The Great Trade Miscalculation: How the West Unintentionally Handed China Its Economic Dominance—and Why the Reckoning Is Now Inevitable - Part II

Executive Summary

China’s Trade Conquest: West’s Shocking Surrender Spells Crisis

West made China great!

The unprecedented integration of China into the global trading system during the 1990s and 2000s was predicated upon assumptions that proved fundamentally flawed.

Policymakers across the United States, European Union, and other developed economies reasoned that opening markets to Chinese manufactures would facilitate wealth creation, consumer benefits, and eventually democratic reform within Beijing.

Instead, what emerged was a systematic transfer of manufacturing capacity and technological expertise to a geopolitical competitor pursuing explicitly mercantilist policies.

The decision to grant China Permanent Normal Trade Relations status in 2000—coupled with its accession to the World Trade Organization in 2001—unleashed an economic transformation of staggering proportions.

Today, as China’s trade surplus passed one trillion dollars annually and dominates one-third of global manufacturing output, the international community is experiencing a collective awakening to the structural consequences of this strategic miscalculation.

Introduction: The Architecture of Accommodation

From Engagement to Reckoning: Three Decades of Strategic Naivety

The foundation for modern China-Western trade relationships was constructed during an era of technological optimism and ideological confidence.

Following China’s 1978 opening under Deng Xiaoping and its gradual market-oriented reforms, Western policymakers believed that deepening economic interdependence would serve multiple strategic objectives simultaneously

(1) Enriching Chinese citizens.

(2) cng middle-class constituencies invested in stability.

(3) Encouraging democratic liberalization.

(4) Providing Western consumers with unprecedented access to affordable goods.

This grand bargain was formalized through a series of carefully orchestrated diplomatic initiatives, culminating in the passage of the Permanent Normal Trade Relations (PNTR) legislation by the U.S. Congress in 2000 with overwhelming bipartisan support.

The intellectual framework supporting this engagement strategy rested upon classical economic theory and liberal internationalism.

Comparative advantage, as theorized by David Ricardo, suggested that both trading partners would benefit from specialization according to their factor endowments.

The Great Imbalance: How U.S.–China Trade Rewrote Global Prosperity

China possessed an abundance of low-cost labor; the United States possessed advanced technology and capital.

The natural equilibrium would involve Chinese exports of labor-intensive manufactures flowing westward, while technological products and services moved eastward.

This arrangement, proponents argued, would generate mutual prosperity while gradually integrating China into a rules-based international system that would moderate its strategic ambitions.

What this framework systematically underestimated was the capacity of state actors, operating within a non-democratic governance structure, to deliberately manipulate comparative advantage through industrial policy, currency management, and strategic investment.

Between 1989 and 2000, U.S.-China trade expanded from $17.8 billion to $94.9 billion, yet this growth masked a widening structural imbalance.

The trade deficit surged from $6 billion in 1989 to nearly $84 billion in 2000, just as PNTR was being implemented.

Far from representing a temporary adjustment to market forces, these deficits signaled the beginning of a multi-decade transfer of manufacturing capacity and employment from developed to developing nations, with China as the primary beneficiary.

The Architects of Advantage: Understanding How the Trade Imbalance Was Enabled

The Policy Machinery Behind Manufacturing Displacement

The allowance of persistent and expanding trade deficits with China was not the result of passive acceptance or market forces beyond governmental control.

Rather, it reflected a series of deliberate policy choices made by American and allied governments, often grounded in incomplete understanding of China’s countervailing policies and future intentions.

Several mechanisms combined to produce this outcome.

(1) First, the granting of PNTR status represented an irreversible commitment to non-discriminatory trade relations regardless of Chinese trade practices. The vote in the House of Representatives passed 237 to 197, while the Senate approved it 83 to 15, demonstrating the bipartisan consensus that undergirded this decision.

Critics at the time, including Representative Ro Khanna, presciently warned that opening trade without addressing underlying structural imbalances would devastate American manufacturing communities.

Yet the consensus view among policymakers and mainstream economists held that the long-term benefits to consumers and the broader economy would justify short-term displacement costs.

(2) Second, and equally consequential, policymakers systematically underestimated China’s willingness and capacity to implement deliberately mercantilist policies in apparent violation of WTO principles.

The Chinese government maintained a sophisticated architecture of currency manipulation, keeping the yuan substantially undervalued relative to the dollar, which artificially reduced the price of Chinese exports while making foreign goods more expensive within China.

