Shifts and Balance: Trump’s Second-Term China Policy and the New Dynamics of US-China Relations

Trump’s second-term China policy has undergone a notable shift from “maximum pressure” to “pragmatic dealmaking.” This transformation stems both from changes in the US-China power balance and from the profound evolution of the global landscape. The world today faces multiple challenges—geopolitical conflicts, economic slowdown, and technological competition—making stable US-China relations a key anchor of the global order.

I. Core Shifts in Trump’s Second-Term China Policy

1. Policy Tone: From Strategic Confrontation to Pragmatic Deal-Making

Trump’s initial aggressive stance in his second term quickly shifted after encountering China’s strong countermeasures. In April 2025, the Trump administration had imposed tariffs approaching 150% on Chinese goods, but China’s subsequent suspension of most rare earth exports caught the US side off guard.

This turning point prompted the Trump team to reassess its China strategy:

• Defense Strategy Report Adjusted: The new edition removed the characterization of China as the “primary security threat,” instead seeking “stable peace, fair trade, and relations of mutual respect”
• Personnel Changes: Trump fired hawkish China advisors from the National Security Council, while pragmatic officials like Commerce Secretary Lutnick gained influence
• Policy Rhetoric Shifted: From “decoupling” to “de-risking,” from “containment” to “competition with cooperation”

2. Real Outcomes: From “Comprehensive Decoupling” to “Selective Cooperation”

Trade War De-escalation

Under the strategic guidance of head-of-state diplomacy, both sides reached phased agreements through multiple rounds of high-level economic consultations. The Trump administration suspended plans for steep tariffs on China’s most important industries and dropped punitive measures against Chinese companies deemed security risks to the US.

Technology Controls Adjusted

The Commerce Department’s approval standards for exporting AI chips to China shifted from “default denial” to “case-by-case review,” making way for Nvidia H200 chip shipments to Chinese customers. This adjustment reflects the reality of American tech companies’ dependence on Chinese market revenues.

Market Access Negotiations

Both sides reached limited consensus on market access in finance and cloud computing, though core differences remain.

3. Deep-Seated Reasons: Changing US-China Power Balance

As Wang Wen, Dean of the Chongyang Institute for Financial Studies at Renmin University, pointed out: Trump catalyzed China’s “disenchantment”—disenchantment with American politics, social governance, and technology.

China’s Development Achievements:

• Substantive progress in technological self-reliance—Huawei’s Mate 60 Pro demonstrated China’s breakthrough capability in high-end chips
• Remarkable results in trade diversification—exports to ASEAN, EU and other markets maintained rapid growth
• Psychological parity emerging—both sides increasingly view each other as equals

II. The 2026 Global Landscape: Global Structure in Turbulent Transformation

1. Economic Environment: Stagnant Growth and Inflation Pressure Coexist

Main Challenges:

• Trade tensions and debt pressures weigh on economic prospects
• Middle East hostilities may disrupt global energy supply chains
• Monetary policy faces difficult trade-offs

2. Geopolitics: Multiple Risks Intertwined

Hotspot Regions:

• Middle East: Hormuz Strait shipping disrupted, international oil prices volatile
• Europe: Russia-Ukraine conflict unresolved
• Asia-Pacific: Taiwan Strait, South China Sea simmer

Global Governance Deficit: Peace deficit, development deficit, security deficit, and governance deficit continue to deepen; the international order faces challenges.

3. Technology Competition: US-China Enters Full-Stack Confrontation

The current US-China AI competition has entered a full-stack confrontation phase—“chip computing power as foundation, LLM capability as core, ecosystem and applications as the decider.”

III. How the Global Landscape Shapes US-China Relations

1. Global Stability Needs Push US-China Toward De-escalation

In an increasingly turbulent world, the international community urgently expects the US and China to provide more certainty and stability. Trump’s return visit to China after nine years carries tremendous symbolic significance.

