This piece is part of a series titled “The future of U.S.-China policy: Recommendations for the incoming administration” from Brookings’s John L. Thornton China Center.
Executive summary
The U.S.-China relationship President Donald J. Trump inherited is vastly different than the one he handed off to the Biden administration in 2021. China continues to expand its global influence and industrial output, but it also faces challenges at home from a softening economy and an increasingly sclerotic and centralized political decisionmaking process. Trump’s team holds a variety of viewpoints on how to maximize America’s leverage, or even on what objectives America should pursue in its competition with China. Left unaddressed, this variance in views risks leading to policy incoherence. To overcome this risk, Trump will need to set a firm direction, identify specific objectives, and put his advisors on notice that they will pay a cost for actions that undermine his goals. Trump has an opportunity to craft a strong policy to move the U.S.-China relationship toward becoming fairer and more equitable. Whether he seizes this opportunity may depend upon the degree to which he acts with purpose, maintains focus, and imposes discipline over a sprawling set of actors within his administration who will implement America’s China strategy.
The ground has shifted
When President Donald J. Trump took the oath of office on January 20, 2025, he inherited a U.S.-China relationship that was markedly different from the relationship he handed off to the Biden administration in 2021. At the end of Trump’s first term, the world was reeling from the effects of COVID-19, a pandemic that emanated from China and that many Trump advisors blamed China for failing to suppress or worse. Trump viewed China as undermining his reelection. The once-touted U.S.-China “Phase 1” trade deal stood in tatters. Leader-level communication between Trump and Xi Jinping had ceased, as had virtually every other bilateral channel of communication. Mutual recrimination filled the void.
As the American economy suffered under the weight of COVID lockdowns in 2021, China’s economy was still humming. Economists were debating when—not if—China’s economy would surpass America’s in terms of gross domestic product. Four years later, bilateral competition remains acute, but the relative distribution of power between the United States and China has shifted.
The bubble around China’s property and construction sectors has popped. This is significant, given that these sectors account for nearly 30% of gross domestic product. This unwinding has removed nearly $18 trillion in Chinese household wealth since 2021. China’s stock market indexes also have vastly underperformed their American counterparts. Foreign direct investment into China has dried up: The flow of investment plunged nearly 80% between 2021 and 2023, reaching its lowest level in three decades. Chinese citizens’ confidence in their country’s economic trajectory also appears to have darkened. According to The Wall Street Journal, as much as $254 billion may have quietly exited the country between June 2023 and June 2024. As China’s leaders have sought to staunch the bleeding by tightening their grip over the Chinese economy, Chinese firms have failed to generate jobs for recent college graduates. Nearly one in five young Chinese adults is unemployed.
China’s economy has had bright spots in recent years. Chinese firms now dominate the markets in electric vehicles, batteries, shipbuilding, and renewable energy technologies, for example, but these sectors cumulatively account for only a small share of the Chinese economy and are insufficient to offset other drags on growth. Analysts such as the Rhodium Group’s Logan Wright now judge that China’s economic size as a share of global GDP may have peaked in 2021 and will remain below the United States. Even experts who hold a more positive view of China’s economic prospects nearly uniformly concede that the country’s growth rate will decline in the coming years.
The shifts in the American and Chinese economies’ relative performance since Trump was last in office put Trump in a stronger position now to reengage with Xi. It would be a mistake, however, for Trump to overplay his hand. Xi certainly is aware of China’s domestic economic challenges, but these challenges have not pushed Xi to a point of desperation. If anything, Xi is in a stronger political position now than when Trump left office in 2021. During the intervening period, Xi secured a third term, further centralized decisionmaking, took tighter control over the military and security services, and elevated more loyal deputies and advisors to positions around him. Xi also has his own politics and brand for strength and resolve to protect. Additionally, Beijing will be watching to see whether Trump’s policy agenda, for example, tax cuts, tariffs, and mass deportations of illegal immigrants, will lead to inflation and rising interest rates, which could weaken Trump’s position over time.
The crux of the China challenge
None of these factors dull the intensively competitive nature of relations between the United States and China. China remains the only country in the world capable of challenging the United States across every domain of global power and influence: political, security, technology, economy, and military. China’s state-directed economic model concentrates national resources in areas that the country’s leadership has prioritized for its long-term competitiveness. China’s leading sectors are further propped up by subsidies that elevate national strategic considerations and diminish imperatives for commercial profits. These sectors also are given a boost by state-directed espionage for commercial gain.
This comprehensive approach to nurturing national economic competitiveness has generated eye-popping levels of industrial output. China is on pace to produce nearly 45% of global industrial output by 2030, according to the United Nations Industrial Development Organization. Outside of America’s industrial dominance in the wake of World War II, it is hard to find modern historical analogs to the levels of global concentration of output that are now occurring in China.
