An Allied Economic Bloc Is the Answer to China

Rahm Emanuel puts the operational prescription before the diagnosis: aggregate allies into an economic bloc, use its combined scale to withstand Chinese pressure, and use the resulting time to rebuild American research, industrial, and defense capacity. The prospective group includes Australia, Japan, South Korea, Taiwan, the European Union, partners in Latin America, and major Gulf states.

That approach is meant to replace a bilateral contest in which China can exploit each country’s dependence separately. Emanuel’s account of Beijing’s strategy is that it was never the reciprocal “win-win” arrangement China presented to trading partners. China seeks to make other countries dependent on Chinese markets, industrial capacity, and supply chains while remaining able to replace any supplier that challenges it. The soybean trade illustrates the asymmetry in his telling: if China cuts purchases from the United States, it can turn to Brazil and Argentina; an individual exporter with China as a major buyer has fewer alternatives.

Emanuel describes Xi Jinping’s largest export not as automobiles or electronics but as “the domestic economic dysfunction of China.” Weak consumer demand, a deflating real-estate sector, and industrial overcapacity have, he argues, led China to push output into foreign markets. He cites pressure on a Chilean steel plant, Indonesian garment manufacturing, and Brazilian industrial production. China’s auto exports have risen even as industry profits have fallen, he notes, which he treats as evidence that export volume is being used to absorb domestic imbalance.

The answer is to “isolate the isolator.” A bloc would do more than coordinate restrictions. It would bring enough market scale, research capability, industrial capacity, and political alignment to prevent China from dealing with partners one by one. It would also give the United States room to restore capacities it has allowed to weaken.

Emanuel’s complaint about Trump is therefore not merely about tone. He argues that the administration has weakened the coalition required to counter China: China is exporting economic dysfunction while the United States is exporting political and cultural dysfunction, escalating tensions with middle powers rather than making them partners.

His shorthand is that Trump “punches down and kisses up”—bullying countries such as Brazil and European allies while treating Xi Jinping and Vladimir Putin as peers. Emanuel sees no coherent strategy in that posture. It isolates America, leaves allies more vulnerable, and narrows Washington’s ability to organize a sustained response to China.

Europe is a necessary but weakened partner in the coalition. Emanuel agrees that immigration disorder and economic stagnation have helped drive European political backlash. But he rejects the claim that Europe’s troubles can simply be assigned to the political left. Angela Merkel, he notes, came from Germany’s Christian Democratic Union; her government admitted large numbers of Syrian refugees and shut down nuclear power after Japan’s Fukushima disaster.

His broader criticism is that Brussels tried to regulate while suffocating innovation, entrepreneurship, and competitiveness. Europe is trying to correct that, he says, and the American interest is not in a dependent Europe but in technologically capable European economies that can contribute to a larger Western alignment. Chinese pressure on German manufacturing should be an opening for coordinated action, not an occasion for the United States to exacerbate Europe’s political tensions.

The bloc Emanuel wants to build can only be credible if the United States brings productive capacity to it. That means preserving its technological advantages while rebuilding the industrial, educational, and institutional base that supports them.

He rejects a choice between technological leadership and manufacturing. American advantages still include software, venture capital, entrepreneurs, national laboratories, universities, DARPA, and the capacity to deploy technologies at scale. But those strengths do not make strategic manufacturing dispensable. The United States, he argues, allowed commercial interests—including the Business Roundtable and Chamber of Commerce—to exert too much influence over national-security policy toward China. Supply chains moved offshore, sector by sector, while the economy became more vulnerable.

The life-sciences race is his warning about how quickly relative advantage can change. After Operation Warp Speed developed highly effective U.S. vaccines quickly while China’s vaccine effort lagged, Emanuel says Xi chose to invest heavily in life sciences. Within five years, China had moved from trailing the United States to rough parity. America squandered the opportunity to turn vaccine performance into political, economic, and cultural influence in the developing world; China, in his account, learned from its failure and invested.

The U.S. response cannot be to cut the institutions that enabled its earlier advantage. Emanuel calls the National Institutes of Health, National Science Foundation, DARPA, national laboratories, and research universities American “crown jewels.” He characterizes repeated proposed cuts to NIH funding as unilateral disarmament.

His proposed funding mechanism is a 10% levy on prediction markets and online sports gambling, with the proceeds directed to NIH, NSF, and DARPA. The point is to double research investment while redirecting public priorities away from what he regards as less productive spending.

Immigration belongs inside the same capacity argument. Emanuel begins with two principles: the United States is both a nation of laws and a nation of immigrants. A durable settlement must honor both. He supports tougher border and workplace enforcement, noting his role in Clinton-era border operations in San Diego, Nogales, and El Paso. People should not be able to violate immigration law and simply receive a pass.

But enforcement alone is strategically self-defeating if the country also drives away people it has trained. Emanuel points to life-sciences leaders in China who were educated and worked in the United States before returning or being forced out. In a competition for advanced industries, he argues, the United States should be recruiting and retaining such people, not helping competitors build their talent base.

