Despite nearly a decade of escalating tariffs and tech sanctions, the United States’ trade war against China is proving unwinnable. American policymakers hoped that pressure would curb China’s economic rise, but recent developments suggest this strategy has backfired.

Over the first 11 months of 2025, China’s trade surplus exceeded $1 trillion for the first time, driven by exports to non-US markets.

In December 2025, the US government quietly reversed course on high-tech export bans by allowing Nvidia to sell its advanced H200 AI chips to China, on the condition that 25 percent of the revenue is paid as a fee to Washington. This unprecedented arrangement reflects a shift from “security-driven” bans to short-term commercial transactions.

Even supporters admit this is a “compromise position” that balances “national security” with economic benefits. The move implicitly acknowledges that the competition with China cannot be won by isolation alone.

China’s economic resilience stems from its superior supply chain capabilities and a domestic strategy centered on high-quality development.

China has spent years modernizing its industries and reducing reliance on foreign technology. Instead of solely pursuing GDP growth, China now prioritizes innovation, sustainability, and social welfare in its development model. This approach emphasizes upgrading to new quality productive forces — such as electric vehicles (EV), renewable energy, artificial intelligence and robotics — to drive greener, more equitable growth.

In practice, this initiative has propelled China to a commanding lead in many advanced sectors, undermining the effectiveness of US trade measures.

Take the EV revolution. China now dominates the EV market. In 2024, over 17 million electric cars were produced worldwide, and Chinese factories accounted for about 12 million of them — more than 70 percent of the global total. This mass scale has given Chinese automakers and battery producers a formidable competitive edge.

China has spent years modernizing its industries and reducing reliance on foreign technology. Instead of solely pursuing GDP growth, China now prioritizes innovation, sustainability, and social welfare in its development model. This approach emphasizes upgrading to new quality productive forces — such as electric vehicles (EV), renewable energy, artificial intelligence and robotics — to drive greener, more equitable growth

Indeed, the Pentagon relies on Chinese supply chains for some 6,000 different battery components used in American weapons systems. Military planners warn that China’s primacy in advanced batteries — crucial for everything from AI data centers to drones and missiles — has become a strategic vulnerability for the US.

China also commands an unprecedented global maritime empire. By controlling eight of the 10 busiest Asian ports, including Shanghai, and investing billions in Belt and Road Initiative terminals across every continent, China has secured unmatched leverage over global trade.

While the US focuses on tariffs, China is forging new frontiers. In October 2025, the maiden voyage of the Polar Silk Road saw the Chinese cargo ship Istanbul Bridge reach the United Kingdom via the Arctic’s Northern Sea Route, slashing weeks off the traditional Suez Canal transit. This breakthrough illustrates China’s strategic prowess: Turning climate shifts into a faster, more dominant trade reality.

China is also rapidly neutralizing US tech sanctions through sheer efficiency and domestic innovation. In early 2025, the startup DeepSeek stunned Silicon Valley by building a top-tier large language model for just $6 million — outperforming American models on complex benchmarks despite using restricted hardware.

Beyond software, China has accelerated its own version of the “Manhattan Project” for semiconductors, reportedly reverse-engineering a prototype EUV (extreme ultraviolet) lithography machine for producing advanced chips.

By bypassing chip bans with more efficient code and local hardware, tech giants like Alibaba and ByteDance are proving that China is no longer just chasing the US lead but successfully forging an independent path to AI supremacy.

China has transcended its role as the “world’s factory” to become a global leader in drug development. In 2025, Chinese firms accounted for nearly half of all new drug molecules entering human trials — a massive leap from 17 percent a decade earlier. This biotech surge, alongside AI and maritime dominance, underscores an innovation-driven economy that is increasingly immune to Western pressure.

For centuries, Western powers have frequently sought to manage or constrain China’s rise, even though China — along with India — was the world’s largest economy prior to the 18th century. This anxiety is encapsulated in a quote often attributed to the French emperor Napoleon Bonaparte: “Let China sleep, for when she wakes, she will shake the world.” Through this lens, the West has tended to interpret China’s development primarily in ideological terms, often overlooking the historical experiences that shape China’s contemporary worldview. With these distorted assumptions, Western states deployed a series of coercive trade strategies to influence or control China’s trajectory.

China’s defeat in the Opium Wars epitomizes this dynamic. When Qing Dynasty (1644-1911) officials refused Britain’s demand to expand opium imports, the conflict culminated in the Treaty of Nanking (1842) and subsequent unequal treaties which forced China to cede territory (including Hong Kong Island), pay substantial indemnities, and open multiple treaty ports to foreign powers. These concessions, imposed at a time when China lagged militarily behind European powers, inaugurated what is widely remembered within China as the “century of humiliation” — a formative national trauma that continues to inform Chinese public sentiment and policymaking.

Today, as China has reemerged as a global economic power with unparalleled supply chain capabilities, attempts to wage or “win” a trade war against China have proved increasingly ineffectual.

Historical memory helps explain why containment strategies falter: Chinese leaders view economic sovereignty through the prism of the “century of humiliation”, treating technological and industrial self reliance as existential imperatives. Consequently, each US tariff, export control, or semiconductor ban has been met with calibrated countermeasures — ranging from restrictions on rare earth minerals to tighter oversight of critical supply chains.

In this long-term strategic rivalry, China is not merely adapting to the existing order — it is reshaping the terms under which global economic power is exercised.

The author is a distinguished research professor at the UCLA Anderson School of Management. 

The views do not necessarily reflect those of China Daily.