How to Win the U.S.-China Economic War

Robert D. Atkinson

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It is dawning on the United States that China is not just a military adversary but an economic one. The two countries are at war for primacy in both innovation and production capacity as much of Beijing’s economic gain in advanced industries comes at Washington’s loss—and vice versa. This trend is likely to continue. Chinese President Xi Jinping acknowledged as much last year when he stated, “Technological innovation has become the main battleground of the global playing field, and competition for tech dominance will grow unprecedentedly fierce.”

Economic war is distinct from economic competition. Canada and the United States, for example, compete economically, but both nations understand that trade is conducted on the basis of a mutually beneficial comparative advantage. By contrast, China has launched massive frontal assaults on U.S. technology and industry capabilities. Beijing’s 2006 National Medium- and Long-Term Plan for the Development of Science and Technology can be considered an initial strike in this conflict, followed in 2015 by Xi’s “Made in China 2025” strategy. Both identified key technologies in which China sought to achieve self-sufficiency, and both are backed by restrictions on foreign firms’ market access in key industries, widespread intellectual property theft, forced technology transfers, enormous subsidies for Chinese firms, and much more. The latter document also added numerical targets for China’s market share in leading industries.

Economic war is not unprecedented. From 1900 to 1945, Germany used a wide array of unfair trade practices to gain economic and political power globally, ultimately in service of its military power. But Beijing has taken economic war to another level. China’s long-standing and increasing attacks are designed to crush its competitors—and make the United States an economic vassal state.