The President Needs to Lead the Cold War on China

The United States is in a cold war with the People’s Republic of China, and it urgently needs a strategy led and directed by the president himself if it is going to win. Absent such leadership, Washington’s approach to China will remain fragmented, contradictory, and unfocused. The absence of leadership is in stark contrast to Chinese Communist Party (CCP) Secretary-General Xi Jinping and the approach that he laid out in the country’s 20th National Congress in 2022, which directs all instruments of China’s power to wage a “protracted struggle”—in other words, a cold war—against the United States.

The United States has been especially timid in responding to China’s economic assault. For decades, China has been building geo-economic leverage through its “military-civil fusion” and “dual circulation” strategies—efforts by the CCP to build the country’s technological and industrial capacity both for domestic economic growth and military modernization. Beijing’s dominant position in global supply chains is also a deliberate result of policies that seek to hold nations hostage by placing China at the center of the production of key economic elements such as critical minerals, semiconductors, and now next-generation energy technology.

And globally, the CCP has gained geopolitical influence through its Belt and Road Initiative, which has also laid the foundation for a new economic network across Southeast Asia, Africa, Latin America, the Middle East, and even a part of Europe that operates on Beijing’s terms.

Conversely, except for sanctions, the United States has been much less active in deploying its economic strengths to promote its foreign-policy and national security interests. Washington’s efforts today to address decades of negligence in foreign economic policy are still fitful and inconsistent. Though there have been some attempts by U.S. government agencies—such as the Treasury Department’s Chinese Military-Industrial Complex Company (CMIC) list or the Justice Department’s current Disruptive Technology Strike Force—to crack down on China’s economic crimes and tighten exports of advanced technologies, these efforts will remain inadequate unless the president himself takes control and directs a strategy to undermine China’s malign economic influence.

Either President Joe Biden or a newly sworn-in President Donald Trump (the presumptive Republican Party nominee, who could return to power next January) should draw upon the example of former President Ronald Reagan in taking hold of China policy. During Reagan’s first term, it was clear that the Soviet threat was one of his top priorities, as evidenced by the clear and actionable guidance that he provided in a series of National Security Decision Directives (NSDDs).

The intent to win the Cold War against the Soviet Union permeated these Reagan-era documents—including in NSDD 32, titled the “U.S. National Security Strategy,” which appropriately positioned all foreign-policy and national security activities in the context of the U.S.-Soviet rivalry. In addition, the Reagan administration also released NSDD 75, titled “U.S. Relations with the USSR,” which laid out a clear strategy for how the United States would engage in comprehensive statecraft to compete with the Soviets across the political, military, and economic domains as well as counter Soviet influence globally.

Both the Trump and Biden administrations deserve some credit for overseeing a fundamental policy shift on China—now a strategic competitor—and for their willingness to start imposing tariffs and export controls to unwind the U.S. economy from years of inert and thoughtless engagement with the CCP. And yet, nearly eight years after Washington finally recognized that it was in competition with China—and after the implementation of hundreds of millions of dollars in tariffs and a series of prohibitive export and investment controls—the United States is still struggling to reach the level of intensity needed to emerge victorious in the competition with China.

For example, the Biden administration’s “small yard, high fence” approach to de-risking—limiting the scope of sectors subject to export controls—fails to address the depth and breadth of the economic threat from China.

Instead of pursuing such a narrow approach, the president must direct all relevant U.S. government agencies to fight this new cold war, just as Reagan did against the Soviets. It will take presidential leadership to develop a dedicated “U.S. Economic Competition with China Strategy.” Whereas Reagan’s NSDD 75 provided a comprehensive strategic approach across the military, economic, and diplomatic spectrum, China’s distortion of the global economy demands that the United States must have a dedicated economic strategy to address the complexity of this challenge. This document must issue clear policy guidance on how Washington will protect the U.S. economy, degrade China’s ability to compete, and build new global economic power centers.

Securing the U.S. economy must be at the heart of the new strategy. Beijing’s success in undermining that economy—via unfair trade practices, deindustrialization through the mass subsidization of Chinese companies to create an unfair playing field, and theft of intellectual property—has already been well documented by both the Trump and Biden administrations and within Congress. Through NSDDs, the president must provide the framework to address that economic aggression. New policy guidance should be much more aggressive in limiting Chinese investment in the United States as well as U.S. investment in China. In addition, U.S. government bureaucracies need clear guidance on export control policy, the scope of bilateral trade, and the future of China’s permanent normal trade relations status.

