Trump's Tariff Obsession Won't Beat China – A Treasury Veteran's Wake-Up Call After Seeing Beijing Up Close

Steven Rattner just got back from China, and he's not mincing words. The former Treasury advisor under Obama published a stark assessment in The New York Times on February 10 with a title that lands like a gut punch: "I Just Returned From China. We Are Not Winning."

Rattner spent a week on the ground touring AI labs, EV factories, robotics firms, and pharma companies – and what he documented should terrify anyone betting on Trump's tariff strategy to slow Beijing down. The reality is blunt: China is leaping ahead in cutting-edge sectors from artificial intelligence to humanoid robots, and slapping duties on imports won't change that trajectory one bit.

A Treasury insider issues a blunt warning: Steven Rattner documented China's technological surge in The New York Times.

Washington's China Delusion

A few weeks back, Rattner sat through a New York dinner where senior trade experts argued over China strategy. Some backed Trump's confrontational playbook – tariffs, export bans, the works. Others pushed for traditional diplomatic engagement. Rattner, who's been investing in China for years and had just wrapped his week-long tour, dismissed both camps outright.

Steven Rattner

Make no mistake: neither approach will work, because China is both a formidable competitor and an irreplaceable manufacturing hub. You can't negotiate or bully your way around that. The only real path forward? America needs to fix its own broken house and outcompete China where it actually has advantages – not chase phantoms with tariff threats.

Rattner pulls no punches on Trump's first year back in office: the chaos has already set America back. Beyond manufacturing, China now threatens US dominance across fast-growing industries – artificial intelligence, pharmaceutical R&D, advanced robotics. The turbulence from the White House isn't just noise; it's actively undermining American competitiveness while Beijing executes a coherent industrial strategy.

Power and Talent: China's AI Edge

What Rattner saw in AI left him shaken. Sure, the US still leads in cutting-edge semiconductor chips, but China controls something more fundamental – electricity. China's power generation capacity exceeds America's by more than double, yet data center electricity costs run half of US rates. When the foundation of AI infrastructure is cheaper and more abundant in Beijing than in Silicon Valley, the math gets uncomfortable fast.

But the real secret weapon is human capital. Rattner met waves of young Chinese entrepreneurs whose drive and intellect match any Silicon Valley cohort – including one billionaire still sleeping in his office. That's not anecdote; it's evidence of a system channeling massive ambition into strategic sectors while America argues about tariff percentages.

Obama-era advisor pulls no punches: Rattner (right) with former President Obama (left) – now delivering hard truths about America's competitive decline.

And despite Trump's tariff offensive, the numbers don't lie: China posted a record $1.2 trillion trade surplus last year. It remains the world's export champion, proving that tariffs haven't dented global reliance on Chinese manufacturing. Everyone still depends on "Made in China" – with or without duties.

Electric Shock: Xiaomi's Five-Year Leap

Consider automobiles. Rattner toured Xiaomi, a company that made smartphones and electronics five years ago and only announced its EV push in 2021. What he witnessed in that factory reads like industrial sci-fi: "gigantic machines resembling mechanical dinosaurs effortlessly and precisely fitting aluminum body parts into vehicles on a production line in a massive factory where workers were barely visible". In the showroom sat a yellow sports car that could pass for a Porsche.

Five years from phones to Porsches: Rattner witnessed Xiaomi's stunning leap into electric vehicles – a timeline that should alarm Detroit.

Ford CEO Jim Farley admitted last summer that Chinese in-car technology is "far superior" to American models, calling China's progress "the most stunning experience I've ever seen". Shortly after, Ford halted production of its F-150 electric truck and took a brutal $19.5 billion write-down on EV projects. That's not a data point – it's a white flag.

Robots and Drugs: The Next Frontiers

Rattner also visited a robotics firm where plastic-toy-like devices moved fluidly across the floor, demonstrating progress in humanoid robots designed to replace specific human tasks. The scale is staggering: in 2024, China installed nearly nine times more industrial robots than the United States.

The humanoid revolution is here: Rattner toured Chinese robotics firms racing ahead in automation while America debates tariffs.

In pharmaceuticals, the reversal is just as stark. A few years ago, China was still licensing drug patents from overseas companies. Now China licenses more drugs outward than it imports, and its clinical trial volume has overtaken America's. That's a complete inversion of the innovation hierarchy in less than a decade.

Beijing's Strategic Edge

Rattner credits China's technological surge to effective government coordination. When Beijing recognized it was falling behind in AI, it declared catch-up a "national priority" and delivered – funding research, relaxing regulations, and building massive power capacity with visible results.

Even under ideal conditions, competing with China would be daunting. But the reality is far from ideal: Trump's erratic policies have placed America in an extremely disadvantageous position. The US needs to rethink industrial policy and mobilize government resources for strategically critical industries – something the current administration shows no sign of doing coherently.

Fix America First

The first step? Reverse Trump's cuts on scientific research and other critical areas. Rattner admits he's skeptical about democratic governments picking corporate winners, but insists "we no longer have the luxury of confining Washington to the sidelines". America should focus on future industries – not Trump's nostalgic fixation on traditional metal-processing manufacturing.

On critical minerals, America's constraint isn't scarcity – it's a byzantine approval process for mining and processing facilities that strangles domestic production. Regulatory gridlock, not geology, is the bottleneck.

Rattner's bottom line is unambiguous: Trump – or anyone else – must face one fact: imposing tariffs or chasing trade deals simply cannot defeat China. To surpass China, it has to “begin at home”, by “getting our own economic house in order". He urges Trump to scrap the suite of ineffective policies he's rolling out.

