Beating China By Imitation: A Bad Trade

From Free Markets to Crony Capitalism: Trump’s China-Style Remake of America

Imagine Chinese President Xi Jinping watching U.S. economic policy today. For decades, American leaders – especially Republican presidents – championed free markets, free trade, and minimal government interference. Now, under Donald Trump’s influence, Washington is embracing tactics that look surprisingly like Beijing’s playbook. It’s an ironic reversal: the party of free enterprise is adopting “state capitalism with U.S. characteristics” – or more bluntly, crony capitalism, and Xi must be loving it.

Turning the Free-Market Tradition on Its Head

Historically, Republican presidents preached the gospel of open markets and small government. Ronald Reagan’s legacy, for instance, was built on deregulation and free trade deals. Trump has flipped that script. He’s openly pressuring companies and meddling in markets in ways that U.S. leaders once scolded other nations for doing. As one commentator noted, for most of the last several decades, U.S. leaders urged Asia to weed out corruption and cronyism, yet “now, Trump is proving America can make cronyism great again, too.” This marks a stunning shift: the United States is starting to resemble the very model of state intervention it used to oppose.

Trump defends his heavy-handed approach as “America First” economics, claiming it’s necessary to counter China’s unfair trade practices. But in fighting the “China threat,” he’s imitating some of China’s worst economic habits. The traditional free-market playbook has been tossed aside in favor of tariffs, government stakes in companies, and deal-making by fiat – tools Republicans once derided as creeping socialism or central planning. The free-market reversal is so stark that even veterans on Wall Street and in policy circles are doing double takes.

Fighting China by Becoming China?

Trump insists that strict measures are needed to compete with China's state-led economy. Yet the supposed cures often look worse than the disease. In trying to beat Beijing, Washington is adopting a Beijing-style arsenal – and then some – undermining the very free-market principles America used to stand for.

Consider the extraordinary moves emerging from Trump’s orbit. The White House demanded a “golden share” – a special, veto-wielding stake – free of charge in Nippon Steel’s recent deal to buy U.S. Steel. At the same time, Trump’s team has floated taking a 15% cut of Nvidia’s sales to China. These are not everyday free-market transactions; they “pulsate with Politburo energy,” as one analysis quipped. In plain terms, the U.S. government is muscling in on private business deals – something you’d expect in a state-run economy, not in the USA.

Then there are Trump’s erratic tariffs. Import taxes used to be carefully considered tools; now they often feel like impulse tweets. Trump hit India with a surprise 50% tariff for buying oil from Russia, even while he gave China a pass for doing the same. Such inconsistency left allies scratching their heads. Who’s next? Which product might suddenly face a punitive duty? This whack-a-mole tariff policy creates uncertainty that rattles businesses and investors. It’s ostensibly to punish “unfair” practices, but it often ends up punishing American firms and consumers with higher costs and confusion – collateral damage in a chaotic trade war.

Even U.S. allies aren’t spared from the new approach. Trump’s trade deals have taken on a “clown show” quality – more circus than strategy. For example, a recent “massive” trade deal with Japan turned out to be basically a shakedown: Tokyo was coerced into giving “the Trump gang a 15% taste of its U.S. business to avoid bigger injuries,” as the Nikkei Asia piece vividly described. In plain English, the U.S. demanded a mafia-style cut in exchange for letting Japan off the hook on harsher tariffs. Extortionate deals like this would have been unthinkable in previous administrations. Now they’re almost routine.

All these measures are justified as leveling the playing field with China. Yes, China’s government has long propped up its companies, guarded its markets, and strong-armed foreign firms – much to the frustration of U.S. leaders. But in countering Beijing, Trump is morphing Washington’s behavior to resemble Beijing’s. The U.S. is now taking stakes in companies, dictating winners and losers, and making up trade rules on the fly. It’s a remedy that may be worse than the ailment, eroding the free-market credibility that underpinned America’s economic strength.

Crony Capitalism, American-Style

What do we call this new model? It’s not classic state capitalism in the ideological sense – there’s no clear national development plan or coherent industrial strategy behind Trump’s moves. Instead, it looks a lot like crony capitalism: the government picking favorites and cutting insiders in on special deals. Trump’s economic edicts often seem driven by personal grievance or political calculation rather than any consistent policy. The result is an economy where political connections matter as much as competitive prowess.

This trend toward cronyism marks a dramatic U-turn for America. The U.S. used to urge other countries to clean up graft, increase transparency, and let markets set prices. Now foreign officials watch, gobsmacked, as Washington doles out sweetheart arrangements and threatening tariffs in the same breath. One can almost sense the schadenfreude in Beijing. Xi's government is certainly unhappy about facing new 30% U.S. tariffs, but they must be amused that “the circus atmosphere pervading Trump 2.0 means time is on China’s side.” In other words, Beijing might endure some short-term pain from Trump’s trade war, confident that the U.S. is undermining itself with policy U-turns and uncertainty.

The irony is thick. The United States, long the champion of free enterprise, is now mimicking the playbook of a communist one-party state, albeit in a haphazard, ad hoc way. Instead of demonstrating the virtues of open markets and the rule of law, America is flirting with the practices of authoritarian economics, where deals are transactional and power often trumps principle.

In the end, this isn’t a triumph of American strength – it’s a self-inflicted wound. By abandoning the free-market high ground, the U.S. risks economic inefficiency, international alienation, and a loss of moral authority. Trump's “Chinafication” of U.S. policy (as some call it) might feel like tough action, but it comes at the cost of America’s own ideals and credibility. It turns out that in the race to “beat China,” we may be losing something fundamental: the very economic ethos that made America successful in the first place.

Sources: https://asia.nikkei.com/opinion/xi-must-be-loving-how-trump-is-remaking-the-us-in-chinas-image