This policy of currency suppression persisted for decades despite repeated international protests. Simultaneously, China maintained substantial tariff barriers and regulatory obstacles that rendered market access to Chinese consumers extraordinarily difficult, creating a systematically asymmetrical trading relationship.

(3) Third, the cost advantages that accrued to American and multinational firms relocating production to China extended far beyond labor costs.

The Chinese government provided aggressive subsidies to export-oriented industries, maintained relatively lax environmental and workplace standards that reduced production costs, and invested heavily in transportation infrastructure and export processing zones designed specifically to facilitate manufacturing for global markets.

When Cheap Goods Cost Dearly: How Trade with China Hollowed America’s Industrial Core

American corporations seized upon these advantages with enthusiasm, not because they were defrauding consumers or acting unpatriotically, but because market competition forced them to pursue lowest-cost production strategies or face displacement by competitors who did so.

The aggregate effect of millions of individual corporate decisions, each rational within its own competitive context, produced a strategic outcome that disadvantaged the United States as a whole.

(4) Fourth, the intellectual framework governing trade policy prioritized consumer welfare through lower prices over employment preservation and industrial capacity retention.

Economists could credibly demonstrate that American consumers benefited from access to inexpensive Chinese manufactures, saving money on textiles, electronics, furniture, and countless other product categories.

The pain of manufacturing job losses, concentrated geographically in industrial regions, was less visible in aggregate statistics than the diffuse benefits enjoyed by consumers nationwide.

Political economy theory would suggest that diffuse benefits create weaker constituencies for policy change than concentrated losses; yet in this case, the concentrated losses proved politically insufficient to reverse the trajectory of trade opening.

Between 1998 and the early 2020s, the widening U.S. trade deficit with China resulted in the displacement of approximately five million well-paying manufacturing jobs and the closure of nearly 70,000 factories across the United States.

These figures, while sometimes cited in isolation, should be understood not as temporary disruptions requiring adjustment assistance, but as the permanent transfer of industrial capacity to a competitor nation.

The workers displaced from these factories faced wage losses averaging 20 to 30 percent in their subsequent employment, a phenomenon that persists across decades despite retraining efforts.

The Chinese Strategy: Manufacturing Supremacy as State Policy

From Workshop to Hegemon: How Beijing Built the World’s Dominant Industrial Apparatus

While Western policymakers debated the philosophical merits of free trade, Chinese leadership under successive administrations from Deng through Xi Jinping pursued a coherent, deliberately executed long-term industrial strategy.

This strategy was not organized around maximizing consumer welfare or integrating into a rules-based international system, but rather around achieving self-sufficiency and technological independence while leveraging manufacturing scale as a tool of statecraft and economic power.

The centerpiece of contemporary Chinese industrial policy is the “Made in China 2025” initiative, announced in 2015 and subsequently expanded with massive resource commitments.

This program represents an explicit, government-directed effort to achieve dominance across ten critical industrial sectors, including advanced machinery, robotics, aerospace, biopharmaceuticals, and new energy vehicles.

The Chinese government has allocated approximately $300 billion specifically to advance manufacturing capabilities within these sectors, supplemented by state-directed credit allocation, tax incentives, and preferential regulatory treatment.

The consequences of this strategy, executed across two decades, have produced a manufacturing apparatus of staggering dimensions.

China’s Industrial Machine: The World’s Factory at Full Tilt

China currently accounts for approximately one-third of global manufactured goods output, a share that exceeds the combined manufacturing capacity of the United States, Japan, South Korea, and the United Kingdom.

China’s universities produce more engineering and related science graduates annually than the total number of graduates across all disciplines in American universities, a differential that compounds over years into a fundamental divergence in technological capacity and innovation potential.

The economic model underlying Chinese manufacturing dominance rests upon a deliberate suppression of domestic consumption and aggressive subsidization of export capacity.

Rather than allowing market forces to determine the allocation of capital, the Chinese state directs massive investment toward manufacturing expansion, often supporting excess capacity that the domestic market cannot absorb.

When overcapacity emerges—as it invariably does when supply consistently exceeds demand—Chinese firms respond by exporting surplus production into international markets at aggressively competitive prices.

This strategy has driven extraordinary economic growth and rapid technological advancement, but it does so by deliberately externalizing adjustment costs onto trading partners.

