The Political Economy of U.S. Empire at a Crossroad

The end of 2025 brought with it three important strategic documents drafted by the planners of US imperialism. These are the president’s National Security Strategy (NSS) for 2025, Report No. 83 from the Council on Foreign Relations’ Task Force on Economic Security, entitled “Winning the Race for Tomorrow’s Technologies,” and the Department of Defense/War’s “Annual Report to Congress on Military and Security Developments Affecting the People’s Republic of China.”

Taken together, the three reports paint a picture in which the international position of US imperialism is shifting from undisputed dominance to being forced to fight for its place in a new world order. While the US maintains its economic and military superiority, China’s major technological advances and control of strategic sectors are rapidly closing the gaps. All the reports point to a global economic system facing stagnation and increasingly acute conflicts between the major powers.

The report by the Council on Foreign Relations (CFR), the US government’s leading think tank, acknowledges that, in all countries, “increasingly, the economy and national security have converged…”. National economies are being bolstered by state investment and “industrial policy,” primarily in the arms and defense sectors. There has also been a sharp increase in the use of export restrictions since 2018, indicating greater economic aggressiveness.

The struggle for technological hegemony and AI

These documents outline the three pillars of US imperialism’s economic policy in its desperate attempt to maintain its hegemony: the promotion of technological competition focused on AI, the tariff war, and the reindustrialization of the US. The NSS is clear: “US national power depends on a strong industrial sector capable of meeting production demands in both peacetime and wartime.” To this end, it proposes “relocating” industrial production to the “Western Hemisphere” under its control and focusing on “critical and emerging technology sectors,” “particularly in artificial intelligence, biotechnology, and quantum computing, which drive global progress.” It is important to note that these three sectors are “dual-use,” meaning they have both civilian or commercial and military applications.

The technological dispute is fundamental to the future of imperialism in general and the United States in particular. At the moment, the US economy is precariously stable because the share prices of the “magnificent seven” are on the rise, largely thanks to speculative investment in “artificial intelligence,” the construction of data centers, and mass surveillance technologies. There is still no confirmation that this technological gamble will be incorporated into the economy as a whole, which would ensure a corresponding rate of return. The gigantic flow of investment into AI has so far ensured the growth of the US stock market, with record after record. But there is a bubble around AI, even bigger than the investment bubbles of the recent past. It remains a gamble, with enormous potential and great risks. Despite the importance of these large advanced technology monopolies, the United States lags far behind in investment, and the rest of the economic sectors show low productivity. Manufacturing output in the US is declining, partly due to tariff policies.

As detailed in the CFR report, over the past ten years, “the Chinese government has spent approximately $900 billion on artificial intelligence, quantum technology, and biotechnology, more than triple what the U.S. government has spent on those technologies during the same period.”

Competition with China, once again, is also the backdrop to this technological race. US imperialism remains hegemonic in the field of semiconductors and AI, but China is responding aggressively and has surprised the world with DeepSeek. China is also well ahead of the US in electric vehicles and lithium batteries, solar panels, and unmanned aerial vehicles (drones), and invests twice as much as the US in quantum technology.

The “Big Stick” policy in Latin America and Europe, to control territories and resources, is due to China having gained a strategic advantage by inserting itself into the value chains of the technology sectors of the future. To reindustrialize and compete with China, the US must first reestablish a privileged position in the markets for strategic resources. The CFR states that “the United States depends on China for rare earths (70% in total, 99% for heavy rare earths), data center and chip components (30% of printed circuit boards [PCBs], 60% of chemicals), biotech inputs and drug development (80% of key starting materials [KSM], 33% of global active pharmaceutical ingredient [API] capacity, 80% of US biotech companies have at least one contract with China), and sole suppliers of quantum equipment (laser diodes, mirrors, amplifiers).”

The Trump administration recently authorized the export of NVIDIA chips to China, with the government’s chief AI officer, David Sacks, arguing that shipping advanced AI chips to China now discourages Chinese competitors, such as Huawei, from redoubling their efforts to catch up with the most advanced chip designs from Nvidia and AMD. This is an acknowledgment that the US blockade has only reinforced China’s race toward autonomy in semiconductor development.

The trade war between China and the US

The imposition of tariffs is already part of the recognition of the decline of the United States. Previously, imperialism was able to impose its economic hegemony through “free trade” and, from there, used the US state, as well as global institutions (UN, IMF, WTO) to impose its political, military, and financial hegemony.

Today, “free trade” favors China, which manages to sell better and cheaper products than the US in various areas, such as the production of means of production, electric cars, solar panels, and others. This is the basis of Trump’s tariff war, a defensive measure typical of the most fragile economies. The imperialist nationalism of the US government is an expression of its decline.

And that has not slowed China down. In 2025, China surpassed the $1 trillion export target in November, an increase of 21.7% over 2024. It sold less to the United States and more to the rest of the world. And the tariffs imposed by Trump caused Chinese exports to the US to decline by almost 20%. But China reduced its purchases of US soybeans and other products and continued to sell three times more to the US than it bought.