His preferred legislative vehicle is the Dignity Act, which he says has support from 23 House Republicans and 23 House Democrats. It is not the bill he would personally write, but he endorses it as a workable compromise on legal and illegal immigration. Its political purpose matters as much as its particular provisions: end the permanent rhetorical war over the border and establish a system that enforces law while attracting talent.

Emanuel does not treat Japan as the appropriate immigration model for the United States. Its island geography, more homogeneous society, and comparatively small immigrant population make the analogy weak. Canada and Denmark, he says, offer more useful examples, including variants of point-based selection.

He is equally blunt about Democrats’ mistakes. The party lost control of the border, he says, and the 2020 debate posture of offering health care to people who crossed illegally was politically and substantively foolish when American families were struggling with their own health-care costs.

Education is where Emanuel most directly connects domestic reform to national competition. College administrative bloat and tuition costs matter, he concedes, but he considers them downstream of a more serious failure: too many children never gain the basic skills needed to reach college prepared. Students begin “dropping out of college” in third grade, he tells David Friedberg, when they fail to learn to read at grade level. A country in which half of children are not reading at grade level cannot expect to outcompete China.

He grounds that judgment in his experience as mayor of Chicago. Emanuel says the city’s graduation rate rose from 56% to 83% during his administration, while elementary reading and math scores improved. He cites Stanford’s Sean Reardon as describing Chicago as the best education system among the nation’s 100 largest systems.

His agenda begins with universal full-day kindergarten and free full-day pre-K. In elementary school, he calls for accountability across parents, teachers, principals, and schools; continuous teacher training rather than one-time credentialing; and resource allocation that recognizes students in higher-poverty areas need more support.

None of this can be a short-term reform project. Emanuel points to Mississippi and Louisiana as places to study for gains in reading and math, but his central lesson is that improvement requires sustained work over decades. Louisiana is, in his account, the only state whose reading and math scores have returned to pre-COVID levels; he planned to visit to understand its approach.

High school, by contrast, needs fundamental redesign. Emanuel wants every student to graduate with college credit through dual-credit and dual-enrollment programs, ultimately aiming for universal participation. No student should receive a diploma without a letter of acceptance to college, community college, vocational training, or a branch of the armed forces.

That is not a college-only agenda. He would make community college free for students with a B average and more tightly link high schools, community colleges, and local labor demand. He cites shortages of electricians needed for data centers, broadband workers, and pipefitters and plumbers needed to build submarines. The objective is a system in which a student can become an engineer, physician, nurse, carpenter, or electrician with a clear route from school into the next stage of life.

His higher-education affordability plan sits inside that same pipeline. Universities would be permitted to enroll up to 20% foreign students, with each institution deciding how to divide the share between undergraduate and graduate programs. Those students would pay full tuition, which Emanuel says could subsidize American students while attracting people likely to remain in the United States and build companies or careers.

Students who earn 20 college credits in high school could pursue a three-year bachelor’s degree. Emanuel proposes free college for households earning below $200,000, tuition growth capped at inflation for families above that threshold, and an arrangement under which institutions could retain savings from reducing federal compliance costs.

The chart introduced in the exchange captured Friedberg’s opposing premise: hospital services, college tuition and fees, textbooks, medical-care services, childcare, food and beverages, and housing rose between 2000 and 2020, while cellphone services, software, toys, and televisions became cheaper. The on-screen chart attributed its data to the Bureau of Labor Statistics and Visual Capitalist, and credited its original design and concept to AEI Senior Fellow Emeritus Mark J. Perry.

Emanuel rejects the inference that government should simply step aside. The GI Bill, he responds, helped expand homeownership and education after World War II. Food prices are not produced by an untouched market when agricultural policy subsidizes production; energy is not unsubsidized when tax policy supports drilling. The relevant question is not whether government affects a sector, but whether public action builds capacity, checks concentrated power, or creates needless constraint.

Housing is the area where Emanuel most clearly identifies government failure. Restrictive local zoning, permitting, and building rules in cities such as San Francisco and New York have helped drive up costs, he argues. If he were again mayor of Chicago, he would compare every zoning, planning, and building rule against Dallas, Houston, and Phoenix. If officials could not justify a particular restriction, he would remove it.

He identifies first-time homeownership as the central housing failure since the 2008 financial crisis. New construction has concentrated at the high and low ends of the market, leaving the entry-level segment constrained. That is a case for targeted public-private intervention, he argues, precisely because the private market has not solved the problem for nearly two decades.

Emanuel rejects redistribution as a growth strategy and corruption as incompatible with capitalism and the rule of law. But he also rejects a deficit plan based only on cuts, particularly while wealth becomes more concentrated. The United States moved from a Clinton-era surplus to enormous deficits, he says, in part because it fought wars in Iraq and Afghanistan while enacting two tax cuts.

