How the US is mirroring China's economic strategy From free market to nationalism

In recent years, the economic dynamics between the United States and China have undergone a dramatic shift, with Washington adopting policies strikingly similar to those Beijing has long championed. From tariffs to industrial subsidies, the U.S. is increasingly mirroring China’s state-driven capitalism. In an insightful analysis by Foreign Affairs, the article explores how America's pivot towards protectionism and state intervention in the market marks a fundamental change, with the U.S. now operating within a framework that once seemed purely Chinese.

In the early years of Donald Trump’s presidency, the U.S. government swiftly implemented protectionist policies that closely resembled the economic strategies of China, fundamentally shifting American economic priorities. This shift from a liberal, free-market approach to one dominated by tariffs, subsidies, and industrial policy marks a departure from the traditional U.S. model, aligning it closer to the state-driven capitalism that has powered China’s rise.

Trump’s imposition of tariffs on steel and aluminum, along with restrictions on Chinese investments in the U.S., seemed to be a reaction to China’s growing dominance. His administration's "America First" policy advocated for domestic production and protection from foreign competition, mirroring China’s approach of state intervention and protectionism. This approach contrasts with decades of U.S. efforts to integrate China into a global, rules-based trading system, hoping it would adopt more liberal economic policies. However, China’s rise has been built not on market liberalization but on a strategy of heavy state subsidies, investment restrictions, and the creation of national champions in key industries.

Over time, this failed engagement strategy saw China’s aggressive economic practices grow bolder. Under Xi Jinping’s leadership, China intensified its pursuit of strategic technological dominance, market expansion, and overcapacity, further cementing its position as a global economic powerhouse. The U.S. had warned Beijing for years to reform its predatory policies, but China remained resolute, often ignoring U.S. demands.

As China's economic dominance expanded, particularly in manufacturing and clean energy, the U.S. found itself struggling to keep pace. China now dominates global electric vehicle and steel production and has a significant advantage in critical technologies. U.S. policymakers, recognizing the inevitability of China’s rise, adjusted their stance, shifting toward protectionist policies similar to those of Beijing. Both the Trump and Biden administrations imposed tariffs on Chinese goods and restricted Chinese investments in the U.S., mirroring China's approach.

Furthermore, the U.S. has engaged in industrial policies—once considered antithetical to its economic philosophy. The Biden administration’s investments in clean energy and semiconductor manufacturing reflect an embrace of state-led market intervention, a strategy long utilized by China to fuel its economic growth. Washington is effectively adapting to Beijing’s economic model, marked by subsidies, tariffs, and market protectionism.

China’s success in leveraging state capitalism has been undeniable. Its victories in clean energy and electric vehicles came not from liberalizing policies, but from strategic government interventions aimed at achieving nationalist goals. As a result, the United States now operates under a similar framework, reshaping its economy to mirror China’s approach. The battle over global economic leadership seems settled—for now, with China emerging victorious.

By Vugar Khalilov