In essence, tariffs, as a defensive measure of US imperialism, failed to halt the decline of imperialism. They affect world trade, but they do not reverse the decline.

Trump’s policy of reindustrialization in the United States is a complicated gamble. It may work partially if he succeeds in repatriating semiconductor production and data centers associated with the artificial intelligence dispute. But the United States is not in a position to reverse globalization as a whole because it would have to destroy and rebuild international value chains, including the production of components that are now globalized. This would entail a general increase in costs that the large monopolies in the United States could not bear.

Overall, Trump’s economic policy does not guarantee the restoration of US hegemony. His biggest bet is on dominance in AI, the heart of the problem. We will see to what extent this bet will compensate for the likely ineffectiveness of the tariff war and the country’s reindustrialization.

In the face of the trade war, it is very important for socialists to explain to the labor movement that the trade policy of bourgeois governments is developed by capitalists for the benefit of their own class and not for workers. Whether “free trade” or protectionism, the implementation of policy is aimed at protecting and increasing the profits of the ruling class. The contradictions inherent in the capitalist system cannot be resolved either by tariffs or by threatening military maneuvers. The only solution to growing unemployment and precariousness, as well as the wave of inflation, is class struggle, with a program that raises the need for workers to take control of the economy.

Protectionist trade policies in imperialist countries such as the US go hand in hand with the rise of chauvinism and attacks on immigrants and other oppressed communities. We must explain to the unions that they should not support these policies, as they will not solve the very real economic crisis that capitalism is going through on a global scale. We must, in all our organizations, fight against the nationalist patriotism and xenophobia that trade wars instill and explain that the key is for workers and oppressed sectors to wage a relentless political struggle for independence from the capitalist class in their organizations and communities, in order to formulate a program of struggle that responds to their most immediate needs.

The military dispute and the arms race

“…the days when the United States held up the entire world order like Atlas are over.” This phrase may imply that imperialism is abandoning the struggle for world hegemony in the military arena. This is a big mistake. The real meaning is that the United States has changed the instruments of that struggle, adapting them to its own decline.

First, Trump maintains the emphasis on the dispute for military hegemony:

“We want to recruit, train, equip, and deploy the most powerful, lethal, and technologically advanced military in the world to protect our interests, deter wars, and, if necessary, win them quickly and decisively, with as few casualties among our forces as possible… We want the world’s strongest, most credible, and most modern nuclear deterrent, as well as state-of-the-art missile defenses, including a Golden Dome for the U.S. homeland, to protect the American people, U.S. assets abroad, and U.S. allies. The United States cannot allow any nation to become so dominant that it threatens our interests. We will work with our allies and partners to maintain the global and regional balance of power, in order to prevent the emergence of dominant adversaries.”

Secondly, imperialism is characterized by no longer having sufficient resources to play the role of world policeman, with military troops in the most important places on the planet.

This focus on military conflict is reflected in an increasingly exorbitant military budget, despite the country’s brutal indebtedness, with public debt exceeding GDP (between 118% and 126%) since 2020. The United States remains by far the country with the largest military budget. In 2024, under Biden, it exceeded $824 billion; in 2026, it rose to $900 billion, and Trump has proposed increasing the US military budget to $1.5 trillion for fiscal year 2027—something never seen before in history.

China ranks second, with total military spending of $246 billion in 2025, maintaining an annual growth rate of 7% over the last two decades. However, other sources, such as the Stockholm International Peace Research Institute (SIPRI), estimate that China’s actual defense spending was around $318 billion in 2024, while another study puts it at an even higher figure: $471 billion.

The United States could be at war with China by 2027. This date has always been part of US strategic military planning documents as the date by which the US could be prepared to deal with China’s arms build-up.

The US industrial war machine is operating at full capacity. US arms manufacturers have taken advantage of the war in Ukraine and military aid provisions and bills to revive their production lines, which are now bolstered by competition with China. Since the start of the war in Ukraine, the United States has already doubled its production of 155 mm artillery shells, with a target of 100,000 shells per month by 2025.

However, China’s rapid military expansion, particularly its naval power, has challenged the United States’ strategic advantage, especially in potential conflicts involving Taiwan. China is rapidly expanding its naval force and aspires to have a larger fleet than the United States. The latter cannot keep pace due to the extensive capacity of Chinese shipyards, which far exceeds that of the United States: According to the Pentagon, China plans to reach a fleet of 400 ships by 2025 and 440 by 2030, while the US Navy’s 2022 Navigation Plan is to reach 350 manned ships… by 2045!

From there, US imperialism is actively “recruiting and engaging” regional supporters to play this counterrevolutionary role. This involves a relocation of the role of Putin’s Russia, which Trump wants to displace from its bloc with China. Hence his change of position on Ukraine and the whole battle he is waging to get Europe to change its position on Russia.

In the same vein, Trump is demanding that European imperialism increase military spending (to 5% of the budget) to ease the burden of NATO on the United States.

In the Middle East, Trump is betting on the counterrevolutionary regional role of Israel and, in parallel, that of Turkiye, Egypt, and the Gulf monarchies.

