Episode 51: How Much Stronger Is America’s Economic Hand Than China’s? (Ben Vagle & Stephen Brooks)

We finally put numbers to a debate everyone keeps hand‑waving. Ben Vagle (Treasury policy analyst on U.S.–China economic strategy) and Dartmouth government professor Stephen Brooks joined us to preview their book Command of Commerce—and the headline is blunt: the United States’ real economic leverage over China is bigger than the cable-news “neck and neck” script. We’ve been letting Beijing (and our own politics) narrate China as 12 feet tall while we ignore where the true choke points sit.

Their core claim: looking only at GDP or raw manufacturing tonnage is antique thinking. Power now runs through firms, profit pools, and the ally web behind complex tech. U.S. and allied companies dominate the profit-rich layers—advanced semiconductors, lithography machinery, high-end components—while a large slice of what “China produces” is actually foreign-firm activity inside Chinese borders. Different picture than the slogan.

Ben and Stephen walk through why profits (not just revenue or output volume) matter: persistent profits signal barriers to entry—places you can’t just copy/paste a domestic substitute after a cutoff. That’s why denying access to advanced chips and the ASML ecosystem bites harder than slapping another broad tariff list on consumer junk. Tariffs feel muscular; precision control of irreplaceable inputs is muscular.

They also warn we’re squandering coalition equity. The leverage only explodes when we act with allies. Go unilateral too early—broad tariffs on friends while lecturing about China—and you burn trust that underwrites coordinated denial. You can only “cut China off” once. Spend that round preemptively and you remove the deterrent still restraining Beijing’s worst impulses.

We got into overcapacity: China’s domestic model still leans on exports and investment because household consumption never properly rose. Real estate binge implodes → they crank subsidized EVs, solar, low-cost platforms (Temu, Shein) back into global markets. That dumps deflationary pressure on our mid‑tier industries and those of Europe and Asia—exactly when a united front would have traction, if we weren’t busy tariff‑sniping allies.

On tariffs the guests were surgical: as a calibrated, narrowly targeted tool paired with a stated objective—fine. As a whipsaw headline (“on/off/double/pause”) it becomes a volatility signal that pushes supply chains to re‑route away from us permanently. If you actually wanted reshoring you’d offer predictable policy + talent + infrastructure, not roulette wheels.

Automation reality check: even if some manufacturing migrates back, the headcount fantasy doesn’t. Modern plants are robot clusters with a thin layer of high-skill technicians, not 1980s payrolls. So if the political sell is “millions of legacy shop-floor jobs,” we are setting up another disillusion cycle instead of investing in the people piece (training, mobility, R&D) that would let communities plug into the profitable tiers we still own.

Big takeaways: (1) America’s leverage sits in profit-dense, ally‑entwined tech ecosystems—not brute tonnage. (2) Coalition discipline multiplies that leverage; unilateral chest‑thumping dilutes it. (3) China’s “size” story masks dependence on foreign-controlled choke points and a structurally weak consumption base. (4) Tariff theatrics aren’t a strategy; predictable, targeted economic statecraft is. (5) Wasting a one‑time cutoff deterrent early shrinks future options.

Book drops mid‑April (commandofcommerce.com). We’ll get them back after the searchlights move on and Washington is still recycling the wrong stats. Subscribe, send this to the friend who only quotes GDP charts, and meet us Wednesday at 4 PM EST. We’ll keep separating leverage from loudness.