International Expectations:

• The world’s two largest economies have a responsibility to inject stability into the world
• Global issues like climate change and public health require US-China cooperation
• Supply chain stability serves everyone’s interests

2. Economic Interdependence Constrains Escalation

US-China economic relations have entered a new phase of “manageable competition, limited confrontation, deep interdependence”:

• China’s dependence on the US market has dropped to 9.55%
• Exports to ASEAN, EU and other markets maintain rapid growth
• American corporate revenues in China remain an important profit source

This deep interdependence means:

• Complete “decoupling” is too costly
• “Engagement” fails to build trust
• “Competition” becomes the only option

3. New Equilibrium Point in Tech Competition

The US and China are deeply interdependent in technology while simultaneously facing deepening strategic mutual suspicion.

America’s Dilemma:

• Tech containment toward China has proven misguided
• Chip Act effects limited—China’s domestication accelerates
• Decoupling has反而 spurred Chinese innovation

China’s Response:

• Competing through a systematic approach of “hardware and software in parallel”
• Accelerating core technology self-reliance
• Diversifying markets through Belt and Road Initiative

IV. The New Normal in US-China Relations: Complex Gameplay of “Fighting While Talking”

1. Dual-Track Model of Competition and Cooperation

US-China relations exhibit a new normal of “fighting while talking”:

Competition Track (Continued Pressure):

• “Precision blockade” in high-tech fields
• Restrictions on semiconductors, AI and other critical domains
• Strengthening military presence through Indo-Pacific strategy

Cooperation Track (Pragmatic Progress):

• Economic consultations and tariff negotiations
• Low-carbon cooperation on climate change
• Public health and pandemic response

2. Strategic Guiding Role of Head-of-State Diplomacy

The “compass” and “anchor” role of head-of-state diplomacy has become more prominent.

From the Busan meeting in October 2025 to the Beijing meeting in May 2026, the US and Chinese presidents personally calibrated the direction for bilateral relations, steering the giant ship of US-China relations through rapids and dangerous shallows.

The core value of head-of-state diplomacy lies in:

• Strategic level: Confirming each other’s strategic intentions
• Tactical level: Promoting resolution of specific issues
• Symbolic level: Stabilizing international expectations

3. The Taiwan Question’s Red Line Effect

The Taiwan question remains the biggest risk point and most sensitive red line in US-China relations.

China’s Position: Firmly drawing red lines—any external interference is unacceptable.

America’s Calculus: Balancing “defense commitments” against “avoiding conflict.”

Core Value of High-Level Communication: “Keeping the bottom line of great-power conflict,” preventing miscalculation and unintended escalation.

V. Outlook: Future Direction of US-China Relations

1. Short-Term: Phase De-escalation Achievable

Within 2026, US-China relations are expected to maintain a pattern of “struggle without rupture”:

• Tariff war further de-escalates, but won’t be fully cancelled
• High-frequency head-of-state communication maintained
• Pragmatic cooperation steadily advanced

2. Medium-Term: Competition Remains the Main Tone

Over the next 3-5 years, US-China competition will center on:

3. Long-Term: Building a New Model of Great-Power Relations

The ultimate direction of US-China relations depends on:

• Changes in the power balance: Who achieves breakthroughs in technological innovation
• Effectiveness of domestic governance: Who better solves their own development problems
• Direction of global governance: Whether a path of peaceful coexistence can be found

Conclusion

In times of change, only balance allows for steady progress. Trump’s second-term China policy adjustment is both a result of real-world pressure and a display of rational choice. In a world full of uncertainty, stable relations with China serve American interests and global expectations.

The future of US-China relations will not be the black-and-white “new Cold War” some envision, but rather a complex new normal of “competition and cooperation coexisting, struggle without rupture, fighting while talking.” Understanding this is the wisdom needed to find a way forward in these turbulent times.

Series Preview: In our next article, we will deeply analyze specific cases of US-China tech competition, from the chip war to the AI race, examining the underlying logic and future trajectory of bilateral technological competition.