And also, very importantly, the Abraham Accords, which would allow for the economic integration of Saudi Arabia and other countries in the region with Israel, in addition to those already signed, such as those with the United Arab Emirates.

This would be a barrier to the economic advancement of China, which is already the main exporter to Israel and, probably, to the main Gulf countries.

It would also strengthen a new counterrevolutionary alliance for Trump.

Pressure or sabotage on the European Union?

In this new world order, Europe has been relegated, unable to appear as an economic and political bloc in its own right or as an equal partner with the United States within NATO. This is partly due to the economic decline of the region.

According to economist Michael Roberts, “eurozone growth is expected to slow by 0.2 percentage points next year, to 1.2% in 2026.” This is well below global GDP growth, estimated at around 2.6%. European imperialism is rapidly losing the last vestiges of its formal colonial possessions, especially in Africa, leaving more territory up for grabs in the new inter-imperialist struggle.

The war in Ukraine, which began in 2022, has shown that Europe’s ability to defend itself against Russia is now much weaker than before. The US is negotiating directly with Putin over the division of Ukraine and, by allowing Putin to maintain his sphere of influence, is leaving Europe in its most vulnerable position since World War II. Today, Russia is carrying out limited military “sabotage” actions in Europe on an unprecedented scale, with little European response except for attempts by EU countries to improve their defensive posture through increased spending.

It is possible that, as socialist analyst Michael Probsting points out, Trump’s goal is to “destroy the European Union and install pro-US governments in European states,” using “right-wing chauvinist rhetoric about the ‘dangers’ of migration and the defense of ‘sovereign nations’ against ‘transnational institutions.’” It is true that if the EU collapses, nation states will have to deal with the US “individually, i.e., from a weaker negotiating position,” and although “realistically, the US cannot expect to turn all European states into vassals, it hopes to achieve this with at least several countries”—Austria, Hungary, Italy, or Poland—named in the expanded version of the NSS. Although this possibility cannot be ruled out, the future of the EU is still to be decided.

In any case, what is clear is that the US no longer counts on Europe as its main partner. The NSS and its more extensive, as yet unpublished version point to the creation or revitalization of various multilateral coordination bodies. This includes the idea of creating a “Core 5” (C5) coalition comprising the United States, China, Russia, India, and Japan. The idea of the C5 indicates that the United States no longer wants to rule the world together with the EU. The US ruling class increasingly sees the EU as an obstacle to reorganizing economic relations with Russia and China, each in its own sphere of influence.

This decline of Europe is made explicit in the National Security document, which adds a self-serving ideological veneer, that of the well-known “war of civilizations.”

“Continental Europe has been losing its share of global GDP—from 25% in 1990 to 14% today—due, in part, to national and transnational regulations that undermine creativity and industriousness. But this economic decline is overshadowed by the real and grimmer prospect of the disappearance of civilization. Among the most important problems facing Europe are the activities of the European Union and other transnational bodies that undermine political freedom and sovereignty, migration policies that are transforming the continent and creating conflicts, censorship of freedom of expression and repression of political opposition, falling birth rates, and the loss of national identity and self-confidence.”

In other words, European decline is a fact, and its origin lies in the European Union and the governments of liberal democracy, which the far right questions. US imperialism cannot act in the same way with European imperialist countries as it does with South American ones. But it explicitly seeks to break up the EU in order to negotiate country by country and openly supports European far-right movements. To this end, the fight against immigrants plays an important role, a fundamental political banner of the European far right.

The consequences for the global class struggle; polarization will increase even more

It is undeniable that a far-right government in power in the most powerful country on the planet, armed with this strategy, will have significant and brutal repercussions around the world. Economic pressure, military resources, and political and ideological influence will manifest themselves harshly throughout the world.

But those who draw unilateral conclusions about the application of this strategy are mistaken. Even with all its power, the US cannot overcome its decline with extra-economic measures such as the tariff war. Either it advances in the mastery and expansion of AI and other cutting-edge technologies, or it deepens its decline and further favors China.

The same is true of the class struggle. The enormous social and economic polarization resulting from the implementation of this strategy will also lead to increasing political polarization and a sharpening of the class struggle. The invasion of Venezuela, which may be only the first in a series, points in the same direction.

Israel’s genocidal offensive against Gaza has led to a historic increase in support for the Palestinian struggle around the world, even leading to phenomena such as the general strike in Italy for the first time.

Mobilizations are emerging around the world that are leading to popular explosions, such as those in Sri Lanka, Bangladesh, and Nepal, which point in this direction.

Even in the United States, the massive “No Kings” mobilizations against Trump, as well as his electoral defeats in New York City and other states, show that this political polarization is on the rise.

There may be further major revolutionary upsurge in Latin America, as in 2018 and 2019, which could lead to direct confrontations not only with the bourgeois governments of the region, but also with Trump.

Moreover, in several countries around the world, an effervescence is beginning to emerge at the vanguard, giving rise to the growth of space for revolutionary programs.

As Moreno said, “imperialism does not do what it wants, but what it can.” And the actions of US imperialism, guided by this strategy, may provoke new upheavals in the class struggle worldwide.