Made in China: America’s Imported Trade Policy
U.S. Treasury Secretary Scott Bessent made it clear in an an interview on Bloomberg TV Thursday: China must rebalance its economy.
“The Chinese need to rebalance their economy in favor of consumption,” Bessent said.
This statement underscores a long-standing issue—China’s refusal to adjust its economic model is at the heart of America’s trade imbalance.
For decades, the United States has not so much chosen to run a trade deficit with China as it has been forced into one. The lack of a coherent U.S. trade policy has allowed Beijing to set the terms, tilting global commerce in its favor. The result? America has become an unwitting partner in a trade policy designed in Beijing—a policy that systematically erodes U.S. manufacturing, distorts global markets, and leaves American workers at a disadvantage. We have not just been importing Chinese goods, we’ve been importing the economic policy of the communist regime that rules China.
China’s economic model is not one of free trade or comparative advantage. It is predatory mercantilism, an aggressive system designed to suppress domestic consumption, keep wages artificially low, and use state-backed subsidies to generate vast industrial overcapacity. This overproduction is then dumped onto global markets, ensuring that foreign competitors cannot compete on price. Meanwhile, China’s government manipulates its currency and capital flows to maintain its trade advantage, preventing market forces from naturally adjusting.
The U.S. as Beijing’s Economic Shock Absorber
Because trade flows must always balance globally, China’s persistent surpluses force America into persistent deficits. The United States is not “choosing” this trade deficit—China’s policies are imposing it.
Michael Pettis, a finance professor at Peking University and one of the foremost analysts of global trade imbalances, has long argued that trade deficits are not simply the result of consumer preferences but are driven by deliberate policy choices. China’s controlled economy, closed capital markets, and credit allocation policies force its citizens to save excessively while limiting their ability to consume. This creates an artificial glut of production, which must be exported. The natural result is a system where the U.S.—with its open capital markets and flexible financial system—automatically absorbs these imbalances, whether it wants to or not.
American manufacturers suffer, not because they are inefficient, but because they are competing against an economic model that does not play by market rules. This is not free trade; it is a rigged game.
What’s more, the claim that countries have “deliberately chosen” to run trade deficits with China ignores historical reality. When China “ascended” to the World Trade Organization in 2000, policymakers expected trade deficits to decline, not explode into persistent and structural imbalances. The idea that the U.S. simply opted for the luxury of Chinese imports ignores how trade deficits were not what was anticipated—they were imposed through Beijing’s interventionist policies and Washington’s failure to counteract them.
China’s Trade Is a One-Way Street
China’s trade relationship with the world is fundamentally asymmetric. As Brad Setser points out in a recent New York Times essay, over the past six years, China’s manufactured exports have grown by over $150 billion a year, while its imports of manufactured goods have barely increased at all. Global trade with China is effectively a one-way street—other nations buy from China, but China doesn’t buy from them. This is not how trade is supposed to work, and it is why countries across the world—including the United States—are now pushing back against Beijing’s policies.
The reason behind this imbalance? China’s internal economy is structured in a way that suppresses household incomes to drive investment and production. In many developed economies, the household sector’s share of GDP is 60 to 70 percent. In China, this figure is closer to 40 percent. This isn’t what most Westerners expect from a so-called socialist economy. The assumption is that wealth and income are more evenly distributed in a communist system. But in reality, China has one of the most skewed distributions of wealth in the world, with a vast share of profits funneled to party officials, well-connected oligarchs and their families, corporations, and the state rather than to workers. Karl Marx would call this alienation—Xi Jinping calls it “socialism with Chinese characteristics.”
Trump’s New Tariffs Are a Necessary Response
President Donald Trump is now preparing to impose new tariffs on Chinese goods, a necessary step to correct these distortions. These tariffs are not a retreat into protectionism but a strategic move to neutralize Beijing’s ability to flood the U.S. market with subsidized products, creating a fairer playing field for American industry.
Critics of tariffs fail to recognize that the alternative is not some idyllic free-market equilibrium. The alternative is continued subjugation to China’s trade policies, in which the U.S. economy is perpetually forced to adjust to Beijing’s industrial overcapacity. Trump’s tariffs aim to break this cycle and force China to internalize its own production surpluses rather than dumping them on foreign markets.
China Is the ‘Vampire Squid’ of Global Trade
Journalist Matt Taibbi famously described Goldman Sachs as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” The same image applies to China’s economic strategy—except instead of a Wall Street bank extracting wealth through financial instruments, it is Beijing extracting industrial capacity from the rest of the world.
China’s tentacles wrap around global supply chains, squeezing competitors out of markets, flooding industries with artificially cheap goods, and pulling entire economies into dependence. This is not competition—it is conquest by economic means. Every time a Western manufacturer shuts down because it can’t compete with China’s subsidized overcapacity, another industry falls under Beijing’s control. Left unchecked, this system ensures that the world remains dependent on China while China itself remains unaccountable to global trade norms.
Can China Rebalance?
The only way to end this economic exploitation is for the U.S. to actively shape its own trade policy, rather than allowing Beijing to dictate the terms. That means tariffs—strategic, transparent, and unapologetic. And it means rebuilding U.S. manufacturing with policies that recognize that trade is not just an economic issue—it is a national security issue.
Whether China’s regime is willing to attempt to rebalance its economy is an open question. The system of skewing domestic wealth, encouraging illiquid investment, and suppressing domestic consumption has greatly benefited the Communist Party’s ability to control the population and enrich Chinese elites.
When the Trump administration demanded that Mexico and Canada beef up border security to avoid tariffs, it was easy enough for those countries to agree. Even asking European countries to lower their tariffs to allow more U.S. products into their markets does not require a fundamental retooling of their economy. What Bessent is proposing to China is a much bigger deal.
Bessent should listen carefully to how the Chinese respond to his call for a new economic paradigm. But he should not expect that they will easily agree.