The Real Question: Can China Actually Overtake the US Amid Trade Wars and Economic Fragmentation?

The billion-dollar question haunting global markets isn’t whether Washington and Beijing will ink a trade deal—it’s whether any agreement can reverse the tectonic shifts reshaping the world economy. Charlene Barshefsky, who orchestrated China’s WTO entry two decades ago, delivered a sobering verdict at Shanghai’s Bund Summit: even a US-China trade deal will merely “set a tactical floor for the moment,” doing nothing to alter the strategic directions both nations are pursuing.

The Illusion of a Quick Fix

When U.S. Treasury officials met Chinese counterparts in Kuala Lumpur last weekend, both sides spun the talks as “very constructive.” Don’t be fooled. Behind the diplomatic pleasantries lies a desperate scramble to prevent a repeat of 2024’s tariff apocalypse, where duties exceeded 100% on certain goods. The urgency is real: Trump-Xi talks loom next week, making a rapid breakthrough seem essential. Yet the foundation remains fragile.

The 90-day ceasefire brokered in Geneva—which slashed U.S. goods tariffs to 55% and Chinese exports to 30%—has been extended twice but expires November 10. That window is slamming shut.

Why Trade Wars Are About Supply Chain Dominance Now

Here’s what changed the game: In late September, Washington blacklisted a massive batch of Chinese firms, instantly severing U.S. exports to thousands of companies. China’s October retaliation—tightening rare earth export controls—revealed the true nature of this conflict. This isn’t about tariffs anymore. It’s about controlling critical supply chains.

Beijing’s rare earth restrictions directly target foreign military systems. Washington’s expected counterstrike? Sanctions on software-driven exports including laptops, smartphones, and jet engines. The message is unmistakable: both sides are preparing for long-term strategic decoupling, not a handshake resolution.

The Elephant in the Room: Economic Bifurcation

Barshefsky’s most provocative insight: the unified global trading system is dead. She forecasts three competing economic blocs emerging—the U.S. alliance, a China-led coalition (including the Global South, Russia, potentially the Middle East), and non-aligned economies like India. Against this backdrop, the question of whether China can overtake the US transforms from an economic riddle into a geopolitical inevitability in specific regions and sectors.

At the Bund Summit, this split was on full display. Yu Yongding, former advisor to China’s central bank, directly challenged Western narratives: the U.S. must “take responsibility” for failing to distribute globalization’s gains domestically instead of scapegoating China. He doubled down on rare earth restrictions as a justified response to U.S. sanctions, though acknowledging technical fixes could minimize European collateral damage.

The Phase One Ghost Haunting Negotiations

Washington just opened a new tariff probe into China’s alleged failure to meet Phase One obligations from Trump’s first term. This move signals the administration isn’t interested in “resets”—it’s interested in accountability. Each negotiation round exposes deeper mistrust, not narrowing positions.

The fragmentation Barshefsky warned about won’t be reversed by any temporary trade agreement. The structural realignment is underway, making short-term deals little more than speed bumps on a longer journey toward a fundamentally reshaped global economy.