America’s Strategic Defeat: Playing with the Dragon’s Tail.
From the Financial Times, Chinese President Xi Jinping won the trade war with Trump this year with a “let the enemy continue to make mistakes” approach, and this defeat in South Korea this October was a turning point for the US president. Trump’s retreat in this war is considered a turning point. Even the idea of separation and reducing economic dependence on Beijing did not go anywhere. Trump gave his meeting with Xi 12 out of 10 and the Chinese president got a passing grade.
Xi, adhering to the proverb “if you wait, you will make halva” in this war, was rewarded for his strategic patience. Trump added to Xi’s windfall last week by approving the sale of Nvidia’s H-200 chips. The American perception is that Nvidia is a business champion and no one can beat it; the reality is different. Advanced chips are the only area where China lags behind the US, and Trump has closed the gap with this gift to Xi.
Trump’s strategy on artificial intelligence is ambiguous. On the one hand, it removes all domestic barriers to the growth of the AI industry to win the competition with China, and on the other, it equips the country to stay in the competition. The industry also lines Trump’s pockets and his billionaire friends support him. Nvidia has promised to pay 15 percent of its revenue from China to the United States; how this tax is calculated and collected is still unclear.
Trying to find the geopolitical logic behind Trump’s policy towards Beijing is a bit of a gamble. Trump’s latest national security strategy document no longer recognizes China and Russia as rivals. It adds a “Trump Amendment” to the Monroe Doctrine that is a slap in the face to China. Trump has banned political and economic influence by foreign powers in the Western Hemisphere. This explains, to some extent, why Trump has been rallying his forces around America’s backyard, Venezuela, which happens to be China’s friend in the region.
The rest of the document seems designed to accelerate China’s influence in the world. The best way for America to limit and control China’s growth is to work with Europe, but Trump is instead seeking regime change. He makes his goal clear, referring to the continent’s “civilizational collapse”: to bring parties close to him to power in Europe. This would make America an ideological rival to Europe’s liberal democratic governments. In doing so, Trump is giving China and Russia the tools to accelerate the West’s collapse.
He is also single-handedly withdrawing from the global energy race. China’s clean-tech exports were worth twice as much as America’s fossil-fuel exports in the first seven months of this year. In his “big, beautiful bill,” Trump eliminated most of the US’s exemptions and subsidies for alternative energy. So China will lead the way in new energy frontiers, offering these technologies to developing countries. By refocusing on fossil fuels, Trump is effectively handing over the future of the world’s energy to China.
Will next year be the Year of the Dragon again? Trump’s prize is his meeting with Xi in April. Until then, he wants nothing to spoil the new US-China relationship. Trump launched his “biggest blow” in May by imposing a 145% tariff on China. Xi then responded by curbing exports of rare earth elements, which could have crippled much of America’s industrial and military production. Trump backed down in October. Now it turns out that Xi’s “blow” is bigger, at least for the next few years. The few concessions China made included curbing exports related to fentanyl and resuming imports of US soybeans.
This year has been a year of learning for the United States. The US can once again sell China soybeans, and China will guarantee access to rare earth elements. In addition, China will gain access to advanced AI chips, although not the latest ones. Other countries that trade with the United States are no longer looking for order in this strange situation, because there is no logic to it. In this great global competition, Trump’s performance has revealed many things: he has shown that China has strong control over the world’s most valuable resources and has made it clear to others that they must find their own way. The slogan “America First” may be good for elections, but in the real world, China is ahead.