The Military-Industrial Battle Between the U.S. and China

Summary

WSJ What’s News: The Military-Industrial Battle Between the U.S. and China

Episode Release Date: June 1, 2025
Host: Alex Osola
Guest: John Eamont, Senior Reporter, The Wall Street Journal

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Introduction

In the June 1st episode of WSJ What’s News, host Alex Osola delves into the escalating military-industrial competition between the United States and China. The discussion centers on China's strategic investments over the past decade that have significantly bolstered its manufacturing capabilities, positioning it as a formidable rival in both economic and potential military confrontations. Osola is joined by senior Wall Street Journal reporter John Eamont, who provides in-depth analysis of the current dynamics shaping this critical geopolitical rivalry.

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China's Industrial Ascendancy

Strategic Investments and Manufacturing Dominance

China has methodically invested in key strategic industries, ranging from basic chemicals to advanced machinery, essential for both economic supremacy and wartime readiness. Over the past decade, under the leadership of Xi Jinping, China has poured substantial resources into sectors like shipbuilding, mining, and the processing of critical minerals. This push has enabled China to become the world's largest shipbuilder, outpacing South Korea and Japan, while the United States has lagged significantly behind.

John Eamont [02:16]: "They're really well equipped. It's hard to think of a country that would be better equipped."

One notable example of China's manufacturing prowess is its drone industry. Chinese drones are not only widely used but are also favored for being both effective and cost-efficient in prolonged conflicts.

John Eamont [02:30]: "These are good drones. These are cheap drones. These are exactly the drones you would want if you were having to wage a long, protracted conflict."

Additionally, China has significantly increased its naval capabilities, producing more destroyers than the United States since 2000. The ability to deploy ships with advanced weaponry, such as cruise missiles, underscores China's growing maritime strength.

John Eamont [03:10]: "One Chinese shipbuild last year produced more commercial ships by tonnage than the entire United States has made since World War II."

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Economic Contradictions Within China

Balancing Industrial Growth with Economic Challenges

Despite China's remarkable advancements in manufacturing and strategic industries, the country faces internal economic challenges that could impact its long-term sustainability and military readiness. Issues such as deflation and high youth unemployment rates present significant hurdles.

John Eamont [05:29]: "On the other hand, economic numbers aren't so good. It's wrestling with deflation, which is typically not a sign of a thriving economy. There's a lot of youth unemployment."

These economic strains suggest that while China excels in specific sectors, there may be underlying vulnerabilities that could hinder its overall economic health and, by extension, its military-industrial capabilities.

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The United States' Industrial Lag

Critical Gaps in Manufacturing and Resource Production

In stark contrast to China's industrial surge, the United States has experienced a decline in manufacturing prowess, particularly in areas vital for national defense. Key sectors where the U.S. lags include shipbuilding, rare earth magnet production, and microelectronics.

John Eamont [08:05]: "China produces something like 92% of the world's rare earth magnets today. And the United States produces a teensy, teensy bit today."

Rare earth magnets, crucial for modern military equipment and electric vehicles, exemplify the U.S.'s dependency on imports for essential materials. Additionally, the decline in domestic shipbuilding capabilities means the U.S. has fewer trained workers and less manufacturing infrastructure to rapidly scale up production in times of conflict.

John Eamont [09:36]: "The size of the population, the fact that it controls such a huge share of the world's manufacturing and has for decades. That's one answer. The second is that America has been de-industrializing manufacturing as a share of the economy has declined for decades."

These factors collectively highlight significant vulnerabilities within the U.S. defense industrial base, making it challenging to match China's output in a potential conflict scenario.

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Impact of U.S. Trade Policies

Assessing the Role of Political Decisions on Industrial Competitiveness

U.S. trade policies, particularly those implemented during President Trump's administration, have had a profound impact on the country's ability to compete industrially with China. Actions such as imposing tariffs and taxes on Chinese goods aim to reduce dependency on Chinese manufacturing and encourage domestic production.

John Eamont [10:36]: "He has a plan to levy a major tax on Chinese ships that deliver convert goods to U.S. ports. That would definitely cause a lot of disruption to the economy."

