‘Bombard the headquarters!’ That was the slogan that helped launch China’s Cultural Revolution in 1966 – and it offers a glimpse into what that revolution actually was: an implicit contract between Mao Zedong, recently sidelined from day-to-day leadership, and his grassroots supporters – mostly in the form of young Red Guards – to burn down everything in between them and rebuild the country from its ashes.
So, when the autocratically minded Donald Trump promises his own grassroots base to ‘demolish the deep state’, it is difficult not to hear echoes of Chinese politics in the 1960s. Mao’s attack on ‘rightism’ was rooted in a complaint that the Chinese Communist Party’s senior leaders, Liu Shaoqi and Deng Xiaoping, were ‘suppressing alternative viewpoints’. Sixty years later, Trump’s attack on ‘wokeism’ has tried to force US universities to make room for ‘viewpoint diversity’ – although in both cases, the only viewpoints being championed are those of the revolutionaries themselves.
But it’s not just the China of 60 years ago that Trump is channelling. His basic economic goal, in broad terms, is to use aggressive policy interventions to boost US factory production, substitute imports, promote exports and move towards a trade surplus with the rest of the world. The goal, in other words, is to take the US economy and make it, well, more like China’s.
From consumption to production
In practice, this would require a wholesale change in the structure of America’s GDP, to move it away from a consumption-based economic model towards a production-led one. Such a change would, in turn, require a kind of reconfiguration in the way Americans see themselves: a cultural revolution, indeed.
As things stand, the US economy and that of China are photographic negatives of each other. Over the past five years, consumer spending has accounted for almost 70 per cent of America’s GDP. In China, by contrast, consumer spending accounts for less than 40 per cent of GDP. Behind the data lies a contrast in these two countries’ policymaking cultures that was laid bare during the Covid pandemic. For the US, the main economic policy priority was to put money in people’s pockets, to ensure their spending power was sustained. China’s priority, by contrast, was to put workers back into factories. China’s President Xi Jinping abhors ‘welfare-ism’.
Now, however, the US has a president who believes that trade deficits are a source of national emasculation. Because consumer spending helps sustain those deficits, Trump officials have voiced their dissatisfaction over the stranglehold consumerism has on the American economy.
Quizzing Jerome Powell, the Federal Reserve chairman, at a congressional hearing in 2023, the then-Senator Vance suggested that the reserve currency status of the dollar had made foreign goods so cheap that Americans had become hooked on ‘mostly useless imports’.
More starkly, Trump himself has mused that American children might have ‘two dolls instead of 30 dolls’, hinting at the kind of national sacrifice he wants Americans to consider as a price worth paying to end the threat China poses to America’s global primacy. And sacrifice, it is worth remembering, is a recurring theme for Chinese policymakers. This January, for example, Xi Jinping reminded his followers that the pursuit of Chinese-style modernization requires ‘great struggle’.
Flawed toolkit
This raises two questions. The first is whether there is any realistic chance that US policies can take back global manufacturing dominance from China. And the second is whether Trump can convince enough Americans to share his vision of the sacrifices needed to turn America from a nation of consumers into one of producers.
On both counts, Trump’s chances of success seem very low indeed. First, the economic policy toolkit that the US administration is relying on to achieve its goals just isn’t up to the task, since it contains only four policies: tariffs, tax cuts, deregulation and efforts to promote a weaker dollar. Trump’s view is that because tariffs generate income for the public sector, they are inherently superior to subsidies, which increase public spending.
And yet it is precisely subsidies that China has relied on – heavily – to ensure that its manufacturing sector can flourish. This first became obvious in 2006, when China’s premier Wen Jiabao engineered China’s first proper tilt towards industrial policy with the ‘Medium and Long-Term Programme of Science and Technology’. Since then, Beijing has rolled out a plethora of additional initiatives, some broadly focused on techno-industrial initiatives such as 2015’s ‘Made in China 2025’, and some more narrowly industry-specific, focusing on New Energy Vehicles, for instance, or on robotics.
By contrast, Trump aims to dismantle the network of subsidies his predecessor put in place: neither President Biden’s Inflation Reduction Act, nor the Infrastructure Investment and Jobs Act, nor the CHIPS and Science Act, are likely to survive Trump’s term in office. Steady cuts in American R&D spending will further undermine the capacity of the US to compete with China, as will the fact that tariffs raise the cost of inputs for American manufacturers, considering intermediate goods make up some 40 per cent of US imports from China.
Unlikely sacrifices
If Trump is envious of China’s success, he might do well to give more study to the tools that Beijing used to create it. Trump’s disdain for the policies make it extremely difficult for him to overcome the most basic obstacle he faces in his effort to engineer a manufacturing renaissance in the US; namely, the fact that the US manufacturing wage of around $60,000 a year is four times China’s, which is closer to $15,000. This is a gap not easily bridged.
And despite the huge wage advantage that China has over the US, Chinese manufacturing is becoming increasingly unfriendly to labour. While China accounts for some 30 per cent of global manufacturing, it is making use of more than 50 per cent of the world’s industrial robots.