His five-part growth program ties fiscal discipline to national capacity:

He would cap overall federal spending growth for five years while making tougher choices inside that limit. Rather than spend $38 billion on detention centers, he proposes taking $8 billion as a starting point to modernize the country’s 1,200 community colleges. His priority is a workforce capable of filling shortages in skilled trades and technical occupations—not expanding detention capacity or offering $50,000 bonuses to ICE agents.

The revenue question remains central. Emanuel targets tax preferences that facilitate inherited wealth, particularly stepped-up basis, as evidence of a code designed to preserve accumulated assets rather than reward new investment. Fiscal pressure, he says, will force difficult choices, and those choices must involve both spending and revenue.

The One China policy and deterrence against force are distinct in Emanuel’s formulation. The former is a political position. The latter is a security commitment: neither side should be permitted to change the cross-strait status quo through kinetic force. Treating the entire policy as ambiguity, he argues, obscures that distinction.

Jason Calacanis raises the prospect of a Chinese move against Taiwan. Emanuel’s answer is that Washington must plan for three strategies rather than treating a full invasion as the only scenario.

The first is an economic quarantine meant to suffocate Taiwan without a conventional assault. The second is an invasion designed to settle the conflict in roughly 96 hours. The third is an incremental move against three small Taiwan-associated islands near the Chinese coast—territory with little inherent strategic value, but whose seizure could test whether the United States and its allies would risk escalation over limited ground.

For an invasion, the objective is to deny Beijing a quick victory. China must understand that an attempted 96-hour operation would become 96 days. That requires visible force, resources, and resilience before a crisis begins.

For a quarantine, U.S. and allied air and naval posture must demonstrate that the strategy cannot work. Emanuel links that capability to access and presence in the Philippines and Japan’s Okinawa islands. For a limited island seizure, Washington needs decisions about response and force posture in advance, because deterrence is weaker when every move appears improvised.

The Philippines is the nearer credibility test. Emanuel does not think Washington can wait for a Taiwan crisis. He says China is already testing American credibility across the Indo-Pacific while U.S. attention and resources are absorbed by conflict around the Strait of Hormuz. A White House managing a war becomes a “one-ball juggler,” he says, and China has used that distraction to intensify pressure on regional states.

The Philippines is not Taiwan, he stresses; it is a treaty ally. If the United States cannot give Manila confidence in the face of Chinese coercion, island-building, and pressure around disputed waters, then American commitments elsewhere will look less credible. The United States already has personnel and resources in the Philippines, he says, but should double them.

Japan is the “long pole” of U.S. Indo-Pacific policy: the constant partner in the Quad with India and Australia, and in U.S. trilateral arrangements with South Korea and with the Philippines. It hosts the largest U.S. military footprint in any single country, including the major presence in Okinawa. Emanuel also points to the depth of the economic relationship: Japan has been the largest direct foreign investor in the United States for five consecutive years, while the United States has been Japan’s largest direct foreign investor for the same period.

Japan’s public statement that a move on Taiwan would constitute a national-security threat has brought economic coercion, political pressure, and military intimidation from China, Emanuel says. U.S. support for the yen is welcome, but insufficient; he wants more military training and a more active response when China and Russia operate around the Senkaku Islands.

The coalition logic extends to the Middle East. Emanuel sees the UAE, Bahrain, Kuwait, Saudi Arabia, Egypt, and Jordan as potential parts of an American-led economic alignment, while Pakistan, Turkey, and Qatar are hedging. He points to the India–Middle East–Europe economic corridor as a way to draw partners closer to the United States economically and politically.

He also sees an opening to further isolate Iran. Hamas has been “degraded to defeat,” in his words; Hezbollah is cornered; the Assad government has fallen; and the Iraqi president is making what Emanuel calls “pretty good headway” against militias. A regional realignment, he argues, could improve Israeli security, restore U.S. leadership, and pull Gulf states more firmly into the economic bloc he wants to build.

Emanuel’s foreign-policy and domestic arguments both depend on workable coalitions rather than ideological sorting. That is the basis of his conflict with the Democratic Socialists of America.

He treats the DSA not as a faction within the Democratic coalition but as a distinct political project. Its priorities, strategy, and definition of the political enemy differ from his own. Emanuel’s test is practical: can a political coalition deliver policies such as a higher minimum wage, universal pre-K, children’s health coverage, immigration compromise, and an education system that prepares people for work? Turning a blue district “midnight blue,” he says, does not meet that test.

The disagreement is strategic as much as ideological. Emanuel regards Trump as an existential crisis. He says DSA-aligned activists instead regard Democratic leaders such as Barack Obama, Nancy Pelosi, and Hakeem Jeffries as the more urgent threat. He cites a Justice Democrat associated with the DSA network who, in Emanuel’s retelling of a Tom Edsall column, said the movement was not principally interested in beating Republicans. Emanuel accepts the candor but rejects the project.

His wage policy illustrates the governing distinction. He supports raising the federal minimum wage and indexing it annually, paired with a generous earned income tax credit. Ideally, he would combine the earned income tax credit and the per-child tax deduction into a single family credit. The objective is to make work pay through policies that can be enacted and administered.