Extreme Weather Will Upend U.S.

Climate change looms in the background of the contest between China and the United States. It is the underappreciated factor that could determine who wins the race to develop frontier technologies, gain economic advantages, and secure influence across the world. And as global temperatures continue to climb, its role will become harder to ignore—because the two countries, the world’s largest emitters of carbon dioxide, both face great risks from climate-related extreme weather. Extreme weather threatens the physical foundations of Chinese and U.S. economic and technological power. It can degrade critical systems such as those that convey electricity and water. It can obstruct the transportation networks and break the supply chains on which industry relies. It can destroy housing and businesses, pushing communities into economic downturns as people leave and stores shutter. It can constrict insurance markets as the affordability and availability of property coverage decline. And it can dampen labor productivity and force governments to divert resources to manage public health crises. According to the 2026 Climate Risk Index produced by the nonprofit Germanwatch, China and the United States ranked among the top 20 countries that suffered the largest economic and human tolls from extreme weather between 1995 and 2024. These weather events will only intensify as the planet warms. XDI, a firm that performs climate-risk analysis, has projected that by 2050, the world’s 100 subnational jurisdictions most exposed to climate disruption will include 29 Chinese provinces and 18 U.S. states. How well China and the United States prepare for extreme weather will shape their future economic prospects. The harms of climate-related disasters can be mitigated with managed retreat of people and infrastructure from severely threatened areas, ambitious engineering projects to protect financial centers, robust early warning systems, and other forms of adaptation. According to a World Resources Institute study, every dollar invested in climate adaptation and resilience can generate more than $10.50 in benefits over ten years. Today, China is investing far more than the United States in these kinds of measures. If the United States does not do more to protect the sources of its national power from the extreme weather to come, its economic competitiveness could suffer ever more severe blows. A STEP AHEAD Beijing has been integrating adaptation into its policy planning for more than a decade, releasing its first National Strategy for Climate Adaptation in 2013. Since then, China has gradually built up programs for climate monitoring and early warning, disaster prevention, natural ecosystem resilience, and climate-proofing infrastructure, agriculture, urban development, and public health systems. These efforts involve regional planning—nearly all provinces in China have climate adaptation plans—and at least 17 central government departments and agencies, with goals set through 2035. In 2024 alone, the national government issued around 100 policy documents related to climate adaptation. At the 2025 UN Climate Summit, Chinese leader Xi Jinping committed to making China “a climate-adaptive society” by 2035. China’s 15th Five-Year Plan, adopted earlier this year, similarly calls for a stronger national climate adaptation framework, better risk assessment in vulnerable sectors and regions, and greater capacity to respond to extreme weather. Beijing is backing up its pledges with significant investment. To reduce flood risk in urban areas, for example, China has carried out 90 “sponge city” pilot projects and demonstrations since 2015, using permeable pavement, wetlands, rain gardens, green roofs, and upgraded drainage systems to more effectively absorb rainfall. Between 2021 and 2025, the initiative received about $8.5 billion in central government funding and mobilized roughly $23 billion in total investment—around the same amount of money as the insurance payouts after the 2025 Los Angeles wildfires. China has also launched 67 pilot projects that explore additional solutions, including resilient power grids that better coordinate energy supply, demand, and storage; coastal wetlands that act as natural buffers against storms, flooding, and sea-level rise; “cool city” design to reduce heat exposure; and farming practices adapted to heat, drought, and shifting rainfall. The country’s investment in disaster prevention and emergency management increased by an average annual rate of almost nine percent between 2019 and 2023. The harms of climate-related disasters can be mitigated. Much of China’s spending is geared toward preparing the country’s infrastructure to withstand extreme weather. Over the next five years, State Grid, China’s dominant power-grid company, plans to invest roughly $570 billion on upgrades to enable the national grid to better manage electricity-supply fluctuations, to expand local backup power through microgrids, and to help maintain reliable service during extreme weather disruptions. Spending on reservoirs, irrigation systems, water diversion, and other infrastructure for conserving water and controlling floods reached a record of nearly $190 billion in 2024. In 2002, China embarked on the largest water transfer scheme in history, the South-to-North Water Diversion Project, which sends water from the country’s wet south to the water-scarce north—home to the major economic hubs of Beijing and Tianjin—as part of a broader effort to strengthen water-supply security and build resilience to drought. China has also built one of the world’s most extensive meteorological observation systems, which, with the assistance of artificial intelligence, can provide forecasts to support early warning systems. And China is harnessing the power of forests, wetlands, rivers, grasslands, and coastal ecosystems to reduce floods, limit heat, and absorb climate shocks. For example, the government has planted vast tracts of forest to combat erosion and desertification. One project dating all the way back to 1978 involves planting a 2,000-mile chain of trees around the Taklamakan desert in the country’s northwest. China is also turning to financial tools to help manage climate risk. These include climate insurance to help households, farmers, and businesses recover from climate-related losses; broader catastrophe insurance to cover losses from large disasters such as floods and typhoons; and expanded