The Asymmetry Revealed: The Current Account Crisis and Global Manufacturing Imbalance

When a Trade Surplus Becomes a Structural Crisis: The $1 Trillion Reckoning

The magnitude of contemporary Chinese trade imbalances has reached scales that were previously thought economically impossible.

In 2024, China’s trade surplus approached $1 trillion—a figure that would have been dismissed as theoretical fantasy only a decade earlier.

When adjusted for inflation, this surplus vastly exceeds any trade surplus recorded globally over the past century, surpassing the peak surpluses of celebrated export powerhouses such as Germany, Japan, and the United States during periods of acknowledged dominance.

The composition of this surplus merits specific attention, as it reveals not a mature, balanced economy maintaining modest trade advantages, but rather a state deliberately pursuing mercantilism across multiple emerging technological domains.

China’s Green Overdrive: How Overcapacity Became a Global Power Play

In electric vehicles, an industry that scarcely existed as a mass-market phenomenon fifteen years ago, China has constructed production capacity roughly three times the size of its domestic market consumption.

This overcapacity spills directly into international markets, where Chinese manufacturers—often supported by government financing subsidies and protected domestic markets—undercut established producers.

Similarly, in solar panel manufacturing, China controls 90 percent of global production capacity, manufacturing 588 gigawatts against global demand of merely 451 gigawatts.

This systematic overcapacity is not a temporary distortion or market adjustment process; it represents the logical outcome of a deliberately pursued state strategy.

When policymakers tolerate weak domestic demand while simultaneously emphasizing investment in manufacturing capacity, the inevitable result is excess production that must be exported.

If other nations attempt to restrict these exports through tariffs or import controls, Chinese firms can simply move the assembly or manufacturing processes to third countries, a strategy already visible in Southeast Asian nations that have become assembly bases for Chinese-designed and Chinese-controlled production.

The implications extend beyond mere trade statistics. Chinese manufacturing dominance in emerging technologies such as electric vehicles and renewable energy components represents the transfer of control over critical infrastructure and energy transition pathways to a single nation with whom the West maintains complex strategic rivalries.

The geopolitical dimension of this economic imbalance cannot be separated from its pure trade aspects; when a nation controls 90 percent of global solar manufacturing capacity, it possesses considerable leverage over the speed and trajectory of global energy transition.

Why the Global Awakening Occurred: The Convergence of Crises

From Comfortable Denial to Uncomfortable Reality: The Triggers of Strategic Reassessment

The international community’s sudden awakening to the consequences of Chinese manufacturing dominance did not result from new intellectual insights or improved analytical capabilities.

Rather, it emerged from a convergence of observable crises that could no longer be explained away through existing frameworks or dismissed as temporary disturbances. Several factors combined to catalyze this reassessment.

The COVID-19 pandemic served as a crucial inflection point, revealing supply chain vulnerabilities that Western governments had complacently accepted for decades.

When global manufacturing came to a near-standstill in 2020, the absence of diversified production capacity for critical goods—from semiconductors to pharmaceuticals to basic medical equipment—became starkly apparent.

Nations that had offshored manufacturing capacity to China discovered that their access to essential goods depended upon decisions made by a competitor government, a realization that transformed trade policy from an economic issue into a national security matter.

The structural persistence of Chinese overcapacity, despite global economic recovery, shattered lingering hopes that the phenomenon would self-correct. Rather than consolidating excess capacity, Chinese firms and the government entities supporting them have continued aggressive expansion.

Second China Shock: Export Boom Fuels Growth, Fractures Global Trade

The expansion of China’s trade surplus contributed to as much as half of its overall economic growth in 2024, with investment in new export-oriented factories comprising much of the remaining growth.

This suggests that Chinese policymakers have made a deliberate choice to prioritize export-led growth over domestic consumption and investment, accepting the geopolitical costs of such a strategy in exchange for near-term economic expansion.

The emergence of a second “China shock” across multiple technological domains simultaneously crystallized international concern. When Chinese overcapacity was confined to labor-intensive consumer goods such as textiles and electronics, developed nations could manage adjustment through sectoral transitions toward higher-value services and advanced technologies.

However, the emergence of serious Chinese competitive threats across electric vehicles, batteries, solar panels, semiconductors, and increasingly artificial intelligence suggests that the entire trajectory of economic development is being compressed into a shorter timeframe, with winners and losers determined by access to Chinese capital and manufacturing expertise.

