Trump’s Megabill Is Ceding the Future to China

Several electric vehicle manufacturers, including Li Auto and Beijing Automotive Industry Holding Co., are headquartered in Beijing. More than half of EVs sold globally come from China. (Na Bian/Bloomberg)

About the author: William Pesek is a longtime Asia opinion writer, based in Tokyo. He is a former columnist for Barron’s and Bloomberg and the author of Japanization: What the World Can Learn from Japan’s Lost Decades*.* He is the head of Yardeni Research’s Tokyo Bureau.

President Donald Trump may be thrilled his budget-busting megabill triumphed last week. But Chinese leader Xi Jinping is even happier.

If Xi’s Communist Party were to devise a blueprint to hobble America’s potential over the next decade, it could hardly do much better than the legislative blitzkrieg Trump signed into law on July 4.

Of course, Trump’s “Big, Beautiful” bill was designed to appease his base. It extends the 2017 tax cuts he championed in his first term and temporarily exempts taxes on tips and overtime pay, provisions he campaigned on. It cuts social programs, in accordance with long-held conservative orthodoxy.

And yet with this bill, the GOP, perhaps unwittingly, is ceding swaths of the country’s future to China.

They just rubber-stamped “the most expensive reconciliation bill in history,” according to the nonpartisan Committee for a Responsible Federal Budget. It will add $4.1 trillion to the national debt through 2034. If the bill’s many temporary provisions are made permanent, that figure balloons to $5.5 trillion.

The U.S. Treasury Department will be relying on the kindness of China and the rest of Asia, where the largest holders of U.S. public debt reside, to pay for this spending spree. If Beijing adds to its $757 billion of U.S. Treasuries, Xi’s party will have even greater leverage over Trump’s economy.

They probably can’t believe their luck. China’s designs on owning the future of renewable energy, electric vehicles, and sustainable infrastructure are getting a political subsidy from the nation it aims to displace: The budget bill champions coal and kills off clean energy tax credits, effectively taking the U.S. out of the competition for solar, wind, and geothermal leadership

In doing so, the U.S. has forfeited a “major growth market” and “embraced a loser’s energy,” notes Asia expert Jeff Kingston. “Beijing will be popping the champagne corks.”

So will BYD. Things have never looked better for the Chinese electric-vehicle sensation. In 2024, it zoomed past Tesla in revenue. Now, thanks to the GOP, China’s EV start-ups and battery makers have an even more open road to global dominance.

Meanwhile, Trump is whittling down the government workforce and raising tariffs, which risks tipping the world’s biggest economy into contraction. Though the labor market is still stable, the headwinds from high import taxes— set to be implemented next month—are a clear and present danger to the jobs outlook. At the same time, Trump’s megabill marks the biggest rollback of the social safety net in generations. Millions are projected to lose healthcare. That could amplify the ripple effects of the expected negative gross domestic product growth from Trump’s tariff policies, reducing the health and size of the middle class.

And the fiscal fallout from the tax cuts could cost the dollar dearly. Robin Brooks, an economist at the Brookings Institution, points out that some recent “counterintuitive price action” for the dollar and U.S. yields bears watching.

The dollar has fallen against other G-10 currencies this year. That is “especially worrying,” Brooks says, because the fall is happening alongside a rise in U.S. interest rates. He parallels this to a similar phenomena in 2022 under then-U.K. Prime Minister Liz Truss. That produced a debt crisis.

Just as the GOP potentially pushes the U.S. into a debt crisis of its own, Trump is “China-fying” the Federal Reserve. Trump’s on-again-off-again flirtation with firing Fed Governor Jerome Powell continues to unnerve global markets and undermine trust in U.S. Treasuries.

Investors are free to dismiss the president’s musings about making himself Fed leader as just Trump being Trump. It is clear, though, that Trump’s desired endgame is to have his own version of the People’s Bank of China Gov. Pan Gongsheng setting interest rates—the lower the better.

If imitation really is the highest form of flattery, Xi’s inner circle is surely blushing at other China-style policy pivots Trump has made since Jan. 20.

Trump’s desire to silence news organizations that dare to report facts are from the Politburo playbook. From threatened to sue the New York Times and CNN and browbeat ABC and CBS into submission via settlements. Trump risks putting the U.S. on a slippery slope toward media blackouts of all criticism.

Then there is Trump’s penchant for central planning. The ways in which he demands fealty from Corporate America seem more the stuff of Xi and Vladimir Putin. Case in point: Trump’s approach to granting carve-outs for tariffs to America’s largest tech firms.

Or consider Trump approving U.S. Steel’s alleged purchase of Nippon Steel, which required the Japanese company to grant the U.S. a “golden share.” Nippon Steel can’t change the company name, shutter facilities, decide where materials are sourced from or cut jobs without Trump’s OK.

Xi’s party has spent decades positioning China to challenge American dominance—and perhaps even surpass it. With its budget bill and its leader set on China-fying the U.S., the GOP risks making that easier than ever for Beijing.

The America First sloganeering written all over Trump’s big bill masks the fact that Xi’s China feels like it just scored a historic win.

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