Highlights
- The US and China are locked in a complex economic competition, with each nation holding strategic advantages in different domains of global trade and economic power.
- China leads in manufacturing and trade networks, while the US dominates in financial systems and technological innovation, creating a nuanced balance of economic leverage.
- The future of economic supremacy will depend on strategic policy choices, industrial policies, and the ability to adapt to rapidly changing global economic dynamics.
The United States and China are entrenched in a strategic economic rivalry, each wielding unique strengths in global trade. For decades after World War II, the U.S. stood unrivaled as the world’s economic superpower, with the dollar dominating finance and American markets seen as the most open and reliable. China, meanwhile, has risen from a minor player to a behemoth trading nation, leveraging its vast manufacturing base and state-driven strategy to challenge U.S. primacy. We avoid military comparisons here, but if we had to, we would pick the USA.
Who has more trade bargaining power today?
Below, we break down key categories of economic leverage and score which nation holds the edge in each, from financial might to technological innovation. The picture is complex – the U.S. retains critical advantages in finance, trust, and innovation, while China commands industrial muscle, resources, and an expansive trade network. In a balanced assessment, we also consider how American policy (including former President Donald Trump’s hardball trade tactics) could further tilt the scales toward the U.S.
Key Categories of Economic Leverage
- Financial and Currency Power: The strength of a nation’s currency in global use and the depth of its financial markets (influencing international investment and sanctions power).
- Economic System & Trust: The degree of market liberalization, rule of law, and credibility that attracts business and investment (e.g. investor confidence in a stable, transparent system).
- Manufacturing & Supply Chain Capacity: Industrial base and export capacity – the “factory floor” leverage to supply (or withhold) goods the world needs.
- Natural Resources & Critical Minerals: Control over essential raw materials (like rare earth elements) needed for high-tech and defense industries, which can become strategic choke points.
- Global Trade Networks & Alliances: Influence through trade relationships, agreements, and initiatives (such as China’s Belt and Road Initiative or U.S. alliances and trade pacts) that extend a country’s economic reach.
- Technology & Innovation Leadership: Dominance in cutting-edge industries (AI, semiconductors, etc.), R&D, and intellectual property, which drives future competitiveness and can be leveraged in trade (e.g. tech export controls).
USA vs. China Trade Leverage Scorecard
| Category | Advantage | Notes (Rationale) |
| Financial & Currency Power | USA | The U.S. dollar is the preeminent global currency, making up ~58% of world foreign reserves and 54% of trade invoicing, whereas China’s renminbi is only ~2% of reserves. Deep U.S. capital markets and an open financial system attract investors, and ~88% of global forex trades involve dollarsbestbrokers.com (opens in a new tab), reinforcing U.S. leverage. The yuan, by contrast, isn’t fully convertible and lacks widespread trust despite China’s push for de-dollarization. |
| Economic System & Trust | USA | The U.S. economy is broadly more liberalized and trusted by global businesses. America’s rule of law, property rights, and transparency rank high – the U.S. is rated “Mostly Free” in economic freedom (25th worldwide) while China is “Mostly Unfree (opens in a new tab)” (151st). The U.S. remains the top destination for foreign investment (opens in a new tab) ($311 billion FDI inflows in 2023, nearly a quarter of the global total), reflecting investor confidence in its stable, innovative environment. China’s one-party communist system and state interventions (e.g. abrupt tech industry crackdowns) make foreign investors cautious, tempering its leverage in trust and soft power. |
| Manufacturing & Supply Chain | China | “The world’s factory” – China is the global manufacturing superpower (opens in a new tab). It produces roughly 29% of the world’s manufactured goods, about 12 percentage points more than the U.S.. In fact, China’s output is three times the U.S.’s share (opens in a new tab) of global manufacturing. Its sprawling supply chains give Beijing leverage: as the U.S. learned during COVID-19 and the 2018–19 trade war, many critical goods (from electronics to medical supplies) originate in or pass through China. Much like America after WWII, China today can use its manufacturing dominance as a bargaining chip – either by supplying global demand or by withholding crucial inputs. The U.S. still excels in some high-tech manufacturing (e.g. aerospace, advanced semiconductors), but in sheer industrial capacity, China holds the upper hand. |
