By Cheng He, Chief Editor, Business News Department, CGTN
U.S. President Donald Trump framed his tariff policy against China around a compelling narrative: the influx of inexpensive Chinese goods has cost U.S. manufacturing jobs and industries, necessitating protection through higher taxes on Chinese imports.
However, there is another side to the story—one that is often overlooked. Chinese imports have played a crucial role in maintaining a low-inflation environment in the U.S., benefiting both consumers and businesses. A 2019 study by two economists from the London School of Economics (LSE) found that increased trade with China boosted the annual purchasing power of the average U.S. household by $1,500 between 2000 and 2007. Additionally, China used the proceeds from its exports to purchase U.S. government bonds, helping keep America’s borrowing costs low.
This dynamic created a win-win situation—one that could have been leveraged as a strategic opportunity to build a more resilient and competitive U.S. economy. But instead of capitalizing on the advantages of low-cost imports, the U.S. missed a chance to invest in long-term economic strength.
Here are three key areas where the U.S. should have focused its efforts over the past two decades while benefiting from affordable Chinese goods:
Investing in Human Capital
Despite being the world’s most developed country, the U.S. has not invested in human capital at a level that matches its economic and geopolitical status.
A report by the Bipartisan Policy Center found that two-thirds of American fourth-graders cannot read proficiently or perform math at grade level. And many families question the value of a college degree, leading to stalled enrollment rates.
Even as the U.S. aims to expand high-tech, high-value industries to maintain its global competitiveness, it faces a talent shortage. The same report shows that 70% of U.S. jobs require post-secondary training, yet less than half of Americans have the necessary credentials.
Instead of relying on outdated industries, the U.S. should have invested heavily in workforce development, fostering expertise in artificial intelligence, biotechnology, and clean energy—the key fields that will define future economic leadership.
Strengthening Research and Development
The U.S. remains a leader in R&D spending but faces increasing competition from emerging economies. A 2023 European Commission report found that China accounted for 17.8% of total R&D spending by the world’s 2,500 leading companies—second only to the U.S. at 42.1%. However, when measured as a percentage of GDP, the U.S. still significantly outpaces China, whose economy is nearly 70% the size of America’s. In 2012, China’s share of global R&D spending was just 4.3%, whereas the U.S. has consistently maintained a 40% share over the past decade.
While the U.S. continues to invest heavily in innovation, it has not done enough. Instead of merely maintaining its lead, the government should have transformed the economic cushion provided by low-cost imports into tax incentives for innovation, increased research grants, and stronger support for tech startups.
Focusing on High-End Manufacturing
Rather than using tariffs to revive low-margin manufacturing jobs, the U.S. should have embraced high-value manufacturing.
Although the U.S. remains dominant in high-end technology, it lacks the capability to manufacture many of the most advanced products it designs. One clear example is the semiconductor industry. While the U.S. leads in designing the most advanced chips, it relies on China’s Taiwan (TSMC) and South Korea (Samsung) for cutting-edge manufacturing.
Moreover, over-financialization in the US has diverted resources away from the real economy, particularly manufacturing. Rather than reinvesting profits into research, development, infrastructure, and industrial chain building, many firms prioritize stock buybacks and dividend payments to inflate share prices.
To stay ahead, the U.S. should have positioned itself as the global leader in advanced manufacturing, driven by robotics, automation, and artificial intelligence. Instead of competing with China on low-cost consumer goods, it should have focused on producing next-generation NEVs, aerospace components, and cutting-edge electronics—but doing so requires an abundant, highly skilled workforce.
Conclusion: A Forward-Thinking Economic Strategy
As inflation stabilizes, the U.S. has an unprecedented opportunity to recalibrate its economic strategy. Instead of imposing tariffs that risk reigniting inflation, policymakers should adopt a forward-looking approach. If the U.S. had seized this strategic window two decades ago, it could have built an economy more resilient, competitive, and immune to foreign competition. The question now is whether it will make the right choices before the next opportunity passes by.