use of reinsurance, which allows insurance companies to share those risks with other insurers so that they can keep paying claims after major events. Last year, China issued guidelines for corporations to report how climate risks affect their business. And as of 2026, China’s stock exchanges require certain large listed companies to disclose how they identify and manage climate-related risks. Such disclosures are meant to help investors, lenders, and regulators see which companies are vulnerable to climate shocks and whether they are prepared to respond. China has also pioneered the development of a new indicator called Gross Ecosystem Product, which measures the economic value that the natural environment provides to people. This indicator enables decision-makers to incorporate the economic value of natural features, including those that can reduce climate risks, into cost-benefit analyses for both public and private investments. It has been adopted by hundreds of local governments across China. China’s approach to adaptation is far from perfect. Many programs remain underfunded, and implementation has been uneven. After a 2021 flood killed 380 people in Zhengzhou, a city that participated in the sponge city pilot program, for example, an official investigation found that only a third of the program’s investment had gone toward measures directly relevant to managing urban flooding, while more than half went to landscaping. Top-down mandates are not always followed at the local level, prompting the central government to reinforce accountability by tying local officials’ performance evaluations to environmental outcomes. But in general, Chinese leaders take climate risk and adaptation seriously. For centuries, political legitimacy in China has been tied to the state’s ability to manage floods, droughts, and other environmental shocks—a legacy that reinforces Beijing’s push to strengthen disaster preparedness. A COUNTRY WITHOUT A PLAN The picture in the United States, meanwhile, looks much different. Some divergence between Chinese and U.S. adaptation efforts is to be expected; the two countries have vastly different governance systems and face different climate risks. But the main distinction is that, in contrast to Beijing, Washington has no consistent national strategy. Even when the U.S. government has recognized climate risks, it has not followed up with sustained policy planning. The U.S. Government Accountability Office has been warning the federal government about the negative financial consequences of extreme weather since 2013. The Biden administration released a national adaptation framework in 2023 that identified “opportunities for action” but offered few details beyond that. In 2024, the GAO again called on Congress to develop a national climate resilience strategy, improve the collection and distribution of information about climate risk, and invest more in resilience measures. Ultimately, the Biden administration secured neither sufficient funding nor the institutional buy-in needed to sustain any progress it made into the next administration. As of now, there does not appear to be any national adaptation effort underway. Instead, the Trump administration is rejecting the very idea of climate risk. It has reduced public access to climate information, issued directives that eliminated climate-related work within the federal government, adopted a National Security Strategy that dismisses climate change, dismantled federal efforts to conduct a congressionally mandated national climate assessment, ended international aid programs that helped other countries cope with climate change, abandoned climate disclosure rules that would have bound publicly traded companies, and diminished U.S. meteorological capabilities, including data collection from satellites and weather balloons. Earlier this month, the White House issued a “resilience strategy” for addressing risks to national security, the economy, public health and safety, and infrastructure, but the document omitted any mention of climate change. Some U.S. cities and states have made progress building climate resilience on their own. New York City, for example, has elevated portions of lower Manhattan to address sea-level rise and funded projects to reduce flooding by absorbing, transferring, and storing precipitation. Phoenix created a government office to spearhead planning for extreme heat. It now has over 140 miles of “cool pavement,” streets treated with reflective asphalt coating that absorbs less heat. Maryland has made it possible for counties and municipalities to work together to issue bonds and collect fees to fund resilience projects across jurisdictional boundaries. But more than half the states do not have their own adaptation plans. And even if they did, individual, localized responses to extreme weather are not enough to address a problem that does not respect borders. At a minimum, the federal government needs to provide high-quality meteorological monitoring and forecasting as a public good and support climate science research to better understand the changes that lie ahead. But it should do much more, starting with a system to facilitate major national adaptation investments and regulation to ensure that owners and operators of critical infrastructure plan for mounting climate risk. ADAPT OR PAY In the economic and technological competition between China and the United States, the country that is better able to adapt to climate change will gain substantial advantages over its rival. Part of the reason is simply that extreme weather and ecological disruptions are expensive. In 2024, China recorded about $55 billion in direct economic losses from water-related and meteorological disasters. In the same year, the United States suffered 27 individual weather and climate disasters that each caused more than $1 billion in damage and together cost $182.7 billion. The prospect of those losses can make certain regions unattractive to investors, difficult to insure, and ultimately less competitive. In China, where low-elevation coastal cities account for roughly one-third of national GDP, sea-level rise, storm surge, and coastal flooding threaten major engines of growth. The World Bank has estimated that climate change could cost the country between 0.5 and 2.3 percent of its GDP as early as 2030. If China can effectively implement its adaptation strategies, however, it has a chance of mitigating some of those costs. The