In April 2025, the Trump administration raised custom tariffs on most Chinese goods up to 145%. The Chinese reaction was to raise its own tariffs up to 125% (Jennifer Clark, “What are tariffs and why is Trump using them?”, BBC, 23 April, 2025). In this context, one must keep in mind that, since December 1978 and the progressive economic opening of China by Deng Xiaping, the development of the Sino-American trade has become a key factor of the economic development of China (Loretta Napoleoni, Maonomics, Why Chinese communists make better capitalists than we do ?, Seven Stories Press, 2011).
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As it happens, economic growth is a core component of the current Chinese social contract and cohesion. Since 1980, Symmetrically, the import of cheap Chinese goods is a way to maintain the buying power of the U.S. citizens. Those imports have “compensated” the social consequences of the massive offshoring of U.S. industries, especially in China and Mexico (Giovanni Arrighi, Adam Smith in Beijing, 2007). So, putting the U.S.-China trade relationship at risk is a direct and massive threat to the very economic, social and political fabric of each country.
In other terms, the U.S. and China appear as pitting themselves against each other into a commercial war that seems to have strategic goals that transcend the trade dimension. One has to wonder if the U.S. as well as China are not weaponizing the different domains and tools of their confrontation.
In this article, we are going to study the strategic stakes of this colossal geo-economic confrontation. Then, we shall see how tariff barriers are hybridizing with geoeconomics warfare. Finally, we shall look at the way these dynamics are fuelling an escalation in other areas.
Confrontation
Since 4 April 2025, The U.S and China have been locked into a new trade war. Both Washington D.C. and Beijing are waging it through the installation of very strong custom tariffs. Indeed, the U.S. imposes 145% customs duty on most Chinese products imports.
In reaction, Beijing imposes a 125% on most American products imports. Nevertheless, this situation could change if Washington D.C and Beijing were deciding to open trade negotiations (Kevin Breuninger, “China insists no tariffs talks underway with Trump and Xi or top aides, despite US claim”, CNBC, 28 April, 2025).
Hunting the Chimera
This extremely violent trade war emerges in the very singular system of geoeconomics created by the U.S.-China relationship. Indeed, since 1980, their interactions have been extremely deep. This happens notably because of the economic interdependence that links these two giants, without uniting them. This relation is so dense that Niall Ferguson calls it “Chimerica”.
This expression expresses the quasi-intimate process of hybridization between these two mammoth national economies. (Niall Ferguson, Xiang Xu, “Making Chimerica Great again”, Wiley one line Library, 21 December 2018).
This process emerges both from the installation of thousands of U.S. industries and corporations in China and from the mammoth trade relation between the two countries.
Imbalance
This relation is also the driver of the fantastic trade imbalance between China and the U.S. As such, it is at the core of the trade war that the President Donald Trump launched against China in 2018. (Jean-Michel Valantin, “The Midwest floods, the trade war and the pandemic swine flu: the agricultural and food super storm is here“, The Red (Team) Analysis Society, September 3, 2019).
De facto, during the existence of Chimerica, the Chinese economic reality is inseparable of the U.S.-China relationship, as long as Chimerica lasts. Indeed, if today the U.S. industrial output represents “only” 16,6% of the world production, while China’s industrial output weighs 28%, it is the result of the installation of large segments of the U.S. industrial base in China and in Asia since the 1980s (Felix Richer, “China is the world’s manufacturing power”, Statista, Feb 18, 2020).
The growth of the Monster
Chimerica results from the export of China-based products at very low costs to the U.S. consumer base. From this point of view, Chimerica literally “is” the different dimensions of the fantastic trade imbalance between the two countries. Since 1986, this imbalance went from zero to more than 336 billion dollars in 2017 and 378 billion dollars in 2018. (Office of the United States Trade representative, “The People’s Republic of China – U.S-China Trade facts“).
So, one notes that, since 2002 when China joined the World Trade Organization, this imbalance has been growing and accelerating.
The Chinese GDP follows the same dynamic. As it happens, according to the IMF, in 2001, China’s GDP corresponded to 13% of the U.S. GDP. It represented 25% of the U.S. GDP in 2007 and 60% in 2016. In 2016, the IMF was projecting a growth of the 2023 Chinese GDP. That would be equivalent to 88% of the U.S. GDP. In other terms, Chimerica is at the core of the Chinese growth, and of the U.S. economy. (Niall Ferguson, Xiang Xu, ibid).
A strong dollar supports this structural imbalance, which heightens the U.S purchasing power, thus favouring the power of the Chinese exports.
In 2018, the U.S. trade deficit reached a historic 418 billion USD. Then, the U.S. imported $539 billion worth of Chinese products, while exporting $120 billion worth of American goods to China. The very same year, President Trump launched the U.S trade war against China, through the imposition of several tariff barriers (Jean-Michel Valantin, The Chimerica series (1) (2) (3), The Red Team Analysis Society, 29 June 2020 and Denisse Lopez and Javier Galan, « 5 charts that explain the U.S-China trade relationship », El Pais, 11 Avril 2025).
Targeting the U.S .
In the same time, in 2019 the Trump administration banned a growing number of strategic technology transfers, especially in the AI field. However, imports from China peaked again in 2022. That year, they reached 536 billion USD, before returning to 427 billion USD in 2023 and 439 billion USD in 2024. During the same time, U.S. exports in China remained in a zone between 125 billion USD and 150 billion USD. (Denisse Lopez and Javier Galan, « 5 charts that explain the U.S-China trade relationship », El Pais, 11 Avril 2025.)
