Jean-Baptiste Colbert, the finance minister to France’s Louis XIV, described international trade as “a perpetual and peaceable war of wit and energy among all nations,” an idea recently cited by JD Vance, the American vice-president and potential Republican presidential candidate. Vance draws inspiration from Colbert’s 17th-century economic protectionism, which influenced Alexander Hamilton, the United States’ first treasury secretary. Hamilton advocated for protecting “infant industries” with tariffs and subsidies, aiming to defend the nascent American economy from dominant foreign powers. Today, Vance and former President Donald Trump similarly view China as the primary economic adversary in a modern contest of commercial strength.
Recent developments underscore the challenges facing the United States in this economic rivalry. Last week, Chinese President Xi Jinping visited Washington for two days of diplomatic engagements that concluded with the extension of an existing trade truce until January. The talks, however, produced no significant breakthroughs on contentious issues such as China’s restrictions on rare earth material exports or its support for Iran’s regime. In a notable, if reportedly jestful, exchange during the visit, Trump asked Xi if he would consider purchasing American weapons, a scenario that would have seemed unlikely 18 months earlier.
The trade conflict escalated sharply last April, when the United States imposed high tariffs on Chinese goods, some exceeding 100 percent, signaling a de facto trade embargo. Vance warned that Americans would no longer accept borrowing money from Chinese lenders to purchase their manufactured goods. The U.S. had anticipated leveraging its large market size, the dollar’s global reserve status, and financial measures to compel China’s compliance. Instead, China demonstrated its advantage through its control of over 90 percent of global processing of rare earth magnets, critical to technologies from artificial intelligence chips to American F-35 fighter jets. In October, Beijing imposed a sweeping ban on rare earth export licenses without prior approval, forcing Washington back to negotiations. This led to a tariff and export control truce established at talks in Busan, South Korea.
Despite aggressive trade policies, the U.S. trade deficit has continued to grow, reaching $88.6 billion in July this year, reflecting a broader shift in economic dynamics. Tariffs, which peaked at an average of 20 percent post-embargo, have since fallen below 10 percent following legal challenges and partial agreements. However, consumer and corporate demand for imported goods remains strong. One key driver of the expanding deficit is the ongoing strategic competition in artificial intelligence, with U.S. technology firms vigorously acquiring semiconductors, memory chips, and IT equipment globally. American investments in AI infrastructure are projected to exceed $10 trillion by 2032, surpassing historical infrastructure investments such as railroads and telecommunications. This surge has contributed to China’s 14 percent growth in export values over the past year, fueled largely by memory chips and AI-related products.
The results of the U.S. economic strategy against China have so far fallen short of original goals. The Trump administration's focus on reducing the trade deficit has diminished, and the deficit itself has widened. Critics point to the administration’s inability to curb China’s strategic advantages, while Trump has shifted some blame to Federal Reserve interest rate policies. Looking ahead, Republicans have generally refrained from highlighting tariffs, deficit reduction, or reindustrialization as achievements in upcoming political campaigns.
Observers note historical parallels with Colbert’s era, where France’s economic policies were ultimately undermined by costly military conflicts under Louis XIV, weakening the country’s finances and contributing to revolutionary pressures. Analysts warn that lessons from this history may be relevant as the United States continues its complex economic competition with China, suggesting that sustained conflict may carry risks beyond trade balances alone.