The president must provide clear guidance on Washington’s approach to targeted decoupling from China. The Biden administration’s export control policy, which currently focuses narrowly on semiconductors and artificial intelligence-enabling chips, is a good start. But more is needed. A new economic competition strategy should be forward-looking and identify a much larger number of sectors that are foundational to the overall health, prosperity, and security of the United States. Sectors that must be considered include pharmaceuticals, biotechnology, information and data technology, and critical materials.

The approach in these select sectors should be complete decoupling from the Chinese economy. The United States cannot afford to be dependent on China for critical components and inputs in these sectors. Biden must lead on this issue and ensure that his government is executing his plans, or they risk falling prey to political and bureaucratic resistance. Such muscular presidential leadership is not happening.

For example, in Biden’s executive order on outbound investment placed the burden on the Treasury Department to identify which “national security technologies” should be subject to the new investment restrictions. The risk in this approach is that, given the economic and political implications, Treasury will be hesitant to go beyond the administration’s narrowly defined “small yard, high fence” approach. Instead, the president needs to be more prescriptive, leveraging the already existing Critical and Emerging Technologies List, which identifies a much more robust set of technologies that the United States should not help China develop through U.S. capital.

Moreover, the Treasury and Commerce departments are still incentivized to continue economic engagement with China. The main work of these agencies is the promotion of U.S. business and global financial stability, a perspective that skews their approach and means that they are more focused on enabling a healthy Chinese economy than on winning the existing conflict. This is a shortsighted approach, as the post-pandemic environment—U.S. economic growth booming while China’s severely slowed—is proof that the United States is far less reliant on China that many believe. Washington needs to protect its economy from predation no matter the costs to the Chinese economy.

The United States can afford to—and should—take the offensive on economic action, coordinating with the efforts of military planners in the Pentagon to deter Chinese aggression and, where possible, subvert its ability to harm U.S. interests.

Washington needs a campaign to deny and degrade China’s ability to undermine U.S. national security. For example, the bureaucracy needs expanded guidance that specially targets all inbound and outbound investments, exports, and transfers of data that could help China modernize its military. In addition, economic measures could add to military deterrence. Given China’s aggressiveness around Taiwan, the Philippines, and elsewhere, the United States needs an economic deterrence plan that identifies economic “fail points” and other financial targets, and that imposes costs on the CCP and undermines its confidence in launching a military attack against the United States or its allies.

Mobilizing the legal system to target malign Chinese actors working on behalf of the CCP is another course of action that the president should mandate. Current U.S. legal statutes should be fully maximized to hold the CCP accountable for its role in fentanyl production, theft of intellectual property, sanctions evasion, human rights abuses, and other criminal activities.

This could be done by leveraging policy tools already in place, such as the Uyghur Forced Labor Prevention Act, the Transnational Criminal Organizations Sanctions Regulations, expansion and enforcement of the Treasury’s CMIC list, following through on banning TikTok if ByteDance does not divest, and enforcing the law against other bad actors, as Trump did against Huawei. A legal strategy from a U.S. president of this magnitude against the CCP has yet to be implemented and would undoubtedly require action against some of China’s largest state-owned enterprises and financial institutions, a move that would draw a sharp response from Beijing.

The U.S. president must make clear that cooperation with Washington’s international allies and partners to create new global economic power centers is imperative. Biden will need to direct his administration to prioritize the use of foreign economic statecraft—such as trade agreements, aid, and development tools—to maximize the United States’ economic engagement with countries necessary to advantaging Washington in its rivalry with China.

Core principles of this approach should include preventing the further spread of CCP economic influence; prioritizing the United States’ engagement with like-minded nations; promoting fair economic and legal frameworks on which the United States excels; and partnering with close allies to combat China’s economic influence.

Mutually shared prosperity is the foundation of any successful global economic strategy, and nothing provides that more strong trade ties between like-minded nations. As a result, the president would need to empower the Office of the U.S. Trade Representative to pursue bilateral trade agreements that help the United States achieve its decoupling efforts but also reinforce its position as the global economic partner of choice. This could start with sector specific trade deals, such as critical minerals, semiconductors, or pharmaceuticals, until political capital is available to pursue more comprehensive trade deals.

Similarly, the U.S. president needs to take charge of development and financial assistance and direct the United States Agency for International Development and the Development Finance Corporation to support projects that provide strategic value to recipient nations that are key to the U.S.-China rivalry—and ensure that the United States receives a return on its investment.

The United States won its first cold war. But that required aggressive economic action alongside a strong military, and in the context of China, Washington is falling short. Presidential leadership is needed now if the United States is going to deny the CCP its global economic ambitions and once again secure the American dream—and global economic freedom—for decades to come.