The biggest casualty of a China trade war: America’s place in the world, experts fear

The Trump administration’s tariff war with China is most often seen through the lens of the economy.

But to many economists, the bigger threat is that Trump’s global trade gambit will erode the United States’ main source of global authority: the long-term geopolitical relationships it has cultivated over nearly a century.

Trump argues steep tariffs will bring manufacturing jobs back to the United States from places like China as well as Mexico and Canada. But experts fear his radical turn from decades of trade practices and his erratic policy announcements will upend the balance of world power and leave the U.S. in a weakened position.

“American dominance was based on being at the center of an incredibly close set of alliances, not based on the unilateral power of the United States,” said Jason Furman, professor of the Practice of Economic Policy at Harvard Kennedy School and former chair of then-President Obama’s Council of Economic Advisers.

As China’s economy and manufacturing might have mushroomed in recent decades, U.S. dominance depended to a greater degree on its historic allegiances. The nation’s economy came out of the pandemic recession stronger than many other rich nations and remains a dominant force in technology, innovation and finance. But the economy is also much different from what it was a generation ago when the U.S. was more of a manufacturing giant, and many are skeptical of Trump’s promise to bring back those days.

“Twenty years ago, the United States was big enough relative to any other economy,” Furman said. “Now we’re basically the same size as China, depending on how you look at it. So this gets at the core of American power.”

After World War II, the U.S. played a key role in setting up a rules-based international monetary system. More than 40 nations gathered in Bretton Woods, N.H., in 1944 to agree on fixed exchange rates and lower tariffs, to promote global stability and cooperation.

Important figures at the U.N. Monetary Conference at Bretton Woods, N.H., gather for a photo on July 3, 1944. From left are Camille Gutt of Belgium; M.S. Stepanov of Russia; Henry Morganthau Jr. of the U.S.; Arthur de Souza Costa of Brazil; and Leslie G. Melville of Australia.

(Abe Fox / Associated Press)

“For the architect now to tear it all down so quickly… irrespective of what happens from here on, I think it’s already been a very dramatic set of events that has no parallel in recent times,” said Jayant Menon, a research fellow at ISEAS-Yusof Ishak Institute who previously served as lead economist at the Asian Development Bank.

A global trade war — or even just a war between the U.S. and China — would likely undermine efforts to build international consensus on a variety of non-economic issues, from eradicating global disease and climate change to the war on drugs.

It could also threaten world peace.

“It’s hard to see how it doesn’t spill over international security more broadly,” Furman said. “A world where the United States and China have fewer mutual interests is a world in which the costs of war have gone down and the benefits of war have gone up.”

Stan Veuger, a senior fellow in economic policy studies at the American Enterprise Institute, a center right think tank, described the Trump administration’s tariff rollouts as an “embarrassing implosion of the U.S.”

“It’s just such a dumb, self-inflicted injury,” he said, noting the response in Canada has been one of anger and incredulity. “You see this most in the countries that have always been closest to us.”

“You can’t throw these kinds of hissy fits and expect people to forget about them,” he said.

Trump backers reject those concerns, saying the president is right to try to reduce a trade imbalance with China, which has long limited its markets to U.S. goods. They also believe his tough talk will force countries to negotiate with the United States for trades that will better benefit Americans. But it’s unclear whether such concessions will materialize; some trading partners have expressed outrage at Trump’s behavior.

Many U.S. allies expected Trump’s second term as U.S. president to be disruptive after his stream of pronouncements on Ukraine, Europe and trade on the campaign trail.

But still many have been astounded by the speed with which his administration broke from decades-long defense policies.

In February, Trump and Vice President JD Vance caused shock waves across the world when they publicly berated Ukraine’s president, Volodymyr Zelensky, at a televised meeting in the Oval Office, accusing him of being ungrateful of U.S. support.

Vice President JD Vance, right, speaks with Ukrainian President Volodymyr Zelensky, left, as President Trump listens in the Oval Office at the White House on Feb. 28 in Washington.

(Mystyslav Chernov / Associated Press)

“You don’t have the cards,” Trump told Zelensky, a U.S. ally whose country is being invaded by Russia. “You’re gambling with the lives of millions of people. You’re gambling with World War III.”

Some historians stress that eight decades of historic alliances are unlikely to be reversed in just a few months.

“The United States will still have strong allies around the world,” Furman said. “But just as economic matter, I don’t think any country in the world is going to be willing to count on the United States to the same degree.”

If Trump does not reverse course, the next U.S. president could find it difficult to undo the tariffs.

“Once you start down that path, it’s hard to change it,” Furman said. “Businesses will have made very, very painful adjustments to figure out how to operate in the new high-tariff world. It’s not going to be so easy for the next president to just come in and agree to drop it off.”

In the short term, Veuger said, the worst-case scenario is that the U.S. gets another stock market plunge, investment falls off the cliff, and we enter “the most unnecessary recession in living memory.” In the longer term, the U.S. could lose some of its relative power.

“It probably becomes less central to the Western military alliance,” Veuger said. “You would think that some countries would start to pivot back to China a bit, certainly for economic relations.”

This week, it emerged that the European Union is giving top officials burner phones and laptops before they travel to the United States because of security concerns.

“That’s not a great place for friends to be,” Furman said.

It remains unclear where the China trade war is heading. Last week, U.S. Treasury Secretary Scott Bessent singled out China as “bad actors” in global trade. “China is the most unbalanced economy in the history of the modern world,” he told reporters, “and they are the biggest source of the U.S. trade problems.”

At the same time, China is seeking to take advantage of faltering U.S. alliances by positioning itself as a stable partner — “shaking hands rather than shaking fists,” as one Chinese foreign ministry spokesperson put it.

Vietnam’s Communist Party General Secretary To Lam, right, and China’s President Xi Jinping, left, leave after their meeting at the Office of the Party Central Committee in Hanoi on Monday.

(Nhac Nguyen / Associated Press)

This week, President Xi Jinping is touring Southeast Asia in a bid to bolster economic alliances with countries such as Vietnam, Cambodia and Malaysia.

“The people are waiting for him to show up because they feel so not just betrayed, but let down by the U.S.,” Menon said. “The U.S. is also an important partner economically to this region, but now they feel all that has changed, and they need to start looking at ways in which they can guard against a huge loss in income that will come from the U.S. basically turning away.”

But while some nations would be driven into a China block, Furman said he did not expect most to gravitate to China.

Rather, he said, Trump’s tariffs would “further the fragmentation and multi-polarity of the world, because there will not be a respectable, dominant alternative to the Chinese approach.”

Still, Menon was stunned to see the role reversal between China and the U.S., especially as Xi stressed the importance of openness and rules-based order and multilateralism.

“You sometimes pinch yourself and say, ‘Is this China?’ ” Menon said. “Isn’t this what the U.S. is supposed to be saying and doing? It’s completely switched.”