Trump's strategic course change: Washington has conceded defeat over China

In May of this year, the President of China Xi Jinping received the US President Donald Trump for a state visit in Beijing. The last state visit by a US President to China was nine years prior at that time. During this visit, the two leaders agreed to build a "constructive relationship with strategic stability." In September, President Xi Jinping successfully concluded his state visit to the United States. In doing so, the two leaders further developed the new direction of China-US relations in substance: a "constructive relationship with strategic stability based on respect, fairness, and reciprocity." Although many analysts in Washington consider this new direction to be essentially an empty relaxation formula, China and the United States have for the first time in more than a decade agreed on a common understanding of the fundamental direction of their bilateral relations that is acceptable to both sides. Third Attempt, Last Chance: What Germany Must Know About China Europe and China: Sunzi's Warning About an Economic War Over the years, China and the United States have proposed different approaches to defining their bilateral relations. In 2012, China proposed building novel relations between great powers characterized by "no conflicts, no confrontation, mutual respect, and win-win cooperation." However, there was no clear response from the US side. From 2017, the United States began establishing "strategic competition" as the overarching framework for its China policy. China, in contrast, always maintained the view that this term could not adequately describe all facets of China-US relations and should not serve as the sole guiding principle for shaping these relations. The formation of the new direction in 2026 means that both countries are now accepting the realities of their bilateral relations, which they had previously either not wanted to accept or had accepted but did not want to openly acknowledge. From Commitment to Will to Win After the end of the Cold War, the question of dealing with China came to the center of foreign policy debates in the United States. Under the Clinton administration, the US began pursuing a policy toward China referred to as an engagement. Their basic assumption was that economic relations with China would promote its integration into the international order led by the United States and ultimately bring about fundamental changes in its internal system and foreign policy behavior. In the new century, the governments of George W. Bush and Barack Obama pursued different strategies in dealing with China, but did not entirely deviate from the basic direction of the engagement policy. Only in 2015 did a broad debate about China policy emerge in the US, both in science and among foreign policy strategists. Most American scientists held the view that the engagement policy had failed. The exchange with China had not led to the desired results. Neither China's political system nor its foreign policy behavior had fundamentally changed. Furthermore, China's potential power rapidly increased, the leadership position of the Communist Party of China became further solidified, and China's foreign policy became more self-assured and assertive. The conclusion of the debate was therefore that the United States must abandon the engagement policy and develop a new paradigm for its China policy. President Xi Jinping of China (l.) and US President Donald Trump at an official welcome ceremony in the Great Hall of the People in Beijing © Kyodo News/dpa Shortly after taking office in 2017, President Trump successfully completed a state visit to China. However, the National Security Strategy of the United States published by the White House subsequently classified China as a "strategic competitor" and a "revisionist state." When Washington initiated the trade war against China in 2018, China-US relations rapidly deteriorated. From 2020, American China policy began to shift from strategic competition to strategic confrontation under the influence of the COVID-19 pandemic and even took on increasingly extreme aspects. US President Joe Biden, who took office in 2021, continued the fundamental direction of strategic competition with China and further formulated the goal of out-competing China, meaning ultimately winning the competition against China. To this end, the Biden administration increased investments in technologically advanced industrial sectors domestically, strengthened relations with American allies, and tightened export control policies against China based on the principle of "small circle, high fence." However, the Russian-Ukrainian conflict that broke out in 2022 brought the American strategy of competition with China to a halt. The fact that an unmanned Chinese aircraft accidentally entered US airspace in early 2023 also contributed to ongoing tensions in bilateral relations. Overall, strategic competition with China during Biden's four-year term developed into a foreign policy consensus between the two American parties as well as between the government and Congress. Even after his return to the White House in 2025, Trump continued to use the "tariff card" against China. The tariffs he introduced in April under the slogan "Liberation Day" triggered a new round of the trade war, to which China reacted with retaliatory measures. Fortunately, the negotiations of the economic and trade delegations of both countries in Geneva, Stockholm, and Kuala Lumpur put the trade war on hold for the time being. In the course of this process, the two leaders met in Busan, South Korea, and initiated a relaxation of China-US relations. According to the National Security Strategy of the United States published shortly thereafter, the relationship between China and the US had changed from a relationship between a rich and a poor country to a competitive relationship between two nearly equal economies (near-peers). The document emphasized that the United States were rebalancing their economic and trade relations with China to establish "reciprocity." The recent remarks by US Trade Representative Jamieson Greer on China also deserve attention. Greer explained that the Trump administration concluded that the United States could not force China into institutional changes through external pressure. Therefore, the US had abandoned the goal of "changing China's economic system" and instead sought a "managed trade relationship." These changes show that the United States have abandoned the goal of winning the competition with China and are now trying to ensure that they derive benefits from this competition. A More Self-Assured China Further changes originated from Beijing. When the United States began a trade war against China in 2018 and promoted "decoupling" of China, this caused great worries and fears among political decision-makers, observers, and even ordinary citizens in China. Finally, China's considerable progress since the beginning of its reform and opening-up policy had only become possible through the steadily growing integration with the world, including the United States. The stronger the opening up to the outside and the more intense the international cooperation, the faster the economic development: There was a broad consensus in China. However, the various measures of the Trump administration put pressure on China's connections to the world. The outbreak of the COVID-19 pandemic led to the countries of the world being largely isolated from each other; the Russian-Ukrainian conflict further increased global division and the formation of blocs. This greatly increased the worries of the people in China. Chinese research scholars were undecided