Price wars triggered by Chinese overcapacity have begun imposing losses across global supply chains. In industries from chemical manufacturing to solar panel production, excess Chinese capacity has driven prices to levels insufficient to cover production costs, let alone generate returns on invested capital.

Firms across Europe, Asia, and North America have responded by demanding government protection through tariffs or subsidies, triggering retaliatory measures and threatening the coherence of the rules-based trading system.

Cause and Effect: The Mechanism of Structural Displacement

How Rational Individual Choices Produced Irrational Collective Outcomes

The persistence of trade deficits between the United States, Europe, and China for more than two decades was not the result of sudden policy failures or individual strategic errors.

Rather, it emerged from the operation of powerful economic incentives that aligned individual corporate interests with outcomes detrimental to broader strategic interests.

When American manufacturers confronted competition from Asian firms with access to lower labor costs, the rational response was to shift production toward lower-cost jurisdictions or face market share losses to competitors pursuing the same strategy.

General Motors, General Electric, Nike, Apple, and thousands of other corporations made essentially identical calculations: produce where labor and operating costs were lowest, or cede markets to competitors who would do so.

From the perspective of individual corporate management, such decisions were not merely rational; they were obligatory, as fiduciary responsibilities to shareholders demanded cost minimization.

Rational Choices, National Folly: China’s Trade Trap

The aggregation of these individual rational decisions, however, produced outcomes that were strategically irrational from the perspective of the nation-state.

Manufacturing capacity accumulated in China across decades, along with the technological expertise, supply chain integration, and institutional knowledge required to sustain it.

Each dollar of capital invested in Chinese factories represented a dollar not invested in American facilities. Each engineer hired by Chinese firms represented technological knowledge and training not retained in developed economies.

The stock of manufacturing capacity is not readily reversible; factories built to supply global markets from Chinese locations have productive lives of decades, during which they will continue to produce and export.

The mechanism by which domestic prices fell while trade deficits widened illustrates the asymmetry inherent in this dynamic.

American consumers purchasing inexpensive goods manufactured in China benefited visibly from lower prices; they enjoyed consuming more goods at given income levels.

However, the employment displacement and wage losses experienced by manufacturing workers were concentrated geographically in industrial regions and temporally compressed into identifiable periods.

The consumer gains accrued gradually and were distributed widely; the employment losses were sudden and geographically concentrated.

From a political economy perspective, this distribution of gains and losses created weak constituencies for maintaining or accelerating trade liberalization, yet the ongoing structural incentives for corporate relocation persisted regardless.

The currency mechanism amplified these dynamics considerably. China’s deliberate undervaluation of the yuan made Chinese exports artificially cheap in dollar terms, while making foreign goods artificially expensive within China.

American firms exporting industrial machinery, aircraft components, or agricultural products faced substantial barriers in accessing Chinese markets, while Chinese firms exporting consumer goods faced minimal barriers in American markets.

This asymmetry was not accidental; it was a deliberate feature of Chinese economic policy, yet Western governments largely tolerated it in the faith that such distortions would be temporary.

The Emerging Reckoning: From Strategic Patience to Strategic Competition

The Tectonic Shift: How Economic Competition Became Geopolitical Conflict

The global response to sustained Chinese manufacturing dominance and overcapacity has undergone a fundamental transformation during the 2020s.

The transition from passive accommodation to active strategic competition represents one of the most significant realignments of international trade policy since World War II.

The initial manifestations of this shift appeared in the Trump administration’s trade war initiatives beginning in 2018, which were initially dismissed by mainstream economists and policymakers as protectionist aberrations that would be reversed by subsequent administrations.

However, the Biden administration, while employing different rhetoric and tactical approaches, has largely maintained and in certain respects expanded the confrontational posture toward Chinese trade practices.

The Inflation Reduction Act, ostensibly focused on climate investment, incorporated substantial protectionist measures explicitly designed to reduce American dependence upon Chinese suppliers of critical technology components.

The CHIPS and Science Act similarly represented a deliberate effort to reshore semiconductor manufacturing capacity to reduce dependence upon Taiwan and other vulnerable suppliers.

These policy shifts reflect a fundamental reassessment of the relationship between trade deficits and national security.

Whereas earlier policy frameworks treated trade deficits as matters of macroeconomic adjustment and consumer welfare, contemporary frameworks increasingly treat manufacturing capacity in critical sectors as matters of strategic autonomy and national security.

