Trump inflames the US-China battle for global hegemony

The battle between the United States and China for global hegemony has entered uncharted territory. In recent decades, rising tensions between the two powers were tempered by a deep economic interdependence that helped mitigate the risks of open rivalry, and by a global alliance structure largely favorable to Washington. Both of these stabilizing factors are now being radically reshaped by Donald Trump’s actions, pushing the competition toward a new paradigm marked by heightened instability and new dangers.

At the forefront is Trump’s sweeping tariff offensive, which has triggered an abrupt decoupling of the two economies. The U.S. and China exchange nearly $600 billion in goods and close to $70 billion in services annually — flows that have long formed a vast network of shared interests and served as a powerful brake on escalation. This economic interconnection has been the key factor distinguishing the current U.S.–China rivalry from that of the Cold War.

Second, the White House’s actions are sowing the seeds of distrust, even indignation, among many traditional U.S. allies. This shift is changing the strategic calculus of several partners in both Europe and Asia, casting doubt on their willingness to align with Washington in its campaign to contain Beijing. The European Union’s moves exemplify its determination to chart its own course and increase its strategic autonomy, or even independence, to use the term used by future German Chancellor Friedrich Merz.

In this way, both the bilateral relationship and the broader international framework of the 21st century’s great struggle for power are entering a turbulent and transformative phase — one whose consequences will inevitably ripple across the globe on multiple levels.

The heart of the matter is clear. Rafael Dezcallar, who served as Spain’s ambassador to China from 2018 to 2024, sums up the core of the issue: “The United States is trying to contain China’s rise, and China is trying to do everything in its power to prevent the United States from succeeding in that endeavor. Structural rivalry is inevitable. The question is how it will develop at different levels: political, military, commercial, economic, technological, and also ideological,” says Dezcallar, author of The Rise of China, an in-depth book that addresses, among other things, the competition between Washington and Beijing.

And that question becomes even more unsettling in light of Trump’s recent actions. Experts consulted agree that economic interdependence was a critical factor in tempering tensions, and its unraveling destabilizes the rivalry betweeen the two powers.

“The economic distancing between the two didn’t begin now. It’s not something Trump started. But, at least for the moment, Trump is clearly accelerating it. We seem to be heading into an ugly economic war. Does this mean we’re entering a more dangerous phase of the U.S.-China relationship? I think so,” says Robin Niblett, a distinguished fellow at Chatham House think tank — of which he was director — and author of The New Cold War.

“As decoupling continues to advance, the situation will also become more unstable because the shared interests that served as guardrails will disappear,” Dezcallar agrees.

Both experts also offer a note of caution. These ties won’t vanish overnight. Political shifts could emerge to temper the current trajectory toward outright conflict. In fact, Trump is increasingly showing signs of wanting to seek agreements — and, according to Dezcallar, China remains open to dialogue as well, though never in terms that resemble capitulation. Niblett adds that different forms of economic interconnection could persist through third countries — less visible and robust than direct ties, but still meaningful in this new paradigm of globalization.

However, even in the best-case scenario, the current escalation signals a political rupture — one that marks a before and after. It seems clear that, after such a dramatic break, there will be no shred of trust left, and both countries will proceed to accelerate all necessary efforts to minimize their dependence on each other. Whether this realignment unfolds abruptly or gradually, it’s clear that the relationship is decisively entering a new phase. After years of relatively contained reconfiguration, there is now an enormous political incentive to proceed at maximum speed with a profound readjustment.

“I don’t think we’re going to move into a phase of armed conflict; we’ll continue in a dynamic of competition, but this shift is undoubtedly generating more tension,” says Miguel Otero, senior researcher at the Elcano Royal Institute, who studies, among other areas, the power triangle between China, the U.S., and Europe, with a special focus on the monetary sector. “I think it’s in some ways a demonstration of the U.S.’s weakness, of its desperation. For more than two decades, it has tried to change China’s macroeconomic policy, and it’s not succeeding. The yuan, for example, has devalued by 17% in recent years, something very striking in a country that has had historical surpluses.”