However, these policies also have mixed results. While they may reduce imports from China, they can strain alliances with other global manufacturing powerhouses like Japan and South Korea, potentially diverting trade to these nations instead of fostering a robust domestic industry.

John Eamont [10:27]: "The United States, it's really hard to imagine is ever going to be able to out-produce China. But potentially, if it has a tight web of alliances and is able to coordinate work closely with countries like Japan and European countries that do have strong manufacturing bases, you can imagine it could put up a much better fight."

These trade strategies aim to reorient the U.S. manufacturing landscape but may not be sufficient to bridge the substantial gap left by decades of industrial decline.

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Future U.S.-China Relations and Industrial Implications

Sustained Geopolitical Rivalry and Mutual Industrial Preparations

The relationship between the United States and China is poised to remain highly competitive, with both nations recognizing each other as primary geopolitical rivals. This enduring rivalry drives both countries to continuously assess and strengthen their industrial capabilities to mitigate vulnerabilities.

John Eamont [11:47]: "What's clear is both countries see the other as their main geopolitical competitor. And it's hard to imagine that changing anytime soon."

Efforts to build indigenous capacities in critical industries are expected to intensify, even if they come at higher costs, as both nations seek to ensure self-sufficiency in the face of potential trade disruptions or blockades.

Additionally, the ongoing tension surrounding Taiwan remains a focal point for monitoring the U.S.-China relationship, as any conflict in the region could have significant implications for global trade and military alliances.

Alex Osola [11:43]: "And where does the U.S. china relationship go from here?"

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Conclusion

The June 1st episode of WSJ What’s News provides a comprehensive overview of the evolving military-industrial competition between the United States and China. While China continues to expand its manufacturing capabilities and strategic industries, the United States faces significant challenges in bridging the industrial gap. U.S. trade policies under President Trump have sought to address some of these issues, but the results are mixed and may impact global alliances. As both nations prepare for sustained rivalry, the balance of industrial power remains a critical factor in their geopolitical strategies. The episode underscores the importance of manufacturing strength in modern warfare and the intricate interplay between economic policies and national security.

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Produced by Charlotte Gartenberg, Supervising Producer Michael Kosmides, and Deputy Editor Chris Sinsley. For more insights and updates, stay tuned to WSJ What’s News.

Transcript

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[Alex Osola]

Hey, what's news, listeners? It's Sunday, June 1st. I'm Alex Osola for the Wall Street Journal. This is what's NEWS Sunday, the show where we tackle the big questions about the biggest stories in the news by reaching out to our colleagues across the newsroom to help explain what's happening in our world. On today's show, over the past decade or so, China has ramped up its investment in some strategic industries. The country has come to dominate the manufacturing of products from basic chemicals to advanced machinery, most of which would be vital in wartime. Today we get into how China's economy fueled that buildup and how US Manufacturing is losing the production battle. Modern warfare is, in a sense, a contest of industrial might. After all, that's how the US won World War II by making more of everything from bullets to food, the air, its enemies. But today, the US Lacks that kind of manufacturing heft. China, on the other hand, has got it in droves. For years, China's leader, Xi Jinping, poured money into developing strategic sectors from shipbuilding to mining and processing critical minerals. Faced with a war, China would be well positioned. And with tensions rising between the US And China, the two countries output is coming into focus as a front line in any conflict. Now, that's not to say that an armed conflict between the US And China is imminent, though. People are keeping an eye on what's going on in Taiwan. But it's also relevant for each country's economy, the sectors that power them and how they're poised to compete. WSJ senior reporter John Eamont joins me now to discuss. So, John, what does China's economy mean for its ability to compete in modern warfare?

[John Eamont]

They're really well equipped. It's hard to think of a country that would be better equipped. If you think about, say, the battlefields in Russia and Ukraine, a lot of the drones that are flying and getting destroyed are Chinese drones, right? They have drone manufacturers. They're producing drones for everywhere in the world. These are good drones. These are cheap drones. These are exactly the drones you would want if you were having to wage a long, protracted conflict, which is why Both sides are buying drones from China and that's just drones. Right. But if you look at shipbuilding, China is by far the world's largest shipbuilder. It is crowded out just about everybody else. South Korea and Japan have hung, but certainly the United States hasn't. The vast majority of China's shipbuilding is civilian, Right? It's building oil tankers and cargo ships. But a ship's a ship. And if they wanted to build ships with guns, they could build lots and lots and lots of ships with guns.