The presence of substantial unused production capacity in Chinese facilities that can be rapidly mobilized for export represents, from this perspective, a strategic vulnerability rather than a source of consumer benefits.

Global Backlash: China’s Overcapacity Fractures the World Order

The European Union, historically committed to rules-based multilateral trade liberalism, has similarly shifted toward strategic competition with China.

The EU’s determination to prevent Chinese manufacturers from dominating electric vehicle and battery markets has led to investigations into potentially unfair subsidies and the imposition of countervailing duties on Chinese EV imports.

These measures represent departures from the EU’s traditional trade framework, undertaken because the political costs of allowing entire manufacturing sectors to be displaced to China were deemed unacceptable.

Developing nations, initially aligned with Chinese interests through BRICS and other multilateral frameworks, have begun expressing concerns about Chinese overcapacity displacing their own nascent manufacturing sectors. India, Indonesia, Vietnam, and other nations have raised complaints about Chinese imports of manufactured goods undercutting local producers and preventing the development of indigenous manufacturing capabilities.

The unity of the developing world in supporting Beijing’s positions against the developed West, a consistent feature of global trade negotiations for decades, has begun to fracture as nations confront the reality that Chinese manufacturing dominance prevents their own development trajectories.

The Structural Problem: Why Tariffs Alone Cannot Solve the Crisis

The Limits of Protectionism: Why Containing Overcapacity Remains Fundamentally Difficult

The emerging policy response to Chinese overcapacity has centered heavily on tariff imposition and import restrictions.

The United States has imposed tariffs on Chinese electric vehicles, batteries, and semiconductor components; the European Union has imposed duties on EV imports; countries throughout Asia and Africa have erected barriers to Chinese manufactured goods.

Yet the fundamental problem driving these policy responses—structural overcapacity in Chinese manufacturing combined with a political economy that tolerates weak domestic consumption—remains largely unaddressed.

The efficacy of tariff-based responses is undermined by several factors.

(1) Chinese manufacturing overcapacity is sufficiently vast that even substantial tariff increases may not render Chinese producers uncompetitive.

When a firm can produce vehicles at a cost substantially below competitors due to government subsidies, state-directed credit at favorable rates, and access to below-market inputs, tariffs that increase prices by 25 or even 50 percent may remain insufficient to price the Chinese product out of global markets.

Many importers continue to view China as the most cost-effective source for goods, even accounting for tariffs.

(2) Chinese firms and the government entities supporting them have demonstrated considerable sophistication in circumventing tariff barriers.

Rather than accepting reduced export volumes when tariffs are imposed, Chinese firms have responded by relocating assembly and manufacturing operations to third countries with lower tariff exposure.

The construction of manufacturing facilities in Mexico, Vietnam, Indonesia, Thailand, and other nations allows Chinese firms to maintain export volumes while technically complying with rules-of-origin requirements and tariff classifications.

The capital investment required to establish these facilities is substantial, but given the scale of Chinese overcapacity, the reallocation of production represents a rational response to tariff barriers.

(3) The tariffs do not address the underlying Chinese incentive structure that generates overcapacity.

China’s Factory Flood: Tariffs Can’t Stop the Surge

If the Chinese government continues to subsidize manufacturing expansion, allocate cheap credit to export-oriented industries, and suppress domestic consumption, then the logical economic outcome is continued excess production that seeks external markets.

Tariffs can slow the rate at which this excess production enters international markets, but they cannot eliminate the production itself. The capital invested in Chinese factories, facing weak domestic demand, will naturally seek export markets regardless of tariff levels.

Some economists and policymakers have suggested that pressure could be applied to China to shift toward a more consumption-oriented development model, reducing the production of excess manufactured goods and instead focusing on meeting the needs of Chinese citizens.

Such a transition would require the Chinese government to abandon the state-directed investment model that has underpinned growth for decades, to tolerate lower rates of overall economic expansion, and to accept the political risks associated with slower growth. The incentive structure facing Chinese leadership provides limited motivation for such a transition.

Future Steps: Toward a New Trading Equilibrium

Reconstructing International Order: Principles and Pathways for Sustainable Resolution

The persistence of Chinese overcapacity and the resulting global trade imbalances cannot be resolved through unilateral tariff imposition or ad hoc protectionist responses.

