17 August 2026

China Has Already Remade the International System

Foreign Affairs  |  Michael B. G. Froman

President Donald Trump initiated sweeping trade and investment controls targeting foreign industrial imports and capital flows, mirroring Beijing's interventionist economic strategies. In early February, the U.S. administration announced universal tariffs on all imported steel and aluminum while mandating new restrictions on cross-border investment. A subsequent presidential memorandum instituted rigorous bilateral screening mechanisms for Chinese firms operating within the United States and American enterprises investing in China.

These state-directed trade measures aim to force critical global supply chains back onto domestic territory by penalizing offshore manufacturing through punitive tariff structures. The systematic adoption of managed trade policies marks a fundamental departure from traditional free-market norms, signaling a broader convergence toward state capitalism mechanisms across Western industrial economies. As Western governments embrace defensive capital controls, aggressive tariff barriers, and active state intervention, global commercial frameworks are permanently restructuring around state-managed competition, protectionist inbound screening, and heavily subsidized domestic industrial production networks.

Comment
Expanding outbound and inbound investment mandates through CFIUS transforms traditional transaction reviews into permanent industrial policy filters. This systemic expansion prioritises sovereign domestic manufacturing capabilities over market efficiency for strategic dual-use sectors. Consequently, defence industrial supply chains face fragmented international capital flows as cross-border technology co-development encounters heightened regulatory friction.
Strategic Question for Discussion
Which factor will prove more decisive in sustaining allied technological edge under an expanded CFIUS regime — the protection of critical dual-use IP through strict capital controls, or the potential loss of joint innovation caused by restricted transnational venture funding?
Share your assessment in the comments below.

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