China and the US are locked in a confrontation that the whole world is watching, betting on who will crack first. The situation is simple now: Chinese factories can produce goods, while the US prints money to buy them. But the US can't buy Chinese products with its money, and Chinese products can't be exchanged for dollars.
Over the years of trade war, from tariffs to chip restrictions, it's getting more real. In 2025, Trump returns to power and immediately raises the tariff on China to 145%, and China retaliates with 125%. As a result, US soybean exports to China plummet by 97%, and sorghum exports hit zero. Illinois farmers have warehouses full of grain, selling it to Brazil at a price crash, and the government has to spend 2.8 billion in subsidies again, repeating the 2018 scenario. USDA data shows that the US trade surplus with China, which was over a trillion last year, has shrunk by 41% this year so far.
As for China, industrial profits rebounded in August, but high-end chips are still a bottleneck. Huawei has made breakthroughs, but overall production capacity lags behind. NVIDIA's AI chip sales to China have halved, and Silicon Valley companies are crying out. However, Washington is determined to decouple. Tariffs not only hurt farmers but also push up American prices. Tax Foundation calculates that each household pays an extra $1,300. This war benefits no one, and global supply chains are in chaos. IMF has cut its growth forecast to 2.8%. Do you think this counts as a win? On the surface, it's mutual confrontation, but at the core, it's a test of whose foundation is thicker and whose determination is stronger.
The move to de-dollarize has become more intense in 2025. Previously, the dollar was the dominant currency, with countries competing to buy U.S. Treasuries. But now? Saudi Arabian oil is being settled in RMB, Russian natural gas is exchanged in rubles for RMB, and Brazilian coffee is swapped in local currencies with Iran. Central banks in the Middle East and Latin America are buying gold in large quantities, and the share of dollars in their reserves has dropped below 12%. J.P. Morgan reports that de-dollarization in Asia is accelerating, with ASEAN foreign exchange deposits shifting to local currencies, fearing that they might be choked by the U.S. one day.
Global South countries have learned from past mistakes and don't want to be tied to the dollar anymore. China has promoted its cross-border payment system, which doubled its transaction volume in 2025, bypassing SWIFT. The Fed prints money and raises interest rates, accumulating debt, but there are few buyers left. CNBC data shows that the share of the dollar in reserves has dropped from 70% to 58%. This isn't anti-American; it's self-protection. Imagine this: the U.S. holds money to buy Chinese goods, but the sellers don't accept dollars anymore. How can these dollars be spent? Chinese factories keep operating, and the goods are sold in other currencies. The dollar hegemony is wobbling. Who will crack first? It might be the one addicted to printing money.
The idea of decoupling supply chains has been discussed for years, but in 2025, it's starting to take effect. U.S. company investments in China have reached record lows, with EPFR data showing that less than 2% of funds are flowing into China. Companies are moving to Mexico to build factories, with imports from China dropping by 16% and Mexico rising by 52%. However, this isn't that simple. Mexico lacks China's molds, equipment, and engineers. Vietnamese industrial parks are digging and building factories, with steel beams welded, but core parts still need to be shipped from Shenzhen.
Germany, Japan, and India have also tried to decouple. A Carnegie report states that their technology chains are too intertwined with China to pull out in the short term. CFR analysis indicates that although U.S.-China trade is large, the U.S. depends heavily on Chinese manufacturing. Electric vehicle batteries and photovoltaic components account for eight out of ten globally. BYD has entered Europe, with its Hungarian plant operating at full capacity, and Norwegian streets have queues of charging stations. Decoupling sounds satisfying, but actually doing it is like pulling a rope. If one side loosens, the other feels the pain. Companies have to spend a lot to reshape the supply chain, and consumers end up paying higher prices. In short, this isn't something that happens overnight. It all comes down to who will run out of funding first.
In 2025, China's manufacturing industry remains the top in the world, accounting for 27.7% of output, while the U.S. ranks second at 16%. UCLA reports that the U.S. GDP is 30.5 trillion, and China's is 19.2 trillion, but China's manufacturing is far ahead of the U.S. Photovoltaics and energy storage are in high demand globally, and BYD's electric vehicles have doubled their exports to Europe. Huawei's HiSilicon chips have seen a recovery in shipments. China leads the world in industrial added value, as shown by CCTV data. Despite a big economic headwind and a sluggish real estate market, factory bankruptcy risks are high, but export resilience is strong.
Industrial profits rebounded in August, driven by high-tech industries. Compared to the U.S., which suffers from severe manufacturing hollowing out, relying on services and finance, the U.S. inflation surges when tariffs are increased. NextBigFuture predicts that China's GDP growth rate in 2026 will be between 4.5% and 5%, while the U.S. will slow down. It's not just talk; China has accumulated experience in human resources and equipment, from exporting T-shirts to AI chips. Replacing China would take years. Global division of labor is reshuffling, and whoever can supply steadily will win.
Original: www.toutiao.com/article/1845054918480907/
Statement: This article represents the views of the author.