Such a global imbalance in industrial output creates three immediate risks for the United States. The first is in national security. China’s factories and shipyards are on track to have production capacity for military equipment at a scale the United States and its partners could struggle to match. Already, according to Michael Beckley, China is embarking on the largest peacetime military buildup since World War II, producing ships, planes, and missiles five to six times as fast as the United States. The second risk is in terms of social cohesion. If America’s economy becomes too dramatically overweighted toward finance, technology, and services, it will leave a large portion of the population behind, resulting in a hollowed-out middle class and a yawning gap between winners and losers in the 21st-century American economy. Such a scenario would fracture the polity and create the seeds of social disorder. Third, and relatedly, the overconcentration of industrial output in China would undermine America’s allies in Europe and Asia. America’s long-term strategic interests would be ill-served if vehicle factories shutter across Europe and if Japan’s and South Korea’s industrial sectors are decimated by Chinese competitors. A core challenge for the Trump administration will be rebalancing global economic activity to ensure sustainable opportunities for growth in industrial output outside China.
The more that other countries grow concerned about Chinese domination of swaths of the global economy, the more likely that other countries will pursue efforts to rebalance output. Already, nascent and organic efforts are becoming visible in places like Brazil, India, Indonesia, and the European Union to pair protectionist measures with industrial policies to ensure local producers can compete with Chinese exporters.
The perils of policy incoherence
Trump assembled a diverse political coalition to secure victory in the 2024 presidential election. It included Christian nationalists, economic protectionists, anti-immigration advocates, rural voters, blue-collar workers, billionaires, technologists, and libertarians. Unsurprisingly, Trump’s supporters also hold a range of views on questions relating to China. This diversity of views on China also extends to Trump’s most senior advisors.
Trump’s secretary of state, Marco Rubio, has described China as a totalitarian threat to America’s influence on the world stage. He has warned that China could usher in a “new dark age” of exploitation and repression if it succeeds in realizing its vision for global dominance. Trump’s national security advisor, Michael Waltz, has framed the China challenge in a similarly ideological and existential light. On the other end of the policy spectrum, Elon Musk has praised China for its technological prowess and industrial efficiency. He has opposed calls for disentangling or decoupling the American and Chinese economies and suggested that he could serve as a bridge between both countries.
Even setting aside the personalities and preferences of Trump’s key advisors, there are deeper philosophical differences within Trump’s circle of advisors and supporters over critical policy questions relating to China. For example, some of Trump’s supporters, such as former Deputy National Security Advisor Matt Pottinger, have called for the United States to seek to hasten the Chinese Communist Party’s demise. Other former Trump administration officials, such as Mike Pompeo and Nikki Haley, have called for the United States to diplomatically recognize Taiwan as an independent state.
Absent firm and decisive policy direction from the top, there is a risk of policy chaos, with different factions canceling each other out and little progress being achieved to address American concerns about Chinese behavior. In such a circumstance, the U.S.-China relationship likely would grow more fractious. If Beijing abandons the hope of resolving U.S.-China differences through diplomacy, it likely will double down on efforts to hedge risk, including by deepening its relationships with countries who share antagonisms against the United States. This could result in an “axis of upheaval” among China, Iran, North Korea, and Russia becoming more entrenched, concrete, and formalized. Over time, it also could lead to an expansion of this axis to include other countries with adversarial relationships with the United States, such as Venezuela, Cuba, Yemen, and others.
Beijing thus far has been a restraint on the formalization of an adversarial “axis of upheaval.” Beijing maintains active bilateral relations with Iran, North Korea, and Russia, but it has not yet shown enthusiasm for solidifying an axis among these countries. Chinese leaders thus far have judged that the reputational and relational costs of becoming captain of an axis of outcasts outweigh the material benefits. Beijing instead prefers to advance its vision for a more multipolar world order through the BRICS+ grouping. This grouping includes democratic states such as India and South Africa as well as other states that maintain non-adversarial relations with the United States, such as the United Arab Emirates and Saudi Arabia. The constellation of participants in BRICS+ offers Beijing a greater veneer of legitimacy for its efforts at revising the international system than would otherwise be available by pushing for changes through any emergent “axis of upheaval.”
If, on the other hand, the world moves in the direction of more solidified oppositional blocs with the United States leading one bloc and China the other, there could be greater potential for proxy conflicts, and perhaps greater risk of the kind of sprawling war that Trump has vowed to steer Americans clear of. Any division of the world behind a new iron curtain separating allied and axis blocs would also reduce markets for American companies to generate wealth for the American people. Further, it would erode the potential for transnational collaboration to spur scientific and technological progress, including by detecting and responding rapidly to future pandemic outbreaks.