Otero points out that, unlike in the 1980s — when the U.S. was able to contain the risks of economic competition from countries like Japan or West Germany by leveraging their sensitivity as recipients of military protection — and by forcing an exchange rate adjustment through the 1985 Plaza Accord — Washington now lacks the levers it needs to win the standoff with China.

The balance of power underlying this escalating battle is complex. The United States still has a higher GDP than China, and the recent slowdown of the Chinese economy has dimmed the prospect of it overtaking the U.S. in the near future. However, if GDP is measured in terms of purchasing power parity — a key metric for assessing a country’s real capacity to produce and act on a national scale — China has already pulled ahead.

Washington still holds an edge in military strength and benefits from the momentum of its extraordinary tech companies. Yet Beijing has demonstrated, at times unexpectedly, its own formidable capacity for progress — both militarily, with developments like hypersonic weapons, and technologically, with innovations such as the DeepSeek AI model. Taken as a whole, there is no doubt that China possesses the immense driving force of a country with colossal productive capacity.

The Biden administration attempted to contain China’s rise by restricting its access to certain cutting-edge technologies and rallying allies around that objective. A clear example is the agreement between major companies in the Netherlands and Japan to restrict Chinese access to high-capacity semiconductors. To achieve this, Biden worked to reinforce the alliance network — with strong support for Europe in the face of Russian aggression and multiple initiatives across the Asia-Pacific region. His aim was to earn the gratitude — and, ideally, the dependency — of partner nations, thereby encouraging their willingness to back containment efforts.

The emergence of China’s DeepSeek has called into question the effectiveness of that strategy. And now, Trump’s policies are triggering a widespread wave of distrust toward Washington among its long-standing allies.

Mikko Huotari, executive director of the Mercator Institute for China Studies, highlights the paradox of the current situation: “There may never have been a better time for a joint G7 and EU tariff policy toward China. But there may also never have been so much distrust between the U.S. and its allies. The U.S. no longer appears to be a reliable actor, and the only leverage it holds is brute power and coercion,” he says.

The tone of Spanish Prime Minister Pedro Sánchez’s visit to Beijing clearly embodies the reality that Washington will hardly be able to count on docile compliance from its traditional European partners.

Naturally, this isn’t a black-and-white shift. It’s a nuanced turn. Europeans still have an interest in ensuring the U.S. doesn’t abruptly withdraw its security umbrella. And the United States’ Asia-Pacific allies have an even more pronounced interest in the face of the Chinese challenge. But everyone has calculated that it is best to reduce their dependence on the U.S. as soon as possible, which will reduce Washington’s leverage.

There is no doubt that the tariff war could inflict enormous damage on China, a nation whose economy relies heavily on exports and faces depressed domestic consumption. If Washington is the one waging the offensive, others will no doubt move to prevent China from redirecting its surpluses into their markets and flooding them. The EU has already sent clear signals in this regard. This is a complex situation for a country grappling with demographic challenges, a burst and still-unresolved real estate bubble, and other structural problems.

Nevertheless, the tools at China’s disposal lead many experts to believe that the conflict triggered by Trump could ultimately give Beijing a comparative advantage. Not only because the U.S. risks inflationary flare-ups, product and component shortages, and a decline in competitiveness as direct consequences of its tariff war. China holds potent weapons across multiple fronts, prompting several analysts to argue that it possesses what is known in strategic jargon as “escalation dominance” — the ability to maintain control in a prolonged standoff.

This is due to several factors, the most central of which is that although China would undoubtedly suffer immense economic damage if the tariff war persists, the U.S. could also face shortages of essential goods it is currently unable to produce domestically or source from elsewhere in the short term. The risk of such a supply chain breakdown is considerable. Trump’s recent decision to roll back tariffs on a wide range of technological products may be a symptom of the difficulties the U.S. faces in sustaining its offensive.

“I think the trade war Trump has proposed and the way he has presented it is a very serious mistake,” saus Dezcaller. “If the standoff continues, there is a risk that China will resort to the leverage it has on the United States; for example, its near-monopoly control of rare earths or its position as a major holder of U.S. debt.”

