China Seeks Power, Not Only Trade

prc’s merchandise surplus with the repose of the domain will top $1 trillion for 2025. That isn’t merely a matter of selling goods to willing buyers. It is economic conquest on a scale the world has never seen. It has happened—and will continue to happen—because the Chinese have the power to crush any industry anywhere in the world.

Example: In October Beijing threatened to cut off magnet supplies to the U.S. Within days, American industries from defense to electric vehicles faced paralysis, and the chokehold affected several other critical sectors: semiconductors, pharmaceuticals, chemicals.

China’s power—which Xi Jinping can exercise at will—consists of 90% excess production capacity. That means it can identify a key industry, build the capacity to produce 90% of global demand, and then flood markets with subsidized exports, priced at marginal cost, backed by a 20% undervalued currency. That quickly wipes out competition.

President Trump needs to treat this less like a trade dispute and more like a war. Fighting back requires America to organize its allies the way Franklin D. Roosevelt built a winning coalition in World War II. Here are five steps he should take:

First, stop fighting alone. America and its core allies—Europe, Japan, South Korea, Israel and the United Kingdom—represent roughly $60 trillion in combined gross domestic product. China plus Russia, Iran, North Korea and others in its orbit total approximately $25 trillion.

Mr. Trump has been pressuring allies individually—tariffs on Europe and other allies, friction with Japan and South Korea. The partners we need are rattled. Mr. Xi is watching this and smiling. He knows if these countries ever coordinate on issues like tariffs, export controls and currency pressure, his industrial machine will break down.

Second, create an expert unit with allied representation—a working group that operates like the Manhattan Project, led by a globally recognized CEO with China experience, staffed by executives who have built businesses at scale and understand what Beijing is doing. Include game theorists who think four moves ahead, chemical engineers who understand how to apply reverse chokeholds on China, and operators who can execute at speed.

Third, accept that this is a long fight. It will last years, possibly decades. Mr. Trump must bring America along: the press, the public, business leaders. Make the case daily using authentic data, not spin.

Fourth, ask Congress to create a Department of Manufacturing. Rebuild capacity in 10 critical industries where China seeks dominance: bio-pharma, artificial intelligence, aerospace, high-tech ships, robotics, advanced rail, electric vehicles, power equipment, advanced agriculture and new materials. Self-sufficiency isn’t isolation. It is survival.

Fifth, clean up the tariffs within 90 days. If the Supreme Court strikes them down, use reciprocal duties by commodity. Negotiate with allies. Get it done fast. Show coordination, not chaos.

In any two-player game, each side tests what the other can’t tolerate. China has shown its weapon: the ability to attack our economy at will. We need a counterforce that creates a threshold of pain Beijing can’t bear.

America and its allies control inputs that China’s factories can’t produce: ultra-pure chemicals for semiconductors, specialty catalysts for refineries, precision equipment for rare-earth processing, agricultural protein that China imports by the tens of millions of tons. These are small-dollar imports on which tens of billions of Chinese industrial output depend.

This leverage has never been used because we haven’t coordinated. When America and its allies deploy export controls together, the Chinese have no good answer. Their processing operations degrade. Their industrial machine stalls. That is the threshold of pain that will bring Beijing to the table for good-faith negotiation.

Mr. Charan is an adviser to CEOs and boards and author of “China’s 90% Model,” forthcoming in February. His clients have included Chinese companies.

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