The False Promise of Tariffs: How the US Underestimates China's Technological Ascendance

China's Unanticipated Tech Surge

China's rise as a technological powerhouse has taken the world by storm. Despite facing trade pressures, including tariffs, China's tech sectors have flourished, propelling it to a leading position in global innovation.

Thirty years ago, China had limited internet access and struggled to produce competitive technology. By 2024, it had become a trailblazer in high-tech fields like robotics, AI, and quantum computing, surpassing renowned rivals.

The D.R.E.A.M. Elements

The secret behind China's technological success lies not in central planning but in five interconnected elements: dialogue, research and development, industrial ecosystem, accumulative changes, and the middle market.

• D: Dialogue - A dynamic balance between government and market, fostering innovation without stifling private sector growth.
• R: Research and Development - Massive investments in domestic research and engagement with global networks have created a thriving scientific landscape.
• E: Industrial Ecosystem - China's vast manufacturing base allows for the rapid development and scaling of new technologies.
• A: Accumulative Changes - Incremental improvements rather than revolutionary breakthroughs drive innovation, leveraging market feedback and manufacturing networks.
• M: Middle Market - Targeting middle-income consumers domestically and globally, Chinese firms emphasize affordability and functionality over high-end luxury.

The Folly of Tariffs

The incoming Trump administration's plan to impose tariffs on Chinese goods is not only misguided but could backfire spectacularly.

Tariffs will not dismantle China's D.R.E.A.M. elements. Instead, they could further accelerate China's push for self-reliance and strengthen its position in global middle markets.

Technological competition is not a zero-sum game where one nation must eclipse another. American policymakers must shift their focus from hindering China to investing in American companies and addressing global challenges.

"Attempts to hobble the competition through tariffs and trade wars will do little toward that end." - Olga Khazan