As a tumultuous 2025 draws to a close, a quiet but seismic shift in the global order has become undeniable: the United States, after a years-long struggle, is losing the technology war with China. This is not the result of a single policy failure or presidential misstep, but the culmination of a half-century divergence in economic philosophy. While the West pursued a neoliberal doctrine that hollowed out its industrial base, China cultivated a potent form of state-directed capitalism designed for long-term strategic competition. The consequences of these divergent paths are now coming to a head, marking a pivotal moment that may well signal the end of the American century.

A Tipping Point in Code and Silicon

The evidence of this strategic defeat is no longer subtle. In the critical arenas of artificial intelligence and semiconductors, the technological gap is closing at an alarming rate. While the U.S. still holds an edge in frontier AI research, China’s progress is staggering. Chinese generative AI models now lag behind their U.S. competitors by only a matter of months, a gap that continues to shrink. More tellingly, Chinese AI firms are making significant inroads in global markets, particularly with cost-conscious startups, by offering powerful open-language models at a fraction of the cost of their American rivals.

In the semiconductor industry—the bedrock of all modern technology—U.S. export controls have failed to halt China’s advance. Instead, they have spurred a determined and massively funded push for self-sufficiency. Beijing has poured billions into its domestic chip industry, achieving significant breakthroughs in equipment manufacturing and mature-node technologies. This has dramatically expanded its manufacturing capabilities, with domestic production capacity growing far faster than global demand in recent years. Projections now suggest China’s self-sufficiency rate in semiconductor equipment could reach 50% by 2025, a stunning acceleration that is reshaping global supply chains.

The Divergent Paths: NeoliberalismSupply Side Economics Full Description:Supply-Side Economics posits that production (supply) is the key to economic prosperity. Proponents argue that by reducing the “burden” of taxes on the wealthy and removing regulatory barriers for corporations, investment will increase, creating jobs and expanding the economy. Key Policies: Tax Cuts: Specifically for high-income earners and corporations, under the premise that this releases capital for investment. Deregulation: Removing environmental, labor, and safety protections to lower the cost of doing business. Critical Perspective:Historical analysis suggests that supply-side policies rarely lead to the promised broad-based prosperity. Instead, they often result in massive budget deficits (starving the state of revenue) and a dramatic concentration of wealth at the top. Critics argue the “trickle-down” effect is a myth used to justify the upward redistribution of wealth. vs. State Capitalism

To understand how the West lost its commanding lead, one must look beyond the tech sector to the foundational economic ideologies that have governed East and West for the past fifty years.

Since the 1970s, the Western world has been in the grip of neoliberalism, an ideology advocating for deregulationDeregulation Full Description:The systematic removal or simplification of government rules and regulations that constrain business activity. Framed as “cutting red tape” to unleash innovation, it involves stripping away protections for workers, consumers, and the environment. Deregulation is a primary tool of neoliberal policy. It targets everything from financial oversight (allowing banks to take bigger risks) to safety standards and environmental laws. The argument is that regulations increase costs and stifle competition. Critical Perspective:History has shown that deregulation often leads to corporate excess, monopoly power, and systemic instability. The removal of financial guardrails directly contributed to major economic collapses. Furthermore, it represents a transfer of power from the democratic state (which creates regulations) to private corporations (who are freed from accountability).
Read more, privatizationPrivatization Full Description:The transfer of ownership, property, or business from the government to the private sector. It involves selling off public assets—such as water, rail, energy, and housing—turning shared public goods into commodities for profit. Privatization is based on the neoliberal assumption that the private sector is inherently more efficient than the public sector. Governments sell off state-owned enterprises to private investors, often at discounted rates, arguing that the profit motive will drive better service and lower costs. Critical Perspective:Critics view privatization as the “enclosure of the commons.” It frequently leads to higher prices for essential services, as private companies prioritize shareholder returns over public access. It also hollows out the state, stripping it of its capacity to act and leaving citizens at the mercy of private monopolies for their basic needs (like water or electricity).
Read more, and the reduction of state influence in the economy. This doctrine, which became the unquestioned common sense for parties of both the left and right, unleashed market forces that prioritized short-term financial returns over long-term industrial health. The results have been stark: decades of de-industrialization, wage stagnation for the majority of the population, and a dramatic rise in inequality. After the 2008 financial crisis, this system began to cannibalize itself through austerity, gutting public services and even reversing life expectancy gains in some nations. This model created a powerful capitalist class whose interests often ran counter to national strategic goals, while the state was progressively weakened and stripped of its ability to direct the economy.

China, in contrast, pursued what could be termed “neoliberalism with Chinese characteristics.” It embraced markets and globalization to fuel its growth but never relinquished the state’s authority. The crucial difference lies in power: in China, the Communist Party rules over the capitalists, not the other way around. The state retains the power to direct private capital toward national missions. When the U.S. initiated its tech war, the Chinese state could effectively order its tech giants to pivot from consumer apps to the national priority of chip fabrication. While Western firms answer to shareholder value, Chinese firms ultimately answer to the strategic objectives of the state. This state-led model, though sometimes inefficient and prone to distortions, has proven remarkably effective at achieving long-term industrial and technological goals.

An Unwinnable Contest and an Uncertain Future

Viewed through this lens, the tech war was a contest the West was structurally unprepared to win. An economically strip-mined society, whose political system is beholden to private capital, cannot effectively compete with a state-civilization capable of mobilizing its entire economy toward strategic ends. The Trump administration’s trade war was not the cause of this defeat, but merely a frantic and ultimately failed recognition of a process that had been underway for decades.

The dawning of this new reality heralds a period of profound uncertainty and a potential crisis of identity for the West. The future may see a significantly diminished America, forced to navigate a world where it no longer sets the terms. This shift could trigger several cascading consequences:

• A Fracturing of the American Empire: While some allies will remain, others may hedge their bets in a world with multiple power centers. The European Union, for instance, may increasingly pursue strategic autonomy, forging closer economic ties with the East.
• The Erosion of the Monroe Doctrine: China’s growing technological and economic influence in South America could challenge two centuries of U.S. hegemony in its own hemisphere.
• The De-Dollarization of the Global Economy: Though the dollar’s dominance remains for now, the momentum behind the de-dollarization trend appears irreversible. Nations like Russia, China, and the BRICS bloc are actively seeking alternatives, increasing trade in local currencies, and buying gold to reduce their reliance on the dollar. A significant decline in the dollar’s status as the world’s reserve currency could trigger a catastrophic economic crisis for a de-industrialized U.S. that relies on its currency’s primacy to fund its deficits.

The end of the tech war is not just about microchips and algorithms; it is about the end of a unipolar world and the ideological framework that sustained it. The West now faces a daunting challenge: confronting the consequences of its own economic choices and navigating a new global landscape where it is no longer the undisputed leader.