 

This isn't the first time Rattner has sounded this alarm. Last December, he told Bloomberg the same thing: to beat China, you can't rely on export controls or trade measures to "slow China's development pace". "America can neither defeat China on the battlefield nor at the negotiating table," he emphasized, insisting America's only option is to do its own work better.

Deep Throat

** The blog article is the sole responsibility of the author and does not represent the position of our company. **

UK Prime Minister Keir Starmer departs for China on January 28 in what amounts to a diplomatic rejection of Washington's either-or foreign policy. Speaking to Bloomberg on January 26, Starmer made his position clear: Britain will stop “sticking your head in the sand and ignoring China” and pursue economic ties with the world's second-largest economy.

Starmer gave Bloomberg his clearest signal yet that Britain won't subordinate economic interests to US demands.

This marks the first visit by a British Prime Minister to China in nearly eight years—a gap Starmer himself calls a "dereliction of duty."

The Bloomberg interview, conducted at 10 Downing Street, lays bare the economic rationale driving this reset. Starmer's four-day trip fulfills a Labour campaign promise to repair UK-China relations, which deteriorated over Hong Kong issues, the COVID-19 pandemic, and espionage allegations. Recent months have seen deliberate moves to ease tensions—most notably, last week's approval for China to build a new embassy in London: widely seen as strategic groundwork for this visit.

Rejecting the Binary Trap

When pressed on whether strengthening China ties would come "at the expense" of Britain's closest allies, Starmer pushed back hard. He cited the US-UK trade talks as precedent: "I remember when I was doing the US trade deal, and everybody put to me that I'd have to make a choice between the US and Europe, and I said, 'I'm not making that choice.'" The message to Washington is unmistakable—Britain will chart its own course, and Trump's tariff threats won't dictate British foreign policy.

Starmer explicitly rejected the approach taken by Canadian Prime Minister Mark Carney, who recently called for smaller nations to band together against what he termed a "new era of great power rivalry." His calculation is simple: developing UK-China relations won't anger Trump or damage transatlantic ties.

Starmer insists that strengthening UK-China ties won't damage relations with Washington.

Timing Is Everything

The context matters. Carney's Davos Forum remarks urging smaller countries to unite in the face of great power competition put a spotlight on Starmer's China visit.

Starmer maintained that UK-US relations remain "very close" and will continue across business, security, and defense sectors. More importantly, he insisted that "Britain can have the best of both worlds" between China and the US—a tightrope walk that few Western leaders have managed successfully in recent years.

Follow the Money

Keir Starmer is finally saying the quiet part out loud to Bloomberg: the UK needs China. While he pays lip service to maintaining "very close" ties with Washington on security and defense, the real headline is his admission that Britain can—and must—pursue the "best of both worlds." The reality is that London is realizing it can no longer afford to blindly follow US foreign policy cliffs.

Make no mistake: the era of delusional decoupling is over. Starmer was blunt, stating that if you "bury your head in the sand and ignore China"—the world's second-largest economy teeming with opportunity—it would not be "sensible". He made it clear that this trip is unapologetically about economic reality, while national security is not compromised. "Quite the opposite," indeed—engagement is the only path to security.

The scale of this mission speaks for itself. Starmer’s hitting Beijing and Shanghai with a delegation of approximately 60 leaders from business, universities, and cultural institutions.

Washington's Chaos Forces London's Hand

The backdrop to this pivot is undeniable. The US-Europe transatlantic partnership is currently in shambles over the Greenland dispute, with Trump threatening tariffs against eight European nations. Add to that his inflammatory remarks about NATO “staying a little back, a little off the frontlines" and it’s no wonder London is looking for stability elsewhere.

Yet, Starmer insists on maintaining a "mature" facade with Trump. He claims the UK approaches these headaches with "British pragmatism, common sense, and adherence to our own principles." But the real issue is evident in his admission that the UK must forge tighter military bonds with Europe. He’s already signaling a capitulation to demands for higher defense spending, noting, "I do think that Europe needs to be stronger in its own defense and security, I think we need to step up to that challenge."

Starmer mentioned a weekend call with Trump regarding Ukraine, warning that both Kyiv and Europe are desperate for American backing. He framed it as, "Ukraine is a very good example of why we need to maintain a very close UK-US relationship".

The roster confirms the priority here is hard cash, not ideology. Reuters reported on the 23rd that heavyweights like Chancellor Rachel Reeves and Business Secretary Peter Kyle are towing a massive group of executives to the Chinese Mainland. The Financial Times adds that this commercial armada spans critical sectors including life sciences, aerospace, and financial services.

Sources close to the PM are cutting through the noise, labeling the refusal of previous Prime Ministers to visit China a sheer "dereliction of duty." The logic is inescapable: they hope to finally strengthen cooperation with the economic superpower. As one source put it, turning a blind eye and pretending China doesn't matter is reckless and will only make Britain poorer and less secure.

Starmer himself emphasized that it is time to reject the "overly simplistic binary choices" of the past—refusing to be boxed into either the so-called "Golden Era" or the disastrous "Ice Age."

When pressed on Starmer’s visit at a January 26 press conference, Foreign Ministry spokesperson Guo Jiakun highlighted the turbulent international landscape. He noted that as permanent members of the UN Security Council, China and the UK serve global interests by strengthening cooperation. Beijing, as always, remains open to pragmatic engagement and will release further details in due course.