is a zero-sum game and both economies may suffer collateral damage from escalating protectionism, many analysts forecast that in the long run the structural advantages—massive scale, efficient production systems, and proactive state policies—give China a relative edge over U.S. efforts to force change.
The U.S. Trade Deficit Dilemma
A central tenet of the Trump administration’s trade policy was to shrink the bilateral deficit with China by imposing steep tariffs. However, most economists now agree that the trade deficit is primarily a reflection of broader U.S. macroeconomic factors. American consumers and businesses tend to spend more than they save, and the deficit is funded by capital inflows. Tariffs may shift the balance of trade between specific partners (for example, reducing the deficit with China), but overall demand for foreign goods remains high.
In practice, tariffs tend to raise input prices and consumer costs rather than redirecting trade flows in a way that permanently alters the deficit. Evidence from past trade conflicts—and even Trump’s first set of tariffs—shows that while U.S. imports from China may dip temporarily, importers switch to other suppliers. In effect, the overall deficit remains largely unchanged.
Given these structural issues, it is unlikely that unilateral tariff measures will reduce the overall U.S. trade deficit. Shifting the deficit with one country almost invariably leads to increases in deficits with others, while the underlying demand and savings imbalance in the U.S. economy persists.
The U.S. remains a global economic and military power with advantages such as a dominant currency, robust services and innovation sectors, and a flexible political system. However, modern U.S. industries are highly reliant on complex, global supply chains. Many companies—from technology firms to automobile manufacturers—depend on Chinese components. Disrupting these supply chains through tariffs or decoupling can inflict collateral damage on the U.S. economy itself. It must be kept in mind that China produces ~30% of global manufacturing output (more than the U.S., Japan, and Germany combined). It is called the “world’s factory” due to its vast manufacturing output.
U.S. Vulnerabilities
Although the U.S. has significant advantages in high-value sectors like finance, innovation, and advanced services, it has seen a decline in traditional manufacturing capacity. This decline makes it more challenging to simply “bring back” all production domestically, even if tariffs are designed to incentivize reshoring.
Many analyses suggest that while the U.S. can use a variety of tools (including tariffs, export controls, and even sanctions) to push back against what it perceives as unfair trade practices, it is not clear that such measures will result in an overall “win.” The balance of economic power has shifted, and the U.S.’s relative vulnerabilities—in particular its dependence on inexpensive components from abroad—could limit how forcefully it can change the dynamics without incurring economic costs.
China’s Unyielding Policy Framework
China’s development model is supported by long-term national plans and an economic structure that includes key policy areas—such as industrial subsidies, state-led innovation, and even aspects of currency policy—are deeply embedded in China’s economic framework. Changing these policies could jeopardize the competitive advantages that have underpinned decades of growth.
Chinese leadership has increasingly used nationalism to justify tough stances in trade disputes. There is a domestic consensus (bolstered by state-controlled media) that views any concession as a sign of weakness. Such a stance makes it less likely that China will be the first to unilaterally budge on what it sees as non-negotiable principles.
While compromise may eventually come through high-level negotiations—as part of a mutually constrained “cease-fire” rather than one side yielding outright—China is unlikely to be the first to change its core policies on issues such as intellectual property protection or industrial subsidies unless there is a clear strategic benefit.
In its earlier phases of economic reform, China did much of its manufacturing through imitation of foreign products. This allowed Chinese companies to quickly reduce R&D costs and bring products to market. Although often criticized for “copying” designs or technologies, this process accelerated industrial learning and capabilities.
Allegations of currency manipulation—keeping the renminbi undervalued—helped make Chinese exports competitively priced in international markets. This policy enabled China to expand its trade surpluses and foster rapid industrialization.
From Imitation To Dominance
Historically, lax enforcement of IPR has meant that foreign technologies could be more freely imitated or “adapted” by Chinese firms, thus lowering costs for domestic production and fueling rapid growth. In time, however, China has begun shifting toward indigenous innovation as its industries mature.
The Chinese government has provided significant subsidies, infrastructure investments, and favorable financing to key industries. The result is a manufacturing base capable not only of mass production but also of eventually moving up the value chain.
With a vast labor force and relatively low wages during its period of rapid growth, China was able to build a competitive advantage in cost-intensive production, which in turn attracted massive foreign direct investment and integration into global supply chains.
In recent years China has shifted from being a “copycat” economy to one that emphasizes indigenous innovation, supported by heavy investments in technology, education, and R&D. This evolution is part of the “Made in China 2025” strategy, which aims to transform China into a leader in high-technology sectors such as semiconductors, electric vehicles, and artificial intelligence.
No Winners, Only Survivors
While the trade war itself is likely to cause short-term disruptions and economic pain on both sides, China’s entrenched structural advantages, state-led industrial policies, and diversified trade networks suggest that it is positioned to weather the trade conflict better than the U.S. in the long run. No other country has such a dense network of suppliers, factories, and logistics that China has.
Efforts by Trump (or any unilateral tariff policy) to reduce the U.S. trade deficit face significant limitations due to underlying macroeconomic imbalances that tariffs alone cannot fix.
The U.S., despite its economic and military strengths, is increasingly vulnerable because of its reliance on global supply chains and the declining share of manufacturing. Consequently, while the U.S. may hold certain strategic advantages, it is not clear that it can easily “take on” China without self-inflicted costs.
China is unlikely to budge first on its core policies (including those on industrial support, currency management, and even intellectual property) because these are seen as essential to its continued rise and national cohesion.
Overall, the trade conflict is emblematic of deeper global shifts. Rather than a clear “winner,” the outcome will likely be a reordering of economic relationships—with China emerging as the more resilient industrial powerhouse, while the U.S. must grapple with internal challenges that go far beyond trade policy.
The total value of trade in goods between the US and China was almost $700bn (€613.3bn) in 2024.
Shazmah Khan is a Politico-Economic Analyst and expert on international relation, with a sharp focus on geopolitical tensions and their impact on the global economy.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of Millat Times.
