The Fault Lines in China’s Power: America Must Build—and Use—Leverage Against Beijing

Foreign Affairs | Ely Ratner and Nick Danby

The U.S.-Chinese trade war of 2025 exposed a profound strategic deficit when China weaponized its 90 percent global command of rare-earth processing, imposing export controls. This move threatened American manufacturing and the U.S. defense industrial base, forcing the Trump administration to concede tariffs and other demands. Beijing thus reset the relationship's terms in its favor, highlighting Washington's failure to leverage China's vulnerabilities.

China faces significant internal economic headwinds, including weak domestic demand, mounting local debt, high youth unemployment, and an aging workforce, alongside a corrupt People's Liberation Army. Externally, it remains dependent on the United States and its partners for critical resources and technology. The United States must develop a competitive strategy to exploit these pain points, not for regime change, but to compel Beijing to divert resources. Immediately, Washington must constrain China's ability to amass threatening power by limiting access to advanced semiconductors. This involves strengthening the "small yard, high fence" approach, targeting smuggling networks and cloud access, and synchronizing export restrictions with allies like the Netherlands and Japan, while preventing the licensing of advanced AI chips to Chinese companies.

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