China’s international position is strengthening, not because of what it has done, but because of what the U.S. has undone
When 2025 began, China was facing growing international isolation. Europe had imposed tariffs on Chinese EVs, and sanctioned 19 Chinese firms over connections to Russia’s war against Ukraine. The date by which China was poised to surpass U.S. GDP had been pushed back in some projections. China’s demographic pressures were mounting, while American population growth remained robust. America was poised to lead the AI race and enjoyed an enviable array of allies that enhanced American economic and military power.
Had America maintained the status quo, China’s ambition to achieve global preeminence appeared increasingly constrained over the medium term. America was making progress towards isolating China.
But now, the strategic trajectory has shifted.
Several recent actions by the Trump Administration have undermined the foundations of American geopolitical influence.
Eroding Intangible Capital
Much of America’s power stems from intangible factors. America’s brand as a free and open nation attracts talent and investment from around the world. America’s commitment to the rule of law gives businesses, travellers, and immigrants a sense of security that enables risk-taking and innovation. American cultural output continues to exert significant global influence, particularly through media, technology, and consumer brands. There is a widely held belief that political change in America can be achieved through democratic cycles. And most importantly, America’s commitment to its allies meant nations around the world were willing to host U.S. military installations, significantly expanding America’s global reach.
Further, trust in American institutions helped the U.S. Dollar become the world’s reserve currency, enabling the United States to finance deficits at low cost and exchange dollars for tangible goods.
China lacks these hallmarks of intangible influence. China is seen as a relatively closed nation, with the rule of law being subsumed by the rule of the Chinese Communist Party. While many work in or travel to China, they remain distinct from a national identity closely tied to ethnicity and political orthodoxy, unlike in the United States and other Anglosphere countries, where citizenship is more open and aspirational. While China’s cultural influence is rising, it currently pales in comparison to America’s. China’s leadership structure is seen as far more rigid, and there is little ability for the average Chinese Citizen to directly impact the course of their nation. And China maintains limited formal alliances, relying instead on transactional partnerships.
Rebalancing Toward Industrial Competition
What China does possess is significant raw manufacturing power. China’s manufacturing sector dwarfs that of the United States, meaning China can often deliver immediate, tangible benefits to prospective trading partners.
The Biden Administration appeared to understand this and sought to deepen trade and military ties with allies to create a unified Western/democratic alliance, including nations like Japan and South Korea, that could, in the aggregate, counter China.
The Trump Administration has abandoned this track in favour of an approach that simultaneously weakens the pillars of American strength while further shifting the balance of leverage in Beijing’s favour, particularly in industrial production and export competitiveness.
Sweeping Changes Undermine Trust
In fewer than 100 days, the Trump Administration has taken a series of actions, ranging from sweeping tariff regimes to threats against institutional independence, that collectively undermine American global leadership.
Diplomatic Rupture
The Trump Administration threatened to invade Greenland and Panama, questioned Canadian sovereignty, berated Ukraine’s president, and insulted key allies across NATO and Asia.
Institutional Degradation
The Trump Administration has threatened to fire the independent Chair of the Federal Reserve, defied court orders, slashed funding for higher education institutions and government-funded research and development, thus putting scientific advancement (including AI advances) at risk, publicly referenced El Salvador’s mass incarceration model in a favourable tone, prompting criticism from rights groups, and publicly entertained the idea of altering presidential term limits, drawing bipartisan legal criticism.
Economic Disruption
As a result of these actions, the American brand has been dramatically weakened. According to Ipsos, views of America have negatively shifted in 26 out of 29 countries surveyed. American commitments are viewed with heightened suspicion, eroding the foundation of trust upon which future trade deals must be built. While the U.S. dollar remains the global reserve currency, its status is under renewed scrutiny as reflected in a 30+ basis point rise in 10-year Treasury yields since the tariff announcement.
Strategic Consequences for the China-U.S. Rivalry
In response to America’s autarkic turn, China is now positioning itself as the defender of free trade. America’s perceived unpredictability has created a vacuum in which China, despite longstanding concerns over practices such as intellectual property violations and trade imbalances, now appears comparatively more stable. And rather than accede to Trump’s demand to “call him” and negotiate a deal after being hit with 145% U.S. tariffs, China has imposed 125% counter tariffs and sought alternative trading partners. For example, as of March 2025, China is importing a record amount of oil from Canada, amid a roughly 90% cut in Chinese oil imports from the United States. Chinese oil imports from Canada rose to 7.3 million barrels in March.
While America may eventually relent on tariffs after negotiating limited symbolic agreements, the damage is done. Recent developments have eroded America’s claim to leadership, narrowing the perceived gap between Western liberalism and authoritarian capitalism. In retreating from institutional leadership and soft power engagement, the United States has repositioned the contest with China onto a terrain where Beijing’s structural advantages, particularly in industrial output and supply chain control, are more decisive.
Absent a recalibration of strategic posture, Washington risks ceding the terms of global competition to a rival with markedly different political values and economic structures. For Canada and other middle-power democracies, this dramatic development heightens the importance of strengthening defence and trade ties with like-minded countries, while maximizing our economic potential to achieve greater self-reliance.
This moment demands strategic clarity, institutional resilience, and a renewed commitment to partnerships that preserve an open global order.
Spencer Fernando
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