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

** 博客文章文責自負,不代表本公司立場 **

The future belongs to artificial general intelligence (AGI). China and the United States are pursuing different strategies in the contest for global leadership.

But one US national security think tank wants to take the rivalry to an extreme. The Center for a New American Security (CNAS) has gone so far as to suggest that Washington consider extreme measures to stop China from achieving AGI first.

CNAS released “Superpowers and AGI” report late last month.

Jacob Stokes, one of the report's authors and a former White House official, called on the US to prepare itself. He listed possible extreme measures, from diplomacy and espionage to cyberattacks and coercive steps. Among them: military strikes on Chinese data centers.

Stokes, one of the authors of the report urged extreme steps, even strikes on Chinese data centers.

CNAS is headquartered in Washington and was founded in 2007. It has long advised the US government on defense, Indo-Pacific and China strategy. Its lean is hawkish.

Late last month, CNAS released a report titled “Superpowers and AGI”. The document reeks of gunpowder. It argues that the race for AGI, and the technology's potential emergence, could profoundly affect US-China competition. It could also heighten the risk of military conflict or catastrophe on multiple fronts.

The Containment Checklist

To that end, the report urges US policymakers to act on several fronts. First, ensure that American resources and technology do not aid China's AI development. Second, establish AI-focused diplomatic channels with allies and with China, so that the potential emergence of AGI is placed on the agenda. Third, develop a technically sophisticated method to track the inputs into AGI and the key performance thresholds of frontier AI systems.

The list goes on. Washington should conduct scenario exercises testing when and how the US should intervene to halt China's AGI development. It should prepare to reverse-engineer or steal the technology should China obtain AGI first. And it should limit and contain the reach of authoritarian digital infrastructure.

The most extreme proposal of all is military strikes. The South China Morning Post reported on 4 September that Stokes, deputy director of CNAS's Indo-Pacific Security Program, addressed an online event on Thursday.

His message was blunt. The US Department of Defense, the National Security Agency and other agencies should begin assessing what intelligence would be needed to justify such operations. That would pave the way for the "hard action" to follow.

The Cold War Playbook

Stokes served as a national security staffer under former US president Barack Obama. In the report he unabashedly lays out a menu of what he calls "diplomatic, espionage, cyber and kinetic measures." Among them are military strikes on the data centers that train and run China's AGI systems. He even touts preventive strikes before China develops AGI at all.

Stokes goes so far as to compare the undertaking to the way "in a past era, policymakers would learn about nuclear weapons." His declared method is to "work backwards from the science to the policy implications."

Citing assessments by research outfit Epoch AI, the report notes that the US currently leads China in advanced AI models by only "months." But it warns that China could pull off an "unexpected technological breakthrough" in fields such as robotics and "embodied AI."

Citing research institute Epoch AI data, the report sees China pulling off surprise breakthroughs.

Notably, Stokes also concedes a gap on the American side. The US government and its intelligence agencies have "not been organised for espionage to gather technological secrets for decades."

"The Height of Recklessness"

Stokes' extreme remarks have drawn questioning within the United States itself. William Hartung, a senior arms and defense budget expert at the Washington-based non-profit Project On Government Oversight (POGO), publicly slammed the report as "the height of recklessness."

Hartung warned that any strike on Chinese data centers would "risk starting a shooting war between two nuclear-armed powers". Such a war could bring tragic consequences for all concerned.

China has consistently maintained that AI should be people-centered and that intelligence should serve the good. Military applications must remain under human control. Beijing opposes turning technological issues into bloc confrontation or weaponry.

Make no mistake: technological competition is no casus belli. When individual American politicians and think-tank figures reach for threats of "military strikes" and "espionage" at every turn, they gravely violate the basic norms of international relations. They also expose a dangerous bid to politicize and militarize technology.