It's official: Donald Trump has been elected president of the United States. Donald Trump's first presidency gave Washington a playbook of hardline tactics for preventing China from overtaking the US as the world's dominant economic and technological power. Trump introduced punitive tariffs on China, as well as trying to rebalance the trade deficit to try and contain China's economic rise, as well as trying to contain its military might. To me, the most beautiful word in the dictionary is tariff. Trump is focused on raising tariffs to prevent China from shipping many of their goods into the United States that perhaps are subsidized by the government. In his campaign for reelection, he left no doubt that his ambition for American supremacy was still his North Star. We will hire American, buy American, build American, grow American, and show the whole world that the American dream is back. But after four years out of the Oval Office, Trump is returning to face an emboldened, savvier China.

and one the US may already be losing its battle to contain. Tackling that is likely to be one of Trump's primary plotlines in the sequel to his first four-year showdown with China. Thank you, thank you. Let's rewind for a second. When China joined the World Trade Organization in 2001, it marked a new era in global economics. Lower trade barriers allowed China to ship cheap toys, t-shirts, and TVs around the globe, and an export bonanza that helped lift hundreds of millions of Chinese into the middle class. Then around here, two pivotal events occurred. I am officially running for president of the United States. And that same year, China officially revealed a 10-year plan to upgrade its thriving export economy with cutting-edge innovations. 'Made in China 2025' is essentially President XI Jinping's vision to secure China's place in the world as a preeminent global technological leader.

At its heart, it's really about ensuring that China's national security goals are at the heart of its policymaking. It's the kind of grand ambition that would galvanize successive US presidents into taking action. This is number one, but this is the first of many. The US efforts to contain China's growth began with tariffs and some of the trade policies in the Trump administration. Basically, they sought to make it more expensive for Chinese companies to sell to the US and consequently redress a massive trade deficit. The imbalance that occurs when the nation imports more from a country than it exports to it. President Biden is holding back on a decision to scrap any Trump era tariffs on China imports. You could see this has had an impact in 2023. The deficit shrank to the smallest total since 2010, reflecting a decline in imports shipped from China. But globally, China's productive prowess is at historic heights.

Its manufactured goods trade surplus is the largest relative to global GDP of any country since the US right after World War two. Trump also introduced policies to control high-tech exports from US manufacturers, as well as those of some allied economies, which were tightened by the Biden administration. So that essentially makes it impossible or much harder to transfer US goods or US technologies into China. The US government stopped Huawei from being able to sell much of its telecom equipment into the United States, and then it went even a step further. It went to many of its allies around the world and tried to persuade them also to not let Huawei sell its equipment into their countries. That caused all sorts of problems for them. In 2022, they constrained China's ability to get the most advanced semiconductors out there, including AI chips that would be used to train models like ChatGPT. They also constrained the country's ability to get chipmaking equipment,

including the machines that make the most advanced chips that drive smartphones, and also AI and quantum computing. Massive appliances like these extreme ultraviolet lithography machines developed by Dutch company ASML. The constraints are also intended to hinder China's tech giants from developing anything that could threaten America's military superiority, a concern long intertwined with Washington's economic strategy. In terms of semiconductors and these really sensitive technologies, China is still lagging behind the US. So we have seen some efficacy there. But the data shows US-led export controls had an unintended side effect. They forced China to become more self-reliant and invest in its own scientists and researchers. They've been very aggressive in applying for patents that they think are going to help them develop domestic industries that are critical to their future. When President X Jinping makes something a priority in China, he can point to banks to provide cheap financing. He can point to state-owned enterprises to throw their full weight

behind, backing that certain sector or industry. For instance, backers of companies like Shanghai Microelectronics Equipment, considered China's best bet for competing with ASML, has advanced lithography machines. At this point, I think everybody believes that they're many years away from being able to match ASML at the pinnacle of the industry. But they're pouring billions and billions of dollars into this effort, and they're very determined to be able to close the gap as much as they possibly can. Evidence that China's semiconductor ecosystem was expanding emerged in 2023, when, while we released the Mate 60, or more precisely when Bloomberg News commissioned a research firm to take one apart. Inside that phone was a semiconductor that was much more powerful than anybody thought China could make on its own. It suggested, instead of being 8 or 10 years behind the US. Actually, China was 4 to 5 years behind the US.

But the cross-application is what really worries DC. That if we can do this with a consumer product like a phone, it's just as easy to do this with much more sensitive technology that's used for military applications and other areas. China really has charged ahead to take a lead. Take a look at this chart. You can see China's market share of many high-tech exports growing, particularly EVs. Despite US tariffs and restrictions on access to technology. Ultimately, there is this idea that trade always gets through. And that's sort of what we see when we think about the EV industry in China. So for example, a big EV automaker like BYD is already getting around some of these potential restrictions by building factories in places like Thailand, in Hungary, and in Brazil. Trump wants to further limit imports of Chinese EVs and batteries. And in his second term, may try to fulfill a popular campaign pledge to protect US carmakers.

I will impose whatever tariffs are required: 100%, 200%, 1,000%. They're not going to sell one car into the United States. The concern in Washington is that the electric vehicles and some of the software behind them would be able to collect personal information and perhaps share it with the Chinese government, or at least with the companies that are involved in making those vehicles. It's the kind of rhetoric Beijing has vehemently rejected. So have two U.S. administrations hindered China in ways Trump initially intended? It doesn't appear so. The vast majority of 'Made in China 2025' targets that Bloomberg tracks actually have been achieved or are on track to be achieved. Tariffs have helped cut America's trade deficit with its rival. But as we saw earlier, they haven't prevented China from boosting exports elsewhere. And while the US may have slowed Beijing's progress in some areas, like advanced chipmaking, overall, Xi Jinping's industrial policies

are successfully advancing China's technological capabilities. But even if the US hasn't managed to trip China yet, nobody expects a second Trump administration to stop trying. If you look at the geopolitical landscape, I think it's clear that the United States will continue to apply pressure on their life for more restriction. How the sequel to Trump's first confrontation with China will play out is yet to be written. But if you listen to Trump, it's clear that keeping America on top is his ultimate goal. We can do things that nobody else can do. China doesn't have what we have. Nobody has what we have.

Trump Is Facing a Losing Tariff War With China

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