[Alex Osola]

But China is already building those ships, right?

[John Eamont]

Yeah, yeah, yeah, they are building lots of ships with guns. So if you look at, for example, destroyers, which are, you know, a very useful multifunctional ship for war, China has built a lot more destroyers than the United States States since the year 2000. So these are new. One way that some scholars look at it is through something called vls, the amount of vertical launch cells that ships have. So basically, let's try to imagine how many cruise missiles could all of China's navy launch versus the United States. And if you go back 15 years ago, it was a pittance that China couldn't remotely would just get blown out of the water. And now I think they're at about half the United States and it's growing. The gap is diminishing by the day. One Chinese shipbuild last year produced more commercial ships by tonnage than the entire United States has made since World War II.

[Alex Osola]

So China is building up all these different sectors. Is the goal here to be self sufficient? Is that ever even possible?

[John Eamont]

Well, yeah, a major goal is to be self sufficient, which is what every country when it thinks about wars is thinking about. How can we make sure that even if there are blockades or there are certain countries that turn their backs on us, that we can continue to fight? China is making a lot of headway with indigenous technology, with making sure that they have all the minerals and materials they would need in their supply chain to continue to be able to produce even if they were under a lot of pressure.

[Alex Osola]

So it is possible there would certainly.

[John Eamont]

Be challenges for China. They do still import lots of semiconductors and microelectronics, and there are certain minerals that they rely on other countries for that could be useful in wartime. It wouldn't necessarily be a walk in the park, but they've made, made a lot of headway. And even if you imagine say that they were cut off from their trading partners, there's every reason to think they would be able to continue to produce military equipment at A pretty extraordinary clip.

[Alex Osola]

You know, we've been talking about just how much money China is pouring into some of these sectors and towards building them up. I'm curious whether all this investment could potentially backfire. Could that happen and what would it look like?

[John Eamont]

What's interesting when you look at China today is you see there's this immediate contradiction, right? On the one hand, it's racing far ahead of the rest of the world in a lot of key technologies for the future. Things like electronic vehicles with shipbuilding, how it's just producing so much more than everyone else. Robots, it seems to be doing very well. There are also advanced pharmaceuticals. There are a lot of things you can point your finger to and just say, wow, this is a country that's really humming. On the other, on the other hand, economic numbers aren't so good. It's wrestling with deflation, which is typically not a sign of a thriving economy. There's a lot of youth unemployment. When I speak to Chinese people, a lot of them are pretty down about the economy in a way that it wouldn't have happened 10 years ago. So how do you reconcile these two things? And one answer is that they're sort of over investing in these strategic industries where the government, because it's authoritarian, can just dedicate enormous resources to strategic industries, but at the same time they're sort of stifling consumption, in some cases even holding back other industries that might employ people in jobs they'd rather have, say the tech sector. So over investing, kind of. It depends on what your priorities are. The government is clearly trying to focus on national security and being self sufficient, but certainly there are costs to broader economic health.

[Alex Osola]

Coming up, how the US's industry stacks up to China's when it comes to products that would be vital in wartime. Stay with us.

[Lou DiLorenzo]

The board member tech relationship is about more than updates and oversight. It's about collaborating to drive business transformation. On this episode of Techfluential, Deloitte's Lou DiLorenzo talks with nationwide board members Sarah Tucker and Jim Fowler, Nationwide EVP and cto, about how this alliance can fuel strategy, unlock innovation and accelerate growth. Where technology and influence converge, new opportunities can emerge. That's techfluential, a podcast from Deloitte and custom content from WSJ.

[Alex Osola]

Welcome back. As we've been discussing, modern warfare is a contest of manufacturing strength. So what does the US's industrial capacity look like, especially compared to the powerhouse that is China? Here's senior reporter John Eamont. John, what are some of the areas where the US has lagged behind China. You already mentioned shipbuilding, but what are some of the others?