Trade war as geoeconomic warfare
In other words, “Chimerica” is the geoeconomic driver of the U.S.-China trade imbalance. Chimerica also drives the deindustrialization of the U.S. in favour of the Chinese industrial development. This very real “chimera” has dire consequences for the U.S. Those are known as the “China shock”, i.e, the degradation of the U.S. global share of value-added manufacturing (David Autor, David Dorn and Gordon H. Hanson, “The China Shock and its enduring effects”, Stanford – Center on China’s economy and institutions, 1 October 2022).
Countering the “China shock”
As it happens, in 1980 the U.S. share of global manufacturing reached 25%, while China accounted for only 6%. Then, in 2001, China joined the World trade Organization, thus boosting its exports worldwide. In 2008, the financial crisis hammered the U.S. economy, followed, in 2020, by the COVID-19 pandemic and its dire consequences (Adam Tooze, Shutdown, How Covid shook the World’s economy, Penguin Random House, first ed. 2021).
In 2024, the U.S. share of global manufacturing reached 16%, while China’s share attained 29%. So, basically, the emergence of Chimerica, combined with the consequences of the global crisis, have been the engine of the transformation of the U.S. from a global productive power into a global purchasing power, besides a driver of the growth of China.
This “shock” from China started in 1980. It was exacerbated by the financial crisis and by the Covid crisis. This “long shock” inflicts deep damages to the U.S. society, through the migration of thousands of plants to China and the closure of non-competitive others in the face of the flood of imports from China. This industrial depletion triggered massive job losses, as well as declining employment and wages as well as fiscal losses (David Autor, David Dorn and Gordon H. Hanson, “The China Shock and its enduring effects”, Stanford – Center on China’s economy and institutions, 1 October 2022).
Thus, numerous local governments lack the financial means needed for the maintenance of infrastructures and public services. It is worth noting that the issue of the maintenance and rebuilding infrastructure was and is a central theme of the first as well as of the second Trump administration. In the latter case, it is especially true in the digital domain (Jean-Michel Valantin, “Trump Geopolitics – 1 : Trump as the AI Power president”, The Red Team Analysis Society, 20 January 2025) .
Chimerica as a geoeconomic war
In other terms, “Chimerica” drives an incremental weakening of the U.S. power, while damaging the U.S. infrastructures and society. From a geo-economic perspective, the consequences of the “China shock” are quite akin to the consequences of what Edward Luttwak defines as a “geo-economic war”. Indeed, theorised in 1990, a “geo-economic war” is thought as a means of inflicting the same kind of damage on a country as could be caused by military means.
This approach concerns infrastructures as well as the financial dimensions of quality of life. The idea is to use economics as a weapons system. (Edward Luttwak, “From Geopolitics to Geoeconomics”, The National Interest, 1990 and Robert D. Blackwill and Jennifer M. Harris, War by other Means, Geoeconomics and Statecraft, 2016).
By adopting this geo-economic war perspective, Trump’s tariffs appear to be a massive geo-economic offensive against Chimerica. Thus, we may understand it as an attempted strategic strike against one the major engines of the Chinese economic growth.
Escalation
Indeed, economic growth and the subsequent enrichment of the Chinese citizenry constitutes the core of the social contract between the Chinese society and the Chinese Communist Party. It follows that the U.S. tariffs are putting at risk the very model of development of contemporary China.
From the “Chinese shock” to the “American shock” ?
To make things worse, this U.S geo-economic strategy is being deployed while the Chinese economy has slowed down since the Covid-19 pandemic. Furthermore, as other economies, the Chinese economy is impacted by the inflation in energy prices that is accompanying the war in Ukraine.
In the face of these difficulties, Beijing reacts to the U.S geo-economic strategy by retaliating in the very same domain.
Extension of the theatre of operations
Since 11 April 2025, Beijing imposes 125% tariff barriers on U.S products. However, it appears that Beijing also adopts a strategy of enlargement and alliances for its geo-economic influence. In this light, the Chinese ministry of Trade multiplies negotiations with the European Union, as well as with the EU member states, in order to reinforce the Chinese penetration of the EU market (Nick Martin, “Trump Tariffs drive China, EU to diversify trade”, DW, 4/11/2025).
Beijing launched other initiatives in Asia. For example, from 7 April 2025, despite numerous tensions between them, and Japanese worries about China’s rare earth dominance, China, South-Korea and Japan established a regional zone of exchange for rare earths and semiconductors. In the same dynamic, China banned exports of rare earth from its territory to the U.S. Beijing also pressures South Korea to do the same (“China follows US playbook in rare earths crackdown; Tesla hit”, Asia Financial, 23 April 2025 and Eirwenn Williams, “Japan sounds alarm: this strategic metal is China’s global domination on chip and battery production”, Rudebaguette, April 28, 2025).
Refined rare earths are key components for the production of semiconductors, necessary for AI computers. Thus, those bans strike at the very core of the U.S. strategy of massive AI development, which is a central policy of the second Trump administration. Indeed, as we have seen, the U.S. AI industry is intricately linked to the second Trump administration (Jean-Michel Valantin, “Trump Geopolitics – 1 : Trump as the AI Power President”, The Red Team Analysis Society, 20 January, 2025).).
Thus, the Chinese ban on rare earth exports may be understood as a global offensive against the U.S. tariff barriers, as well as against the AI industry networks that constitute the very fabric of this administration, when the U.S. AI strategy is a major driver of the economic and military U.S. development of its power.
In other words, the U.S. geo-economic war aims at the very fabric of the Chinese society, while the Chinese counter-strategy aims at the very engines of the U.S. AI technological, industrial and political power (Jean-Michel Valantin, “DeepSeek vs Stargate – China’s offensive on U.S AI dominance ?“, The Red Team Analysis Society, February 18, 2025).
It now remains to be seen how this strategic confrontation expands in other domains, and if it triggers, or not, escalation dynamics.