United States has acquired fewer tools for managing a similar problem. A 2022 U.S. Office of Management and Budget report found that climate change could drive up federal spending on programs such as crop insurance, wildfire suppression, and coastal disaster response by $25 to $128 billion annually by the late twenty-first century—an estimate that, as the report notes, is likely far lower than the total cost the government will incur. Wildfires are already forcing households, developers, and insurers to price in disaster risks; in California, the country’s largest state economy, major insurers have paused or restricted new homeowners’ policies after the Palisades and Eaton fires in 2025 produced a $23.7 billion insurance bill. Nor is the exposure limited to wildfire: the Congressional Budget Office has estimated that two feet of sea-level rise by 2100—the low end of a likely scenario—could put $250 billion in the U.S. residential property market at risk from recurring flooding, and four feet of sea-level rise could put $930 billion at risk. The United States, however, has made only slight progress in reducing the risk of future damage and is not making the type of sustained investments in large-scale projects—such as a unified plan for coastal flood protections, a nationwide climate-resilient electric grid, or interstate water transfer systems—that could better protect its economy and people from climate-driven harm. China’s approach to adaptation is far from perfect. China’s and the United States’ abilities to adapt to climate change will have significant consequences for a key driver of future economic growth: artificial intelligence. The data centers that power AI require enormous amounts of electricity. In the United States, data centers account for about four percent of total electricity use today, and this number could exceed more than ten percent within the next several years. But the U.S. electric grid is aging, and much of it was built in the mid-twentieth century, long before planners began factoring in extreme weather caused by climate change. According to the nonprofit organization Climate Central, weather-related events caused about 80 percent of major reported U.S. outages between 2000 and 2023, and the frequency of weather-related outages has increased substantially over that period. The average duration of an outage for a U.S. electricity customer in 2024 was around 11 hours—roughly 50 percent longer than in China. China’s electricity demand for data centers is also growing rapidly and is projected to nearly triple by 2030. But because China’s overall power system is so large, data centers accounted for only one to two percent of total electricity demand in 2024. China may therefore be better able to absorb rising data-center demand in the near term, even if demand grows quickly. The country has already built climate resilience measures into grid planning and investment, too, including through a 2024–27 project to strengthen disaster protections, upgrade local grids, and raise design standards in areas exposed to floods, ice storms, typhoons, and other extreme-weather risks. The reliability of electric grids is not the only climate-related factor that will affect the AI race. Data centers themselves are also exposed to coastal inundation, flooding, tropical cyclone winds, and wildfires. XDI found that more than 200 of the 3,382 U.S. data centers it analyzed—particularly those in Florida, New Jersey, and Oregon—could face significant risk of damage from climate change–related hazards by midcentury. China’s data centers could be even more exposed: nearly one-quarter of the data centers analyzed by XDI could face high risk by 2050, and the danger is concentrated in critical economic centers, such as Jiangsu Province and Shanghai. Both countries have the means to address the challenge. The United States is equipped with a mature data center industry, abundant private capital, and diversified financing tools for pricing, transferring, and insuring climate risk. China’s strengths lie in state-led planning and coordination, supported by large-scale infrastructure investment and capable grids and power companies. But it is not enough to hold these advantages; both countries must put in the effort to protect their AI infrastructure. Climate adaptation itself also presents an economic opportunity—one that China is better positioned to take advantage of than the United States. China is already dominant in clean energy industries, which now account for roughly one-third of its economic growth. The country that can produce adaptation technologies at scale stands to gain not only new manufacturing and job opportunities but also trade advantages as the rest of the world seeks out climate-resilient infrastructure. There will be growing global demand for grid equipment designed to withstand extreme weather, distributed energy and storage systems, water-saving irrigation equipment and climate-smart agricultural technologies, and climate-resilient construction materials, as well as data services such as AI-enabled early warning systems, meteorological and satellite-data services, and climate analytics platforms. If the United States continues to underinvest in adaptation-related technologies, knowledge, and expertise, it risks ceding ground in yet another consequential industry. As climate change becomes more and more disruptive, a United States that cannot protect its infrastructure and other economic assets will suffer immensely. It will face skyrocketing disaster response bills, become less attractive to investors, fall behind in emerging industries, and ultimately become less competitive. Although China has a lot left to do to make its own economy more climate resilient—and both countries still need to be doing much more to cut their greenhouse gas emissions and address the root cause of climate risk—it is far ahead of the United States in building the state capacity and crafting the long-term plans necessary to prepare for the extreme weather to come. It’s time for Washington to make investing in adaptation a priority. If it fails to act, the U.S. economy will suffer the consequences. You are reading a free article Subscribe to Foreign Affairs to get unlimited access. - Paywall-free reading of new articles and over a century of archives - Six issues a year in print and online, plus audio articles - Unlock access to the Foreign Affairs app for reading on the go Already a subscriber? Sign In