Both President Donald Trump and Chinese President Xi Jinping declared victory after their recent meeting in South Korea, which resulted in a one year truce in the economic war between the two superpowers. Yet the thaw hides a harsh reality: the United States and China did not return to the status quo ante but entered a new phase in which Beijing has gained the upper hand. To rectify this situation, Washington needs to understand what went wrong—and use the truce, however long it lasts, to strengthen its hand when the next escalation inevitably occurs.

It didn’t have to be this way. The pivotal moment came when Trump briefly imposed 145% tariffs on China in April. These soaring duties were designed to halt trade, force manufacturers to leave China, and coerce Xi into submission. They b

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