Trump Wanted To Break China—Now It's Crushing The US At Its Own Game

When President Donald Trump returned to the White House in January 2025, one of his signature ambitions remained unchanged: confronting China's global economic influence. From tariffs and trade talks to reshoring initiatives and supply chain pressure, the second term opened with renewed efforts to curb Beijing's rise—and reassert American dominance.

Since January, Trump has ramped up economic pressure on China with sweeping import tariffs. His administration has also tightened controls on exports of certain advanced technologies to the Asian nation, added additional Chinese firms to U.S. government restricted lists.

But by midyear, that narrative is facing an unexpected twist. Chinese large-cap stocks, long seen as vulnerable to Western pressure, are posting their strongest outperformance versus U.S. equities in 16 years, stamping out fears that Trump’s policies would weaken the world's second-largest economy.

And they're doing it in spectacular fashion. Through July 21, the iShares China Large-Cap ETF FXI is up 25% year-to-date, outpacing the SPDR S&P 500 ETF Trust SPY, which has gained just 8%. The last time Chinese stocks posted a greater degree of relative strength was in 2009, when they beat the S&P 500 by 18 percentage points.

Despite the rally, the FXI ETF has still 92% upside to reach its all-time high set in late 2007, suggesting that this run may still have room to go—at least technically.

China's Top 7 Stocks Just Beat The Magnificent Seven — By A Lot

While Wall Street keeps cheering on Nvidia Corp. NVDA, Microsoft Corp. MSFT and Apple Inc. AAPL, the seven largest publicly traded Chinese companies — a group that includes Xiaomi Corp. XIACY, Alibaba Group Holdings Ltd. BABA, and Tencent Holding Ltd. TCEHY — have now outperformed the U.S. Magnificent Seven by a wide margin in 2025.

Xiaomi has emerged as the breakout star, fueled by the blockbuster release of its YU7 electric SUV, which logged 289,000 orders in its first hour.

Goldman Sachs analyst Timothy Zhao said consumer demand for the YU7 "far exceeds our and market expectations," and believes it cements Xiaomi's leadership in China's premium EV market.

China's Economy Holds Up Better Than Expected

Despite Trump's tariff hikes earlier this year, China's economy is proving more resilient than many expected.

As highlighted by Goldman Sachs economist Andrew Tilton, real GDP rose 5.3% year-over-year in the first half of 2025, well ahead of forecasts. Exports grew 6.2% in the second quarter despite tariff headwinds, aided by trade rerouting and sustained global demand.

Tilton said the government still has "ample room" to hit its full-year growth target of around 5% and sees no immediate need for major stimulus.

Bottom Line: China Is Winning the 2025 Trade Shock—So Far

Despite Trump's tariff campaign, China's large-cap stocks are outperforming their U.S. counterparts by the widest margin since the post-crisis rally of 2009.

With explosive EV demand, solid GDP growth and massive valuation gaps, Chinese equities are showing unexpected strength.

And for now, investors betting against China's comeback are on the wrong side of the trade.

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