Will Tariffs work?

The competition between the United States and China has become one of the defining geopolitical and economic struggles of the 21st century. Both nations are engaged in a multifaceted rivalry, encompassing trade, technology, military dominance, and geopolitical influence. In response to China’s growing global presence, the United States has crafted a strategy based on three key pillars: tariffs, security measures, and subsidies. These three components — often referred to as the “three-legged stool” — represent a robust and sometimes contentious approach to ensuring that the U.S. remains competitive in a world where China’s power continues to rise. However, the central question remains: will this strategy work in the long run?

The Role of Tariffs in the US-China Strategy

Tariffs have emerged as one of the most visible tools in the U.S. strategy for China competition. Under the leadership of former President Donald Trump, tariffs were used aggressively to penalize China for what the U.S. government viewed as unfair trade practices, intellectual property theft, and an imbalanced trade relationship. The idea was that by imposing significant tariffs on Chinese goods, the U.S. would make Chinese products more expensive, thereby reducing the trade deficit and incentivizing China to alter its policies.

While the tariffs may have succeeded in pressuring China on some issues — such as intellectual property and forced technology transfers — the effectiveness of tariffs as a long-term strategy is debatable. First, they have resulted in higher costs for American consumers and businesses that rely on Chinese imports. The U.S. government’s attempts to strike a “deal” with China, through phase one trade agreements, yielded some positive results, but many key structural issues remain unresolved. Additionally, China has found alternative markets and adjusted its own supply chains to mitigate the effects of the tariffs. Thus, the tariffs, while impactful in the short term, have yet to bring about the fundamental shifts in China’s behavior that would guarantee sustained success for the U.S.

Security Concerns and the Military Dimension

Security concerns represent another leg of the U.S. strategy against China. This dimension of the competition is perhaps the most critical given the strategic and military implications of the rivalry. China’s rapid modernization of its military, coupled with its assertiveness in the South China Sea and near the Taiwan Strait, has been a source of growing concern for the U.S. and its allies. The United States views China’s military rise not just as a regional challenge, but as a global one, with long-term implications for U.S. global dominance and the balance of power.

To counter China’s military ambitions, the U.S. has strengthened its alliances with regional powers such as Japan, South Korea, and Australia, while also seeking to bolster Taiwan’s defense capabilities. Furthermore, the U.S. has ramped up its presence in the Indo-Pacific region, conducting joint military exercises and increasing freedom-of-navigation operations in contested waters. Yet, the question arises: is a purely military response the most effective way to confront China?

While military deterrence remains a core aspect of the strategy, the risk of direct confrontation is high, and the U.S. must tread carefully to avoid escalation into a larger conflict. A military-first strategy may not be enough to constrain China’s rise. Instead, the U.S. needs to consider whether its security strategy is comprehensive enough to address not only military challenges but also the non-military aspects of competition, including the economic and technological dimensions.

Subsidies: A Domestic Strategy to Compete with China

The third leg of the U.S. strategy involves subsidies, particularly aimed at revitalizing American industry and technology sectors that are increasingly challenged by China’s own industrial policies. China’s state-led capitalism has enabled it to dominate certain sectors, particularly in technology, manufacturing, and green energy. The U.S., recognizing its vulnerability, has responded by increasing subsidies for domestic industries, especially those in high-tech and critical infrastructure sectors such as semiconductors, electric vehicles, and artificial intelligence.

Subsidies play a dual role in this strategy: they stimulate domestic innovation and strengthen supply chains, while also positioning the U.S. to compete with China’s economic model. For instance, the CHIPS and Science Act, signed into law in 2022, was designed to incentivize semiconductor production within the U.S. — a clear response to China’s dominance in this critical field. However, the success of subsidies depends on whether they can be effectively implemented to foster genuine innovation, attract private investment, and avoid distorting markets in a way that stifles competition.

The challenge with subsidies lies in their execution. The U.S. has historically been wary of industrial policy, preferring market-driven solutions over government intervention. The shift toward a more active role for the state in shaping industrial policy represents a significant departure from this tradition. If not managed carefully, these subsidies could lead to inefficiencies, or worse, create new forms of dependency on government support. Moreover, subsidies alone are unlikely to solve the deeper structural issues facing the U.S. economy, such as labor market dislocation or the rising cost of education and healthcare, which hinder America’s long-term competitiveness.

Will the Three-Legged Stool Work?

The United States’ strategy for China competition, built on tariffs, security, and subsidies, represents a bold attempt to navigate the complexities of a rapidly changing global landscape. However, its success is far from guaranteed.

On the one hand, the U.S. strategy has put significant pressure on China, forcing it to adapt its approach to trade, military engagement, and technology development. However, tariffs have had mixed results, security measures are fraught with the risk of escalation, and subsidies may not be sufficient to reverse long-term economic trends or challenge China’s already formidable industrial capabilities.

To work, the U.S. strategy must be flexible and holistic, incorporating not just tariffs, security, and subsidies, but also addressing broader issues such as global supply chain resilience, technological innovation, and diplomatic engagement. The U.S. must also work with its allies, recognizing that China’s rise is not just a bilateral issue but one that impacts global stability.

Furthermore, the U.S. must avoid becoming overly reliant on any one leg of the stool. A balance between the three components — tariffs, security, and subsidies — is essential, with each supporting the others to create a comprehensive and sustainable approach. The strategy must also evolve to account for China’s own adaptations and global shifts, ensuring that the U.S. remains agile in the face of new challenges.

In conclusion, while the “three-legged stool” strategy is a promising framework for U.S.-China competition, its long-term success will depend on how effectively the U.S. can navigate the complex interplay of these three pillars. It will also require a willingness to adapt and reassess as China’s global influence continues to grow, and as the global economic and geopolitical environment changes. If managed correctly, this strategy may allow the U.S. to maintain its competitive edge, but it will require careful execution, cooperation with allies, and a nuanced understanding of both the opportunities and risks at play.