The U.S.-Chinese trade war of 2025 lasted barely a month, but the strategic deficit it exposed had been festering for decades. On April 2, his so-called Liberation Day, U.S. President Donald Trump imposed sweeping tariffs on dozens of countries, including China, which suddenly faced average levies of nearly 75 percent. But while most governments struggled to respond, Chinese leader Xi Jinping was poised to retaliate. Two days later, Beijing not only announced comparable duties but also raised the stakes by introducing export controls on seven rare-earth elements that power everything from smartphones to fighter jets. Because China commands 90 percent of rare-earth processing worldwide, the move threatened severe disruptions to American manufacturing and the U.S. defense industrial base.

Shaken by China’s leverage, the Trump administration quickly folded, realizing that soaring U.S. tariffs were no match for Beijing’s stranglehold on critical minerals. A temporary truce in May gave way to summer negotiations, which Beijing punctuated by further tightening its licensing rules in October, a clear signal that future controls could bite even harder. Weeks later, when the two leaders met in South Korea, Trump walked back his tariffs and shelved U.S. port fees targeting China’s dominance in global shipbuilding, among other concessions. In return, Beijing offered a one-year reprieve from its rare-earth restrictions, which Washington knew could be reversed at any time.

This looming threat recast U.S. policy toward China. In the ensuing months, the United States softened its approach on issues important to Beijing, dialing back support for Taiwan and loosening controls on advanced technology. Reflecting an effort to avoid re-escalation, the Trump administration outlined its pursuit of “strategic stability” in the 2026 National Defense Strategy. China, meanwhile, had more than survived the confrontation. Beijing had reset the terms of the relationship in its favor, narrowing Washington’s strategic options right through Trump’s May 2026 visit to China.

It did not have to be this way. China’s success in cornering the Trump administration was not simply a result of the United States’ failure to secure its supply chains. It reflected a profound failure of U.S. strategy. As the scholar Thomas Schelling famously observed, “The power to hurt is bargaining power.” Whereas Beijing had spent years identifying where it could squeeze Washington hardest and then built the capabilities to do so, the United States was not ready to exploit the anxieties that keep China’s leaders up at night—even though there is no shortage of them.

At home, China’s economy faces stiff headwinds: weak domestic demand, mounting local debt, a depressed property market, high youth unemployment, and an aging and shrinking workforce. Its military, the People’s Liberation Army (PLA), is corrupt and untested, and the regime has grown increasingly reliant on repression, digital surveillance, and propaganda to maintain social control. Abroad, the country is locked in sovereignty disputes with most of its neighbors, touts North Korea as its only formal treaty ally, and remains heavily dependent on the United States and its partners for energy, capital, industrial inputs, advanced technology, export markets, and the dollar itself.

This litany of liabilities foretells neither China’s imminent collapse nor its inevitable decline. It does, however, suggest that Beijing is susceptible to strategic pressure. Yet the United States has too often failed to press on China’s pain points or even develop options for doing so. When Xi called Trump’s bluff, he laid bare this foundational gap in Washington’s China strategy: the absence of competitive leverage over its foremost rival.

This strategic deficit did not emerge overnight. U.S. policymakers in both parties have long avoided exploiting or deepening China’s weaknesses, viewing such efforts as unnecessary or counterproductive, if not beyond the bounds of fair play. When Washington did consider serious economic or diplomatic pressure on China, it was often in service of other foreign policy priorities, such as enforcing sanctions on Iran or North Korea, rather than as part of a deliberate strategy to compete with Beijing. Recent moves against China’s telecommunications and semiconductor sectors marked a welcome shift but remained too episodic and detached from a broader approach. Instead, successive U.S. administrations have largely focused on a combination of amassing military power, investing at home, building coalitions of like-minded allies, and respecting guardrails to prevent inadvertent escalation with China.

This approach may have served Washington well in an era of unrivaled American power, but it is insufficient to contend with a competitor that has demonstrated the will—and increasingly the capability—to challenge vital U.S. interests. Consider how few consequences Beijing has faced for its massive theft of U.S. intellectual property, its incessant provocations in the Taiwan Strait and South China Sea, its relentless cyber-intrusions into U.S. critical infrastructure, its economic coercion of American allies, and, more recently, its weaponization of critical minerals. In each instance, Washington’s response has been modest, predictable, and ineffective at steering Beijing away from an aggressive and threatening posture.

China, by contrast, has been a clever practitioner of finding the gaps and seams in American power. Through industrial policy, anticompetitive trade practices, and forced technology transfers, Beijing has exploited the U.S. market economy to accelerate its own development at the United States’ expense. The PLA has pursued cyber-capabilities and space technologies, backed by an arsenal of missiles, with the express intent of challenging and eroding the U.S. military’s ability to deploy and sustain forces in the Western Pacific. And it has leveraged the open Internet in the United States to target civilian infrastructure and siphon vast quantities of trade secrets and private data, including the 2015 hacking of the Office of Personnel Management that compromised the personal information of 22 million federal employees.

Xi’s decision to weaponize critical minerals should clarify the way forward for Washington. The United States must surely do more to secure supply chains and reduce its reliance on China, as most policymakers and experts now agree. But many of those efforts will take years at best. Meanwhile, Beijing continues to sharpen its tools of coercion and is likely to find new targets to exploit faster than Washington can shield them. This means that a purely defensive approach—one that focuses only on “de-risking,” self-sufficiency, and resilience—will not be enough. The United States must also be ready to go on offense.

THE ART OF THE SQUEEZE

Leveraging an adversary’s vulnerabilities may sound aggressive or destabilizing, but the goal is not regime change or all-out confrontation. It is to protect and advance U.S. national interests through calibrated and proportional means. To avoid a scattershot approach, which would risk escalation and dilute the compounding power of coordinated pressure, the United States must follow a coherent and disciplined framework.

To start, policymakers should ask whether exploiting a particular weakness will afford the United States a substantial and sustained competitive edge. The vulnerabilities worth pursuing should be important to China’s leaders and difficult for them to resolve. Beijing’s own policy priorities offer such a road map. Xi has spent his tenure trying to shore up China’s fragilities: corruption, domestic instability, excessive reliance on exports, and dependence on other countries for food, energy, and technology. Although he has made some headway, his continued spending of financial and political capital on these problems underscores how exposed China remains. It also illuminates where American pressure is most likely to pay off. By accentuating existing insecurities, the United States can compel Beijing to do more of what it is already doing, but at greater expense and with lesser effect, ideally forcing it to divert resources away from other, more threatening initiatives.

The United States should also zero in on vulnerabilities that are susceptible to outside pressure. Not every Chinese weakness can be exploited. Demographic decline, for instance, may sap China’s strength, but there is little the United States can do to accelerate or shape its trajectory. Instead, Washington should target vulnerabilities that its policy instruments can demonstrably affect. This requires assessing whether unilateral action will suffice and, if not, whether the United States can build a coalition to prevent, for example, “sanctions spoilers” from undermining U.S. pressure campaigns.

Finally, before putting a vulnerability in their sights, American policymakers should be confident that the expected returns outweigh the costs and risks. If they get this calculus wrong, it could harden Beijing’s resistance,........

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