Trump Should Judge Every Deal With China by One Question

The world watched as President Trump met with Xi Jinping over the past two days. Despite departing Beijing without any concrete agreements officially announced by either side, various news reports and statements from administration officials suggest commitments were made and additional deals could be finalized in the coming days.

As Trump considers next steps, he should judge every proposed action and agreement in the techno-economic and trade space on one question: Does it strengthen or weaken China’s national power industries, especially vis-à-vis the United States?

If you’re wondering why, here’s the short version:

• America is at grave risk of losing leadership to China in a critical set of advanced, traded-sector industries that underpin economic strength, military capability, and geopolitical power in the 21st century—what ITIF calls “national power industries.”
• This is not normal economic competition between market economies. Competition in these industries is win-lose, and market share translates into production scale, innovation capacity, supply chain control, talent concentration, and geopolitical leverage. When China gains global market share, the United States and allied nations do not simply lose sales; they lose industrial capability.
• China’s push to dominate national power industries is not accidental. It is a carefully orchestrated, multi-decade strategic campaign backed by massive subsidies, protected domestic markets, cheap capital, forced technology transfer, and state-directed investment. The goal is to displace Western techno-economic power and reshape the global order under CCP leadership.
• How Washington responds will determine whether the U.S. maintains the advanced production and innovation capabilities necessary to be a leading global power. Incrementalism will not be enough. Nor will maintaining America’s 50-year-old system of financial capitalism.
• Domestic industrial policy alone is insufficient. Even under the best circumstances, the United States cannot fully replicate the scale, coordination, political system, or subsidy capacity behind China’s techno-economic-trade mercantilist model.

That means America must not only strengthen its own national power industries but also take steps to slow China’s progress toward global techno-economic dominance.

Which brings us back to the talks and potential agreements emerging from the Trump administration’s meetings in Beijing.

Any proposed deal in the techno-economic and trade space should be evaluated primarily through one lens: Does it help or hinder the rise of Chinese firms in industries critical to national power?

According to every major media outlet, topics on Trump and Xi’s agenda included tariffs, AI, market access for American firms in China, Taiwan and Iran, rare earths, fentanyl, and technology restrictions. Notably, Beijing hopes to extend the current trade truce and secure relief from U.S. sanctions and tech restrictions. There has also been speculation that Trump and his advisers are seeking a major investment from China, discussing a potential arrangement that would allow China to invest as much as $1 trillion in the United States to build factories and other industrial facilities.

From a short-term political or economic perspective, some of these proposals may appear attractive. But many risk advancing China’s long-term techno-economic position in ways fundamentally misaligned with U.S. strategic interests.

To start, Washington should stop treating advanced tech restrictions as ordinary bargaining chips in trade negotiations. Export controls on certain technologies exist because these industries are foundational to military power, industrial leadership, and geopolitical influence. Relieving pressure on China’s technological upgrading in exchange for temporary trade concessions or commodity purchases risks sacrificing future strategic leverage for short-term optics. The United States is not going to lose its soybean industry. But it could lose its biotech and IT equipment industries.

Similarly, large-scale Chinese investment in U.S. manufacturing should not automatically be viewed as a strategic win simply because it creates jobs or factories on American soil. Chinese investment in the United States is good for China’s strategic interests, not America’s. It lets Chinese firms destroy U.S. firms inside the tariff wall, while siphoning off U.S. intellectual property and gaining access to American industrial know-how. Trump should avoid the siren song of short-term gains and ribbon-cutting. And U.S. investment in China is good for China because it spreads knowledge and boosts local supply chains. That is why the supposed “Board of Investment” should be viewed with caution.

The same logic applies to rare earths and critical minerals. While stabilizing access to Chinese-controlled supply chains may reduce near-term disruptions, dependence itself is part of Beijing’s leverage strategy. The long-term objective should not be cheaper dependence on China, but resilient allied production capacity outside Chinese control. Toward that end, if Xi does not back away from weaponizing rare earths, Trump should threaten to impose controls on the strategic goods China depends on.

Even “market access” requires more scrutiny than Washington traditionally applies. Policies that benefit specific multinational corporations do not necessarily strengthen America’s national power industries. Too often, U.S. firms gain access to the Chinese market while China simultaneously gains technology, industrial scale, supply chain leverage, and strategic positioning that further erodes America’s competitive position. Certainly, a commitment to buy more Boeing jets, if real, is welcome. But let’s be clear: China is only doing this because it previously weaponized a Boeing boycott, which the feckless Europeans were all too happy to capitalize on through increased Airbus sales.

This is ultimately the core problem with how much of Washington still approaches economic relations with China. The United States continues to treat trade negotiations largely as transactional exercises focused on purchases, tariffs, market access, and quarterly economic outcomes. China treats them as instruments of sustained national strategy. Of course, Xi does not have to run for re-election. U.S. policymakers do, with stakes particularly high as midterm elections approach. But those in the administration still can and should act as statesmen focused on protecting America’s long-term security and national interests.

Beijing understands that strong national power industries are now central to geopolitical power. Washington increasingly says the same, but too often still negotiates as though it is competing with a normal market economy rather than a state-directed rival pursuing global techno-economic and industrial dominance.

For the last 20 years, the Chinese strategy has been to stall, buying time to avoid conflict now as they build and get stronger, and as the West gets weaker. This is what Muhammad Ali once famously called the "rope-a-dope" strategy. Trump should approach every proposal coming out of Beijing with that reality in mind.

The question is not whether a deal produces favorable headlines, temporary export gains, or short-term political wins. The question is whether it strengthens or weakens America’s long-term position in the industries that will determine global power in the decades ahead. And based on the initial reports, at least, Trump appears to have left Beijing having mostly failed on that front.