A sustainable resolution requires the development of a renewed international framework capable of addressing mercantilist trade policies while maintaining the benefits of economic interdependence and specialization.

The most intellectually coherent approach to managing Chinese overcapacity involves developing a principled, risk-based framework for evaluating policy responses.

Rather than imposing blanket tariffs across all Chinese products, policymakers should differentiate between sectors based on the strategic risks posed by Chinese dominance.

In sectors involving critical infrastructure—semiconductors, rare earth minerals, pharmaceutical precursors, energy storage systems—the risks of dependence upon a geopolitical competitor warrant substantial domestic support for alternative suppliers, even if such support requires higher consumer prices or fiscal expenditures.

Trade Reckoning: Risk Tariffs Over Blind Liberalism

In sectors where Chinese dominance poses limited strategic risks, tariff barriers should be minimized in favor of maintaining the efficiency gains from global specialization.[brookings]

This risk-based approach would recognize that electric vehicle and battery manufacturing merit substantial domestic support in developed economies because the transition to renewable energy represents a fundamental transformation of economic systems, and concentrating this transformation under the control of a single nation poses unacceptable strategic risks.

Conversely, sectors such as garment manufacturing or furniture production, where Chinese dominance imposes limited security risks, could remain more exposed to global competition while supporting workers displaced from these sectors through enhanced adjustment assistance.

The international community should simultaneously work toward reforming the World Trade Organization and related institutions to address mercantilist trade policies more directly.

The original WTO framework was designed to address tariff barriers and other explicit trade restrictions, but it proved inadequate for addressing the implicit protections provided through currency manipulation, state-owned enterprises, and directed credit allocation.

A reformed framework would need to establish clearer guidelines regarding acceptable policy tools and establish more robust enforcement mechanisms for addressing violations.

China’s integration into the global trading system was premised upon the assumption that economic interdependence would eventually produce political convergence toward liberal democratic norms.

The failure of this assumption to materialize has implications extending beyond trade policy.

If economic opening did not produce the anticipated political outcomes, then the strategic calculus regarding appropriate levels of trade and investment exposure must be revised.

This does not necessitate wholesale decoupling or a return to autarky, but it does suggest that developed nations must be more explicit about conditions under which economic engagement serves their interests.

Conclusion

The End of an Era and the Uncertain Transition

From Engagement to Rivalry: Navigating a More Fractious Global Order

The remarkable period of expanding global trade integration that characterized the final decades of the twentieth century and the early decades of the twenty-first century has definitively concluded.

The assumptions upon which this integration was constructed—that economic interdependence would produce peaceful resolution of conflicts, that authoritarian regimes would eventually democratize through exposure to market forces, and that the benefits of specialization would be widely distributed—have been substantially discredited by subsequent history.

China’s emergence as the dominant manufacturing power on the global stage represents the logical outcome of a strategic choice made by successive Chinese governments to prioritize manufacturing expansion over consumption, production for export over satisfaction of domestic needs, and state-directed capital allocation over market-determined resource distribution.

The Western choice to accommodate this strategy, granting China full access to developed market economies without insisting upon reciprocal access to Chinese markets or challenging deliberate distortions such as currency manipulation, represented a strategic miscalculation of considerable magnitude.

Trade Awakening: No Turning Back from China’s Dominance

The awakening to this miscalculation is now clearly evident across developed and developing nations alike.

The policy response is still being formulated, and the mechanisms by which the international order will adapt to the new reality of Chinese manufacturing dominance and sustained trade imbalances remain uncertain. What is no longer uncertain is that the era of passive accommodation has ended.

Whether the transition toward a new equilibrium occurs through negotiated reform of international institutions, through unilateral protectionist measures that fragment global trade, or through some hybrid approach involving elements of both remains to be determined.

What is certain is that the decisions made during the next several years regarding trade policy, manufacturing capacity development, and international institutional reform will shape global economic dynamics for decades to come. Policymakers now confront the consequences of earlier strategic choices, and the range of options available for addressing these consequences has narrowed considerably.

The great trade miscalculation of the 1990s and 2000s cannot be reversed; the manufacturing capacity transferred to China, the technological expertise acquired by Chinese firms, and the strategic vulnerabilities created by decades of dependence cannot be easily undone.

What remains possible is to manage the transition toward a new equilibrium thoughtfully, with attention to both the economic efficiency gains that trade enables and the strategic security concerns that concentrated manufacturing capacity in geopolitical competitors engenders.