[John Eamont]

Minerals and materials are another thing. So a common example is the rare earth magnet. This is something that was invented by the United States. These magnets are made up of something called rare earths, which are from a group of minerals that are difficult to mine efficiently and properly process efficiently. And they make these magnets that are extremely powerful. And those are very important for motors in vehicles. And the United States hardly produces them and has hardly produced them for years. And China produces something like 92% of the world's rare earth magnets today. And the United States produces a teensy, teensy bit today. So this is a major vulnerability, for example, for the United States. And there are all sorts of little thingamabobs like that that are actually very important for running a military machine that, that the United States has really lagged in. It relies on imports for many different types of microelectronics. So that's at a very basic level. And then as you continue building up and you look at something like ships, I mean, the United States hardly produces commercial ships anymore. So that just means you don't have the same efficiencies in the scale of these Chinese naval yards. It means you have very few workers who are actually trained in how to make ships. Which means that if you ever needed to ramp up shipbuilding capacity, you'd really struggle to do so. So there are a lot of potential weaknesses in the United States defense industrial base.

[Alex Osola]

I'm sure each sector has its own dynamics. But just broadly, why is the US Lagging so far behind?

[John Eamont]

One thing is because China is this unprecedented manufacturing power. If we compare the United States to almost any other country, and we imagined some type of conflict scenario, we might think the United States would actually be able to output produce them similar to how it did outproduce Germany or Japan in World War II. It's just China is a different beast entirely. The size of the population, the fact that it controls such a huge share of the world's manufacturing and has for decades. That's one answer. The second is that America has been de industrializing manufacturing as a share of the economy has declined for decades. But the United States economy has moved in different directions, Right? In a world of free trade, the United States has had comparative advantages elsewhere, and the economy has grown in other directions. You can debate whether the pluses ever outweigh the but certainly if you look at it from the perspective of a potential conflict, that's a real problem.

[Alex Osola]

I'm curious what role President Trump's trade policies play in bringing the US Into a better military position compared to China.

[John Eamont]

From one hand, you can certainly see that this is alienating allies. The United States, it's really hard to imagine is ever going to be able to out produce China. But potentially, if it has a tight web of alliances and is able to coordinate work closely with countries like Japan and European countries that do have strong manufacturing bases, you can imagine it could put up a much better fight. To the extent that it's alienating these countries, you could see how that could certainly put the United States in a worse position. You could certainly take the other side of that too, and say that this is making American allies realize that they've got to demonstrate that they have things to offer that they can't just free ride. So that's one way to look at it. Are certain of his policies, right? Like he has a plan to levy a major tax on Chinese ships that deliver convert goods to U.S. ports. That would definitely cause a lot of disruption to the economy. Like they could diminish interest in buying Chinese ships. That could lead to more orders not really coming to the United States just from that policy loan, but potentially going to places like Japan and South Korea. But that wouldn't automatically mean rebuilding the U.S. shipbuilding industry. That's tougher.

[Alex Osola]

And where does the U.S. china relationship go from here?

[John Eamont]

What's clear is both countries see the other as their main geopolitical competitor. And it's hard to imagine that changing anytime soon. And that just almost certainly means there's going to be a lot of thought in both countries about their vulnerabilities and which of their industries are vulnerable to the other side decides to stop trading a particular product. And so therefore there'll be a lot of thought into how can we build up indigenous capacity in this, even if it costs more. There's definitely going to be a lot of wariness for the foreseeable future between the United States and China, which obviously they continue to have a huge trading relationship. So the world's gonna be an interesting place for a while, unfortunately.

[Alex Osola]

John Eamont is a senior reporter based in Singapore. Thanks, John.

[John Eamont]

Thanks so much, Alex.

[Alex Osola]

And that's it for what's new Sunday for June 1st. Today's show was produced by Charlotte Gartenberg with supervising producer Michael Kosmides and deputy editor Chris Sinsley. I'm Alex Osola and we'll be back tomorrow morning with a brand new show. Until then, thanks for listening.

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