China–US: ‘strategic stability’ put to the test by Chinese ambitions
The start of the 21st century has been marked by growing rivalry between a dominant power, the United States, and a new rival, China. Since 2016, this rivalry has manifested itself across an increasing number of sectors: trade, technology, finance, defence and energy. Each side is building or safeguarding its comparative advantages and dominant positions in order to maintain its attributes of power and curb its rival.
Whilst China had underestimated the duration, intensity and unpredictability of US trade policy during Donald Trump’s first term, it has shown that it was better prepared for his return. The year 2025 was thus marked by a more offensive stance from China, particularly following Liberation Day in April, when Beijing threatened to impose drastic controls on exports of rare earths and their use in global value chains.
Following the one-year truce announced in Busan in October 2025, Xi Jinping’s visit to Washington from 23 to 25 September this year provided an opportunity to take stock of the persistent disagreements and potential areas of progress. For both presidents, the focus is now on ‘strategic stability’, which they need both domestically and internationally. Donald Trump will face a Democrat Congress after his electoral defeat and an economy plagued by inflation, whilst Xi Jinping is preparing for the 2027 Communist Party Congress, at which he will seek a new term, against a backdrop of more challenging economic growth. Externally, the United States is already engaged in the Gulf and in Ukraine and cannot afford a further escalation in Asia.
Strategic stability therefore does not rest on a resolved disagreement, but on the mutual recognition that neither Washington nor Beijing can, in the short term, impose its model on the other. China sees this as a respite to consolidate its industrial, financial and technological autonomy; the United States, as a means of containing escalation whilst preserving its levers of pressure.
The trade truce does not resolve the deep-seated antagonisms
On the trade front, a sense of stabilisation…
Following the great uncertainty caused by Liberation Day, reciprocal tariffs have stabilised at around 30 per cent, though at a higher level than before Donald Trump’s return to office.
The meeting between Donald Trump and Xi Jinping in Washington extended the truce by three months and laid the groundwork for a ‘Trade and Investment Council’, tasked with negotiating tariffs on non-strategic goods. The two countries have committed to establishing a tariff regime covering $60 billion worth of non-sensitive exports – $30 billion per country – across various agricultural and manufacturing sectors. China is also reported to have agreed to increase its purchases of US coal to 10 million tonnes per year.
As regards strategic goods, ranging from soya to semiconductors, however, no progress is to be reported. Bilateral trade has, in fact, been following a misleading trend for over a year: whilst US imports continue to rise, China’s share of these has fallen sharply, from over 20 per cent in 2020 to 8.1 per cent in August 2026. This trend, however, did not begin with the latest tariff measures; it started as early as 2018.
Over the past eight years, China has taken steps to anticipate upheavals in global trade and protect itself from further US escalations or sanctions. It has internationalised its production processes by relocating the final stages – notably assembly – to third countries benefiting from more favourable tariffs or free trade agreements with the United States. The decline in US imports from China is therefore inextricably linked to the rise of these ‘platform countries’, such as Vietnam and Mexico.
China’s strategy is, for the time being, paying off. The authorities are aware that the United States is struggling to implement rules of origin capable of measuring the Chinese value added incorporated into products transiting through third countries, and that there is no alternative capable of supplying, on tariff terms comparable to those of China, the consumer goods on which US households depend.
… which does not resolve the deep-seated tensions
But this stabilisation does not resolve the deep-seated tensions. On the American side, the balance is a response to accelerating inflation and a partial failure of tariff policy, which has been largely overturned by the courts. On the Chinese side, maintaining export momentum remains a necessity.
The latest G20 Finance Ministers’ meeting in Asheville highlighted the fragility of this compromise. China found itself isolated during negotiations over the communiqué, which called for action against ‘non-market’ policies and identified persistent surpluses and weak domestic demand as imbalances to be corrected. By refusing to sign it, the country found itself alone against the other nineteen G20 members: a sign that its model is becoming increasingly difficult for the rest of the world to accommodate.
Faced with accusations of industrial overcapacity, levelled by both developed and emerging economies, China has hardened its defence. Its authorities and regime-linked think tanks present this overcapacity as the result of comparative advantages built up in numerous sectors – comparable to those of France in the luxury goods sector or the United States in the aerospace industry – and a lack of competitiveness in the rest of the world. However, this rhetoric overlooks the resources deployed to achieve this ambition and the imbalances it creates. The OECD estimates that public support accounts for 60 per cent of the increase in China’s market share since 2005, whilst the IMF estimates industrial policy expenditure at 4 per cent of GDP per year.
The rules of the GATT[1] and subsequently the WTO were based on the Ricardian theory of comparative: comparative advantages were supposed to shift, and countries were expected to abandon certain sectors as they moved up the value chain. China has not followed this pattern. Only certain textile activities have been relocated to South Asia, notably to India, Pakistan and Bangladesh. The apparent restructuring of value chains, as reflected in trade statistics, is therefore largely an illusion. With the exception of high-profile cases such as Apple – which, moreover, has retained a large proportion of its production in China – few companies have actually left the country. They have mainly relocated assembly operations, thereby circumventing US customs duties.
Chinese indicators thus point to a growing divergence between supply and demand. In September, year-on-year, industrial production rose by 5.5 per cent, retail sales by 1.1 per cent and exports by 36.3 per cent. Despite the official rhetoric on rebalancing, no concrete measures to support consumption have been announced. On the contrary, the15thFive-Year Plan outlines an increasingly industrial model, underpinned by network infrastructure (electricity, communications, logistics, computing), robotics and artificial intelligence.
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[1] General Agreement on Tariffs and Trade (GATT): a legal and financial framework established at international level in the wake of the Second World War, spearheaded by the United States (1947), which remained in place until the creation of the WTO in 1995
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