whether to go to the United States for study. Chinese companies reached their limits in coping with American pressure and blockade measures. Young people in China faced a labor market where increasingly intense competition reigned without corresponding improvement in individual opportunities—a phenomenon called "involution." Some voices even argued that China's development and rise had come to a standstill. They described this phenomenon as "China Peak," i.e., the reaching of the peak of China's rise. A man is stacking containers for onward shipment at a logistics station in China. © Lian Zhen/dpa However, even after eight years of interruptions, trade and technology wars with the United States have left the fundamental data of the Chinese economy stable. According to the National Bureau of Statistics of China, the Gross Domestic Product (GDP) rose from around 91.9 trillion Yuan in 2018 to 140.2 trillion Yuan in 2025. This corresponds to a cumulative increase of about 52 percent over eight years and an average GDP growth rate of 5.2 percent. Although China's real estate sector is still in difficulty, traditional industries face great challenges, and the trend of population aging can hardly be reversed. However, China's high-tech industries have achieved significant progress, and the advanced manufacturing industry, especially the semiconductor industry, has become more resilient. In light of US export controls on high technology, many Chinese companies that depended on American chips did not collapse. Instead, they increased their investments in independent research, development, and production of domestic alternatives to US chips. In the field of artificial intelligence (AI), Chinese unicorn companies like DeepSeek and Moonshot AI have rapidly risen; their AI models are at the forefront of the world. Since they use special computing methods, their models do not require the latest chips, which also reduces costs. As Nvidia CEO Jensen Huang explained, the US export control policy originally aimed to prevent the development of the Chinese AI industry, but it actually had the opposite effect. The Bayan-Obo mine for rare earths in Inner Mongolia in North China. © Ren Junchuan/dpa Previously, Chinese decision-makers and analysts believed that China could still not keep up with the United States in many areas. However, the framework of "strategic competition" transformed all interactions between China and the US into a confrontation in the style of the Cold War between the United States and the Soviet Union. This was clearly a strategic narrative that was disadvantageous for China. After China had resisted and criticized "strategic competition" for almost a decade, the introduction of the concept of "constructive relationship with strategic stability" reflects Beijing's re-evaluation of the respective positions and roles of both countries in the international system as well as the new reality of China-US relations. China now views these bilateral relations from a more equal position and with greater confidence. At least it no longer fears to the same extent that the competition could impair its national development prospects. Rather, China is convinced that it now has the ability to effectively control the competition and steer it in more stable directions. A New Strategic Balance Many analysts are of the opinion that the new consensus on a "constructive relationship with strategic stability" is owed to the personal will and personal friendship of President Trump and President Xi Jinping. In particular, President Trump surprisingly decided to bet on more stable relations with China. In other words: if Trump had not been elected president, this new consensus would not exist. However, this view masks two more permanent and stable structural factors in China-US relations that together form the new strategic balance between the two countries. The Taiwanese President Lai Ching-te waves during the National Day celebrations in Taipei. © Chiang Ying-ying/dpa The first factor is that neither China nor the United States can withstand the catastrophic consequences of a military conflict. This is because both countries possess nuclear weapons sufficient to destroy the other side. The resulting state of deterrence is called "Mutual Assured Destruction" (MAD). The Taiwan issue remains the only sensitive topic that could trigger a deliberately induced military conflict between China and the United States. Since taking office, Lai Ching-te, who is at the forefront of Taiwan's political leadership, has continued a policy that tends toward the "independence of Taiwan" and rejects dialogue and exchange between both sides on the Taiwan Strait. US Taiwan policy is also marked by great uncertainty. On the one hand, hardliners in the US Congress try to draw political benefits from Taiwan's support. In 2022, then-Speaker of the US House, Nancy Pelosi, persisted despite warnings and visited Taiwan. This triggered a strong military reaction from China; their actions were criticized by numerous sides. On the other hand, the US government continues to support Taiwan both in words and in deeds. Former President Biden publicly stated four times that the United States would militarily defend Taiwan. The White House characterized these statements as "verbal missteps." During Biden's term, the US repeatedly approved extensive arms sales to Taiwan, which Beijing considered to have crossed a "red line." After the summit in May, President Trump decided to suspend arms sales to Taiwan worth $14 billion. This gave new impetus to the stabilization of China-US relations. Whether Trump will resume arms sales to Taiwan during his remaining term remains an important variable for the further development of the new consensus between both countries. The former Speaker of the US House, Nancy Pelosi, speaks in Washington about her trip to Taiwan and the visit of a US Congressional delegation to Asia. © Michael Brochstein/imago Chips against Rare Earths The second factor is that both China and the United States can disrupt the supply chains of the other in the areas where they hold a superior position. This ability is based on their mutual dependence within the global supply chain networks. The United States use its technological advantage to impose export controls on chips to China. China, in turn, uses its advantages in supply chains for critical minerals like rare earths to impose export controls against the United States. Experience shows that these mutual supply chain disruptions have led both sides to bear economic costs that could have been avoided. China is an important market for American semiconductor companies like Nvidia. After the US government introduced a licensing requirement for Nvidia's exports of H20 AI chips to China in April 2025, the company did not achieve sales of $2.5 billion in the first fiscal quarter. Similarly, exports of rare earth magnets temporarily fell by 75 percent within two months after the Chinese government introduced a licensing requirement for the export of rare earths. Some small and medium-sized Chinese magnet manufacturers had to reduce their production by about 15 percent immediately, while large quantities of rare earth products accumulated in their warehouses. Both countries have realized that an attempt by one side to achieve overwhelming superiority exacerbates bilateral competition and ultimately forces both countries to accept a certain degree of mutual vulnerability. The best option is therefore to agree and put an end to the dispute. Nvidia CEO Jensen Huang presents new AI technologies, graphics chips, and applications for robotics and autonomous driving at the CES technology show in Las Vegas on January 6, 2025. © Artur Widak/imago