These represent two significant vulnerabilities for the U.S. The first relates to strategic raw materials, a sector in which China holds a dominant position — an advantage that helps explain Trump’s overt interest in resource-rich regions like Greenland and Ukraine. The second involves the debt market tremors. The U.S. is a heavily indebted country. An increase in interest rates on U.S. debt could have massive repercussions, while the alternative — default — would undermine its central role and authority in the global financial system.

But there are other reasons why China may have the upper hand in escalation.

“This isn’t a battle you win, but one that requires a balance between who loses the least,” says Huotari. “And that’s a game Beijing can play quite well. This has to do with political systems. The U.S. is becoming more authoritarian, but it has significant internal forces that are difficult to control. China is better positioned. That doesn’t mean the net suffering is less, but there’s probably a greater capacity to withstand the pressure.”

China is a society of 1.4 billion people subjected to increasingly tight control by the country’s authoritarian regime.

The chaos and suffering tied to this escalation could, in turn, accelerate the erosion of one of the U.S.’s key assets: its alliances. “It seems plausible that the U.S. is losing the scale of its global alliances and relationships. And, if that proves true, it will be a victory for China,” says Huotari.

“The U.S. has been unique as a great power in terms of committing to alliances. It decided to protect its interests by investing in alliances. Now we have a huge shift. An administration that questions that premise, that believes alliances are a burden,” Niblett remarks. “However,” he continues, “that shift must be interpreted in light of two considerations.” “The first is that this is an extreme position, and it’s not shared by many, including the Republican establishment. We shouldn’t dismiss the idea that, within five years, this dynamic could change. The second is that China is a country that doesn’t believe in alliances. The U.S. will lose influence and credibility, but I’m skeptical that others could take advantage of that loss to gain a significant advantage.”

Dezcallar agrees there are limits to China’s ability to capitalize on a potential vacuum. He points out that a formal alliance with Europe is unthinkable, given their differing values, and that democratic countries in Asia have a structural interest in maintaining a relationship with Washington to balance the giant next door. Still, he believes Beijing may find new opportunities. “I am convinced that Washington’s actions open up new spaces for China,” he argues, pointing, for example, to possibilities for increased influence in the Global South, which Trump neglected during his first term.

“I think we’re heading toward a decoupling of the two powers, which will be accompanied by the development of spheres of influence. These will not be geographical, as in the Cold War, but rather much more liquid, more volatile spheres of influence. We’ll see them within societies, with supporters of one type of relationship with one or the other,” says Otero.

For the rest of the world, this intensifying rivalry could open up space to exploit the competition between superpowers through strategic triangulation — seeking concessions from both sides.

That may be a tactic that Putin’s Russia will try to pursue. Although the reasons for Trump’s soft stance toward Moscow are unclear, some believe it is an attempt to drive a wedge between Russia and China. However, most experts consulted believe that a true strategic separation between Beijing and Moscow is inconceivable. In their view, all Trump accomplishes by giving Putin some breathing room is to release him from the awkward position of overdependence on Beijing. Once out of that corner, Putin is likely to maintain a close — though not formal — alliance with China, trying to gain a better position by playing both sides.

The current deterioration in China-U.S. relations does not necessarily have to lead to military repercussions. However, the rising economic tension could produce destabilizing effects. Taiwan remains the most volatile flashpoint.

“The situation is dynamic,” says Huotari. “We have seen a significant increase in the number, quality, and intensity of Chinese military maneuvers around Taiwan. It’s massive, very frequent, leading to an almost permanent presence of Chinese naval forces around Taiwan, which reduces reaction times for anyone willing and able to react. So the level of tension is quite high. Meanwhile, the Taiwanese leadership has taken measures that have angered the Chinese side. So here, too, the situation is deteriorating.”

“I think the trade dispute is a separate story from military affairs,” Huotari continues. “But in a situation where both sides are on high alert, it only takes a drop to escalate. So I see significant risks of trade tensions spilling over into the broader issue of regional security.”

Niblett, generally cautious about projecting apocalyptic scenarios, nevertheless warns: “The more time passes, the more Taiwan becomes an issue, the stronger China becomes militarily, and the greater the risk of some kind of conflict.”

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