Summary of "Lawfare Daily: Steve Brooks and Ben Vagle on U.S.-China Economic Competition"

Episode Title: Lawfare Daily: Steve Brooks and Ben Vagle on U.S.-China Economic Competition
Release Date: August 13, 2025
Host: Matt Gluck, Executive Editor at Executive Functions
Guests:

• Steve Brooks, Professor of Government at Dartmouth
• Ben Vagle, Incoming J.D. Ph.D. Candidate at Stanford
  Podcast: The Lawfare Podcast by The Lawfare Institute

1. Introduction

In this episode of The Lawfare Podcast, host Matt Gluck engages in a comprehensive discussion with Steve Brooks and Ben Vagle about the intricate dynamics of U.S.-China economic competition. Centered around their new book, "Command of Commerce," the conversation delves into the relative economic strengths of the United States and China, the strategic implications of economic interdependence, and the potential tools and strategies the U.S. can employ in both peacetime and conflict scenarios.

2. Overview of "Command of Commerce": Objectives and Key Findings

Matt Gluck introduces the book, highlighting its focus on assessing the economic competition between the U.S. and China. The authors aim to challenge prevailing conventional wisdom regarding China's economic parity with the U.S. and the feasibility of the U.S. imposing an economic cutoff on China without significant self-harm.

3. Measuring Economic Power: Beyond GDP

Ben Vagle emphasizes the limitations of traditional economic metrics like Gross Domestic Product (GDP) in accurately gauging a country's true economic power, especially in a globalized production landscape.

“[Ben Vagle]... we decided to develop a new set of estimates on how to look at the power of countries relative to one another that just simply goes beyond the standard gross domestic product... our analysis shows that the U.S. really does retain a lead that is quite impressive...”
[02:37]

The authors argue that corporate profits, especially from high-technology sectors, provide a more nuanced understanding of economic influence and capacity, revealing the U.S.'s substantial lead over China.

4. The Role of High-Tech Firms in Geopolitical Power

High-technology sectors are identified as pivotal in determining geopolitical economic power. Ben Vagle presents data showing that U.S. firms dominate high-tech profits globally.

“[Ben Vagle]... 56% of high technology profits are being generated by the high technology firms of the United States.”
[08:14]

This significant lead underscores the U.S.'s advantages in sectors critical for both civilian and military applications.

5. The iPhone Example: Understanding Value-Added and Trade Deficits

Using the iPhone as a case study, Steve Brooks illustrates how traditional measures misrepresent China's economic role.

“[Steve Brooks]... in the iPhone, only 3.8% of the parts and components... come from China. It’s not a Chinese phone.”
[12:34]

He explains that while the iPhone is assembled in China and thus counted as a Chinese export, the actual value-added from Chinese firms is minimal. Most high-tech components are sourced from the U.S., South Korea, Japan, and Taiwan, highlighting the critical role of these allied nations in the supply chain.

6. Potential US Strategies: Decoupling and the Importance of Allies

Ben Vagle discusses the implications of the U.S. attempting to unilaterally cut off economic ties with China versus collaborating with allies.

“[Ben Vagle]... if the U.S. were to cut off China with its allies, then China will be hurt massively more than the United States, by our estimates, at a minimum of five times more than the United States.”
[03:53]

The conversation underscores that effective economic leverage over China necessitates a multilateral approach involving strategic allies, rather than unilateral actions that could inflict reciprocal harm.

7. China's Economic Weapons: Assessing Their Effectiveness

Steve Brooks outlines four potential economic weapons China might deploy against the U.S.:

1. Selling off U.S. Treasury Securities
2. Exploiting Foreign Direct Investment (FDI)
3. Denying Access to Raw Materials
4. Prying Away U.S. Allies

However, he argues that most of these weapons are either ineffective or have limited impact.

“[Steve Brooks]... three of the four economic weapons... are not really effective weapons for China at all. The only one which is really a useful weapon is the cutoff of raw materials.”
[31:09]

8. Short-term and Long-term Impacts of Economic Cutoffs

The hosts explore the consequences of the U.S. imposing economic sanctions or an outright cutoff of China, both in the short and long term.

Ben Vagle models scenarios where the U.S. and its allies collectively cut off China, projecting that:

“[Ben Vagle]... China could see anywhere from 25 to 50% of its GDP disrupted...”
[44:07]

In contrast, unilateral actions by the U.S. would result in relatively lesser but still significant economic losses:

“[Ben Vagle]... the US would see something along the lines of 3.5 to 4% of its GDP disrupted...”
[25:42]

In the long run, multilateral cutoffs could lead to sustained economic disadvantages for China, as foreign production decouples from its economy.

9. Conclusion: Strategic Implications for U.S.-China Relations

The episode concludes by emphasizing the necessity for the U.S. to maintain and strengthen alliances to effectively manage economic competition with China. Decoupling or imposing sanctions unilaterally not only diminishes the strategic leverage but also poses significant economic risks to the U.S. and its allies.

“[Matt Gluck]... if you care not just about short-term economic growth, but also long-term chances for peace, then you don't decouple from China.”
[50:57]

The discussion highlights that coordinated, allied efforts provide the U.S. with the necessary leverage to constrain China's economic ambitions without incurring disproportionate self-harm.

Notable Quotes

• Ben Vagle on Corporate Influence:
  “We calculated that US firms are generating currently around 38% of profits globally, whereas Chinese firms are collectively only generating around 16% of profits globally.”
  [06:20]

• Steve Brooks on High-Tech Dominance:
  “56% of profits globally are being generated by the high technology firms of the United States.”
  [08:14]

• Ben Vagle on GDP Metrics:
  “Should we even be using that form of GDP [PPP] in measuring geopolitical competition? ... in high technology industries that feed into military industries, you have to look at goods that are tradable.”
  [40:52]

• Economic Analyst on Market GDP vs. PPP:
  “If you're interested in power, as Krugman argues and shows, you must look at GDP in market terms.”
  [43:41]

Final Remarks

Matt Gluck wraps up the episode by recommending the book "Command of Commerce" to listeners interested in a deeper understanding of U.S.-China economic dynamics. He underscores the importance of strategic economic policies and alliances in navigating the complex landscape of international trade and geopolitical competition.

“[Matt Gluck]... It’s a positive story for the US and its allies in that they will eventually go back to basically the economies and growth that they had before. China will be permanently harmed to a very significant degree.”
[59:39]

Recommendation: For policymakers, scholars, and individuals keen on understanding the underpinnings of U.S.-China economic relations, "Command of Commerce" offers valuable insights into leveraging economic power strategically.