To counter the economic threat from China's state-directed capitalism, the U.S. is ironically being forced to adopt similar strategies. This involves greater government intervention in capital allocation and industrial policy, representing a convergence of economic models rather than a clear victory for free-market capitalism.

China's economic ascent began when Deng Xiaoping invited American experts to teach them about capitalism. This strategy, combined with becoming the world's manufacturing hub, allowed them to learn the system, grow strong quietly, and eventually become a dominant global power.

To thrive economically, a nation should pursue two seemingly contradictory paths simultaneously. Domestically, it should deregulate to foster innovation and become an attractive place to build. Internationally, it must use interventionist policies like tariffs to protect its industries from countries that do not operate on free-market principles.

The success of tariffs hinges on the insight that China's economic model prioritizes volume and employment over per-unit profitability. This creates a vulnerability where Chinese producers are forced to absorb tariff costs to maintain output, effectively subsidizing the tariff revenue and preventing significant price increases for US consumers.

China's government subsidizes key industries like EVs and drones to achieve global dominance. To compete, the U.S. must move beyond free-market ideals and implement protectionist policies like tariffs and non-trade barriers to incentivize domestic production and mitigate strategic vulnerabilities.

China's economy presents a stark contrast: a collapsing domestic property market versus a remarkably resilient export sector. Despite tariffs, exports remain strong because China continues to improve product quality and price competitiveness, maintaining global manufacturing dominance.

China's economic model, driven by internal provincial competition, creates massive overcapacity. This is intentionally turned into an asset by dumping subsidized products (like EVs) into foreign markets below cost. The goal is to eliminate foreign competitors, create dependency, and convert domestic economic chaos into international power.

The "invisible hand" of the market has led to the hollowing out of America's industrial base. The US should learn from China's focus on production and scale, adapting tools like public investment to crowd in private capital for frontier industries, rather than fully copying China's state-directed model.

In trying to compete, the U.S. is mirroring China's protectionism and industrial policy. This is a strategic error, as the U.S. political system lacks the ability to centrally direct resources and execute long-term industrial strategy as effectively as China's state-controlled economy.