How Washington is Ceding its Geoeconomic Edge to China

The United States is falling behind in its geoeconomic competition with China—especially in the developing world. While Beijing invests vast sums in much-needed infrastructure and other projects through its Belt and Road Initiative, Global Development Initiative, and the China-created multilateral Asian Infrastructure Investment Bank, Washington lobs accusations of debt-trap diplomacy and seeks to dissuade countries from accepting Chinese investment—but without providing a sufficient alternative.

In the last few years, however, Washington has taken some promising steps to level the playing field, including launching the Partnership for Global Infrastructure and Investment (PGI) in 2022, which aims to mobilize $600 billion among G7 countries over five years in global infrastructure investments. The Biden administration pledged a U.S. target of $200 billion to the effort.

But the second Trump administration has thrown that progress into question. Alongside an unproductive focus on tariffs as a punitive measure, President Trump’s attempts to cut foreign aid and cast such measures as a waste of American resources is distracting political attention away from investments as a way to win goodwill, promote global development and U.S. foreign policy interests—and counter China. The Trump administration’s rhetoric and policies are making the United States resemble the China it likes to criticize: transactional, unilateral, and demanding.

A strong U.S. commitment to development financing, infrastructure, and investment in the Global South would give Washington greater political legitimacy, limit Beijing’s ability to undermine U.S. interests, and benefit recipient countries by ensuring a race to the top in the provision of high-quality investments.

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The Trump administration favors transactional approaches to development finance over longer-term mutually beneficial cooperation. This is a reversal from how Washington has typically billed its approach to development investment and financing as a welcome alternative to Beijing, emphasizing the transparency and sustainability of U.S. financing instruments versus what are viewed as corrupt and coercive Chinese methods.

Key examples of this difference are the PGI economic corridors launched by the United States and partners to spur commercial partnerships and local economic development. A flagship project is the Lobito Corridor, which provides finance to build a rail line linking Angola’s Lobito Port to the Democratic Republic of the Congo (DRC) and landlocked Zambia. Perhaps the largest symbol of U.S. efforts to counter Chinese presence in Africa (Beijing has been involved in the nearby TAZARA railway project and is dominant in cobalt mining in the DRC), the Lobito Corridor aims to boost trade and facilitate export access to global markets for these mineral-rich economies. But, unlike China, the U.S.-led project also includes additional investments that are meant to spur longer-term economic growth for local communities across multiple sectors, for example in solar power, data centers, telecommunications and Internet connectivity, agribusiness, and critical minerals mining and processing

The new administration has so far expressed tacit support for PGI—in April the acting U.S. ambassador to Angola led a publicity tour of the Lobito Corridor to signal continued U.S. commitment. However, the Trump administration appears to be focused solely on minerals access, while other projects such as food security, telecoms, and broader economic development have already been or are likely to be scaled back or eliminated. The Elon Musk-led Department of Government Efficiency (DOGE) effort to slash government spending is certainly affecting U.S. resources for foreign investment and aid, particularly given the recent axing of the U.S. Agency for International Development, which has played an important role in providing technical assistance and implementing feasibility assessments for PGI-related projects.

A similar situation is unfolding with the U.S. International Development Financing Corporation (DFC), which was formed in part to counter Chinese influence. DFC was created during the first Trump administration with a mandate to mobilize private capital to address development challenges while advancing U.S. foreign policy priorities, and it continues to have bipartisan support for its reauthorization, and for increasing its lending cap and improving institutional functions.

But Trump advisors have floated ideas of turning it into a sovereign wealth fund, while an executive order in March 2025 called on the DFC to fund domestic investments into minerals production, which goes against its mission of overseas investment (previous authorization by Trump for DFC to make domestic investments during the COVID-19 pandemic ended in scandal). Trump’s nominee for DFC head has stated that he wants “pro-market” investments that bring returns for Americans, and expressed interest in infrastructure and mining projects in Greenland, which the president wants to control.

The Trump administration also prefers unilateral over multilateral approaches. And yet a defining feature of PGI and other projects is partnerships. The Lobito Corridor, for instance, involves not only the United States but also the European Union, recipient country governments, and multilateral financing institutions such as the Africa Finance Corporation and the African Development Bank. Trump’s proclivity to attack traditional allies and partners will not inspire coordination over complex large-scale investment projects that have often included multiple governments and private investors. While Trump may be persuaded on the need to compete with China, his administration is likely to adopt a more transactional and bilateral basis for investment decisions and critical minerals access, as seen in the recent minerals deal with Ukraine.

Finally, Trump is de-prioritizing sustainable development and the renewable energy sector. Given the Trump administration’s strong skepticism toward climate change, Biden-era commitments to clean energy financing could be quashed. Under Trump, Washington has already withdrawn from multilateral initiatives such as the Just Energy Transition Partnership, designed to help developing countries transition away from fossil fuel use. The Minerals Security Partnership, launched to spur the development of diverse critical minerals supply chains, has been reframed to emphasize mining over clean energy and sustainability goals. This would only give more legitimacy to China’s claims of global leadership in clean energy and its touting of green BRI projects. It would also be a missed opportunity for the United States, still seen by many developing country leaders as the preferred partner over China in sustainable sectors.

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These trends are not encouraging for the United States’ ability to marshal geoeconomic influence. As Washington pursues more blatantly self-interested policies, Beijing is rebranding itself as a high-quality investor willing to work with multilaterally, due in no small part to external pressures and pushback in many developing countries against economically infeasible and politically problematic Chinese-financed projects. As developing countries become increasingly skeptical of extractive investments that bring little benefit to local populations, a positive-sum approach that spurs broader economic development is likely to be more appealing. Concrete U.S. commitment to development financing as well as infrastructure and investment projects, which are still very much in demand in the Global South, would give Washington greater political legitimacy, limit Beijing’s ability to undermine U.S. interests, and benefit recipient countries by ensuring a race to the top in the provision of high-quality investments.

Audrye Wong is an assistant professor of political science and international relations at the University of Southern California, and Jeane Kirkpatrick Fellow at the American Enterprise Institute.

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