| Natural Resources & Critical Minerals | China | China controls the lion’s share of critical minerals that modern economies and militaries depend on. It produces around 70% of the world’s rare earth elements as cited in this outlet; and oversees 90% of global rare earth processing. These obscure metals (like neodymium and dysprosium) are vital for electronics, electric vehicles, and defense systems – and Beijing has not hesitated to weaponize this dominance. Notably, China cut off rare earth exports to Japan in a 2010 dispute and has recently imposed export restrictions on materials like gallium and germanium (key for semiconductors) in retaliation to U.S. tech sanctions. The U.S., by contrast, is highly dependent on Chinese minerals, with no domestic separation capacity for heavy rare earths and over 70% of U.S. rare earth imports coming from Chinavoronoiapp.com (opens in a new tab). This resource leverage gives China a significant bargaining chip in trade negotiations. |
Global Trade Networks & Alliances
China has eclipsed the U.S. as the top trading partner for most of the world (opens in a new tab). About 70% of countries trade more with China than with America, and China is the largest two-way trade partner for 60 nations (the U.S. for only 33 (opens in a new tab)). Through its Belt and Road Initiative (BRI) – spanning investments and infrastructure across Asia, Africa, Europe, and Latin America – Beijing has built a vast trade network; 147 countries (two-thirds of the world’s population) have signed onto BRI projects or expressed interestcfr.org (opens in a new tab). This reach translates into influence: many nations now depend on Chinese markets, loans, or infrastructure, subtly aligning their policies with Beijing. By contrast, the U.S. relies on traditional alliances and trade pacts (e.g. with the EU, Japan, NAFTA/USMCA partners) for influence. America still wields clout – especially as a buyer: thanks to its huge consumer market, the U.S. remains a critical export destination for many countries. (In 2023, nearly 80% of economies imported more from China than the U.S., but the U.S. still absorbs a massive volume of exports from those nations.) However, on balance, China’s expanding trade footprint and financing abroad have given it greater bargaining power across the Global South, whereas U.S. influence has stagnated or even eroded in some regions.
Technology & Innovation–TIE
Both nations are technology superpowers, leading in different ways. The U.S. maintains an edge in many cutting-edge fields – its companies and universities spearhead breakthroughs in software, advanced semiconductors, aerospace, and biotech. For example, in artificial intelligence the U.S. produced 40 of the world’s top AI models in 2024 (opens in a new tab)., far more than China’s 15, and American firms invest 12× more in private AI funding (opens in a new tab) than Chinese firms.
However, China is rapidly closing the gap: China leads in sheer volume of STEM research and patents (including **over 70% of global AI patent filings by some counts (opens in a new tab)), and its tech giants (Huawei, Alibaba, Baidu, etc.) are innovators in 5G, e-commerce, and AI applications. Critically, China excels at scaling up manufacturing of high-tech products (think solar panels, drones, batteries) and has a strategic plan for tech self-sufficiency. The rivalry is intense – the U.S. has tried to constrain China’s tech rise (e.g. banning exports of advanced chips), while China pours investment into R&D. In short, tech leverage is split: the U.S. today leads in foundational technologies and global talent magnetism, but China’s state-driven push and market scale give it formidable innovative momentum. Neither can easily outmatch the other in this domain, making it a contested tie.
Scoring summary: In this scorecard, China comes out ahead on three factors (Manufacturing, Resources, Trade network) versus the U.S. leading in two (Finance, Economic trust), with technology a near-equal contest. This suggests that neither side holds absolute leverage – each dominates in certain arenas. China’s leverage is unprecedented in scope but also constrained by its weaknesses (e.g. reliance on U.S.-led finance and high-tech inputs), while the U.S. remains a formidable economic force but can no longer dictate terms unilaterally as it did in the 20th century.
The balance of power can still shift, depending on policy choices and global responses.
Tilting the Balance: What Can Strengthen U.S. Leverage?