To strengthen the odds of avoiding this dark future, Trump will need to set a firm course for his approach to China and impose discipline throughout his team to follow his vision. Trump will need to secure Xi’s buy-in that a path remains open to managing U.S.-China tensions and sustaining a functioning bilateral relationship and that conflict is not preordained. Trump’s efforts to do so will be strengthened if they are anchored in a clear and easily understandable set of objectives and principles that he seeks to advance through his handling of relations with China.
America only gets one China policy
Trump will need to coalesce his political coalition behind his vision and his priorities on China. It is not possible for the United States to pursue two parallel policies on China, such as by allowing Trump to act as a “good cop” while Trump’s advisors and/or members of Congress perform the role of “bad cop.” Beijing has learned over decades to focus on the signal that emanates from the president, given that the president is the only person elected to represent the entire country on the world stage. Beijing may seek to establish a high-level channel(s) to Trump to play to the president’s vanity and circumvent Trump’s China hawks. Problematic as it may be, if such a channel materializes, it will be essential for the messages being conveyed through that channel to reflect the policies being transmitted by the rest of the government. To the extent there is dissonance in messaging between the president and the rest of his administration, it will harm Trump’s negotiating position. Beijing would view such dissonance as reflecting either the president’s weakness in failing to get his administration to pull in his preferred direction or as a deliberate act of duplicity. If Beijing were to reach either of these judgments about Trump’s approach to the relationship, it would diminish Trump’s standing in Beijing.
It is worth recalling that during the process of normalizing U.S.-China relations, former President Richard Nixon made private assurances to Chinese Premier Zhou Enlai about Taiwan. Nixon privately assured his Chinese interlocutors that he would recognize Taiwan as part of China and would avoid claims that Taiwan’s status was undetermined. Nixon failed to impose his views upon his administration, though, and his private assurances proved of little value to Beijing, particularly after Nixon’s impeachment. Now, over 50 years later, Beijing is still smarting from accepting Nixon’s private assurances as a substitute for coordinated and visible changes in American policy. This lesson has not been forgotten by China’s leaders.
Second, and relatedly, the Trump administration will need to hew to the approach that Trump sets for America’s long-term relationship with China. If Trump calls for U.S.-China negotiations to resolve differences and advance America’s interests, his staff would be insubordinate to call for the collapse of the Chinese Communist Party or the full decoupling of the U.S. and Chinese economies. Such calls would imply that Trump lacks control of his government and America’s long-term strategic direction.
American calls for regime change in China signal to the Chinese people that America is bent on determining their future. For Chinese people, such calls also validate the refrain from state-directed propaganda that America is focused on holding back the progress of the Chinese people and that only a strong and determined Chinese Communist Party can push back against such hostility. Calls for regime change also widen the distance between the United States and its allies, none of whom have shown any interest in supporting such an approach. In other words, undisciplined calls for regime change/collapse or full decoupling will not achieve their desired aims but will spur a rally-around-the-flag dynamic inside China. This would make it harder, not easier, for Trump to achieve his stated aims with China.
Lastly, to make defining progress with China that will outlast his term, Trump will need to settle on a clear goal, or a set of goals, and organize his China strategy around those goals. If, for example, Trump’s goal is to revitalize American manufacturing while limiting China’s capacity to surpass American output in key industrial sectors that are deemed vital for America’s 21st-century competitiveness, then all facets of Trump’s China policy should be supportive of his strategic focus. This would mean coordinating security, diplomatic, trade, and economic policies around a central goal(s), and avoiding scenarios whereby different policies operate in silos and work at cross-purposes. It also would require the White House to vigorously oversee the implementation of policy decisions to ensure they align with the president’s direction, rather than parochial interests among departments and agencies that are inconsistent with Trump’s overall strategy. Given the president’s competing demands and limited attention span, he may need to instruct and empower his chief of staff and national security advisor to ensure adherence to his China policy decisions.
The White House will need to play an active role in directing traffic among various departments and agencies that are involved in the conduct of the U.S.-China relationship. The president and his staff can set a strategic direction and concrete goals through public statements, classified presidential policy directives, the publication of the National Security Strategy, and discrete policy decisions.
The Biden administration organized its approach to China around a tagline of “invest, align, and compete.” This strategy unlocked progress in strengthening America’s alignment with allies and partners on China. It also spurred record levels of investment—both public and private—in strengthening America’s technological base. Where the strategy proved lacking, however, was in identifying and prioritizing concrete goals, objectives, and benchmarks.