Trade Leverage in the Trump 2.0 Era: America’s Strategic Pushback Against China
China’s rise as the global manufacturing giant and its dominance over critical supply chains—particularly in rare earths as well as many critical minerals—has undeniably weakened America’s post-WWII economic supremacy. But under President Trump’s second administration, Washington is recalibrating, doubling down on national industrial policy to tilt leverage back in its favor. Albeit staring with tariffs as the centerpiece.
Trump’s revived trade doctrine builds on his earlier hardline approach—tariffs, reshoring incentives, and a reassertion of U.S. sovereignty over global trade rules. This time, it’s more targeted. The White House is actively deploying tools like the CHIPS Act (from Biden era) a rare earth price floor (backed by the Department of Defense with MP Materials assuming it applies to many market participants), and strategic tariff waivers for allied sourcing. The aim: rebuild critical sectors—semiconductors, battery components, pharmaceuticals—and reduce structural dependence on China, especially for defense and energy transition technologies.
In tandem, Trump’s trade team is aggressively pursuing a dual-track strategy. Domestically, tax breaks and federal contracts are being directed toward rare earth magnet producers, while abroad, the administration is courting partners like Australia, Vietnam, and Brazil to form a “critical minerals coalition” that bypasses Chinese processing dominance. For rare earth elements, the Trump administration should be studying the Rare Earth Exchanges project rankings.
At the same time, U.S. financial institutions—backed by Treasury and EXIM—are deploying capital to fortify these alternative supply routes. Trump has also softened prior tensions with key allies, recognizing that U.S.-EU and U.S.-Japan coordination on tech standards and export controls can box in Beijing far more effectively than unilateral tariffs. The message is clear: America isn’t retreating from globalization—it’s reengineering it on better terms. But we must be mindful with costs, as tariffs are like taxes.
The technological front remains a crucial pillar of U.S. leverage. American firms lead in foundational AI models, advanced chip design, and defense-related innovation. Trump’s push to pair national innovation policy with strict IP enforcement and foreign investment screening signals a new era of techno-economic nationalism. Meanwhile, the dollar remains unrivaled in trade and reserves, reinforcing the U.S.’s ability to sanction, attract capital, and finance deficits. China may boast of scale and speed, but trust in its system is thin—particularly among investors and borrowers from the Global South, who are squeezed by Belt and Road debt burdens. China has made some progress with digital currency and trading partners, but the game is still America’s to win.
Conclusion
The U.S.–China trade leverage battle is not about dominance—it’s about asymmetry. China holds the industrial sword; the U.S. wields financial and technological shields. Arguably, the U.S. culture, individualistic in nature, offers unique advantages over a more collectivist, communistic culture, despite the hybrid nature of what China has emerged into (e.g., ruthless bare-knuckle capitalistic models for industry internally, then promoting the winners into the global economy).
Trump’s second-term industrial policy, if executed with discipline and coordination, could reinforce America’s global leverage by reducing vulnerabilities (e.g. critical minerals and rare earth element supply chains) and solidifying alliances.
It won’t be easy—supply chain rewiring takes time—but the trajectory is unmistakable. The era of passive globalization is over; the age of strategic interdependence has begun. And this media cannot understate the need for industrial policy applied to rare earth element and critical mineral supply chains. This involves tight global partnerships.
Sources: The analysis above is informed by data and reports from think tanks and official sources, including the Lowy Institute (on global trade patterns)interactives.lowyinstitute.org (opens in a new tab)interactives.lowyinstitute.org (opens in a new tab), the Hudson Institute and CSIS (on China’s control of critical minerals and U.S. responses)hudson.org (opens in a new tab)hudson.org (opens in a new tab)csis.org (opens in a new tab)csis.org (opens in a new tab), the Heritage Foundation and UNCTAD (on economic freedom and investment flows)static.heritage.org (opens in a new tab)santandertrade.com (opens in a new tab), Statista and OECD data (on manufacturing output)statista.com (opens in a new tab)cepr.org (opens in a new tab), and the Stanford AI Index (on U.S.-China tech competition)hai.stanford.edu (opens in a new tab)hai.stanford.edu (opens in a new tab), among others. These illustrate the shifting landscape of economic power between the U.S. and China in real time.
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