Goals to guide America’s China strategy
Trump should make clear internally within the United States government and early in his tenure what he most seeks to achieve and avoid with China. Much like previous presidents who have made a lasting imprint on American foreign policy such as Harry Truman and Ronald Reagan, Trump has an opportunity to set a strategic direction and empower his staff to advance the day-to-day details in service of his vision.
Technology
Trump could, for example, set an aim for the United States to preserve an innovation edge in emerging technologies that will define the coming century, including artificial intelligence, biotechnology, quantum computing, and life sciences. He could instruct that U.S. technology must not contribute to China’s military or surveillance capabilities.
Trade
On trade and industrial issues, Trump could instruct that all decisions be made in service of rebalancing the global economy and supporting greater industrial output capacity in the United States and its partner countries. Achieving such an outcome will require China to rebalance its own economy to give greater weight to domestic demand and to lessen dependence on exports for growth. To spur Beijing to enact such reforms, Washington will need to reach beyond its own unilateral policy toolkit to enlist coordinated pressure from a broad range of China’s trade partners; the percentage of China’s global exports that go to the United States is less than 15% and shrinking. America’s diminishing importance as a direct export market for Chinese products has reduced America’s unilateral leverage to compel Beijing to make economic reforms it has resisted for the duration of Xi’s tenure. While it would be unreasonable to expect anyone to persuade Trump of tariffs’ limited impact on Beijing’s economic policy decisions, Trump’s advisors should encourage any tariffs to be narrowly scoped around emerging and strategic industries where protections are needed to foster domestic competitiveness and/or protect national security. Tariffs can play an effective role, for example, in protecting America’s steel and aluminum sectors. These sectors are critical to America’s national security and are at risk of being decimated by below-cost, subsidized Chinese output.
Security
On security issues, Trump could advise his military to strengthen America’s deterrent and uphold its freedom to fly, sail, and operate anywhere that international law allows. He could decide that the United States must resist China from establishing any permanent military foothold in the Western hemisphere that could put the American homeland at risk. He further could instruct his administration to support American allies in preventing China from asserting any exclusive sphere of influence beyond its territorial boundaries, while avoiding military conflict between the United States and China.
These goals likely will require reforms to America’s strained defense industrial base. Wars in Ukraine and the Middle East have exposed profound weaknesses in this corner of the economy. Bloated and inefficient defense sector monopsonies such as RTX, Lockheed Martin, Northrop Grumman, and others may need to be broken up to spur greater competition and accelerate innovation.
Taiwan
On Taiwan, Trump can signal his prioritization of maintaining the status quo. This means withholding support for Taiwan independence so long as China does not use coercive military power against Taiwan. It also means bolstering visible support for Taiwan should it become necessary to offset rising Chinese pressure on Taiwan short of the use of force. The goal, in effect, would be to preserve an equilibrium that enables the people of Taiwan to exercise self-governance while limiting China’s strategic appetite for pursuing a military conquest that could put U.S. and Chinese forces on a collision course.
Human capital
Trump also could make clear that he views America’s capacity to attract China’s brightest and most ambitious people through lawful immigration as a strategic means to sap the strength of America’s foremost rival. Trump could make clear that the United States will not use journalists, scholars, or other private citizens as pawns in great power competition. Like Reagan did with Soviet dissidents, Trump also could signal a willingness to provide tangible support for those trying to escape repression.
China policy could burnish Trump’s legacy
If Trump pursues this path, or something resembling it, he will deserve credit for demonstrating a greater tolerance for risk and a willingness to exercise leverage in service of a fairer and more equitable U.S.-China relationship. He would be remembered for demonstrating statesmanship by blending strength and firmness with pragmatism in pursuit of concrete objectives. Trump could allow a pathway to remain open for China to develop so long as it refrains from seizing territory by force, organizing adversarial blocs of countries in opposition to America, or cornering the global market on industrial outputs in strategic sectors.
There are many issues on the world stage where America’s asymmetry in power is so favorable that Trump can afford to play by feel and trust his instincts in charting America’s path. Competition with China is not one of them. China is a formidable rival. The margin for error is relatively small. If Trump decides to approach the relationship with jazz-like improvisation like he did during the first term, he likely will get played again by the Chinese.
If, on the other hand, Trump succeeds in setting a firm course for deterring U.S.-China conflict, rebalancing the global economy, and generating more opportunities for American workers—all big ifs—then his legacy will be burnished. Achieving such an outcome will not be easy or straightforward. It will require clear and persistent presidential direction. The first step down this path will be for Trump to begin his term by articulating his goals and vision for China and then directing his top advisors to advance his vision.
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Acknowledgements and disclosures
The author is grateful to two blind peer reviewers for their feedback, Kevin Dong and Joyce Yang for their research assistance, Adam Lammon for editing, and Rachel Slattery for layout.
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