Executive Summary
The trajectory of U.S.-China bilateral relations through the 2030s remains sufficiently indeterminate that multiple pathways remain plausible, notwithstanding the heightened tensions that have characterized the past decade.
FAF analysis examines a scenario in which both powers, having exhausted mutual coercive efficacy and recognized the asymmetric costs of protracted competition, establish institutional mechanisms for managing their relationship within a framework of competitive coexistence.
Drawing upon historical precedent—particularly the détente framework achieved during the 1970s between the United States and the Soviet Union—and contemporaneous economic, military, and technological realities, this examination delineates the parameters through which stabilization might occur.
Central to this equilibrium is a core geopolitical bargain wherein Washington accepts Beijing's continued material advancement and regional preeminence in East Asia whilst simultaneously ensuring that China declines to pursue global hegemonic substitution; reciprocally, China accedes to a posture of constrained ambition, acknowledging that competitive superiority, rather than dominative hegemony, constitutes an attainable and preferable strategic objective.
Introduction
Contemporary discourse surrounding U.S.-China relations has oscillated between categorical doom and technological determinism, with policymakers and analysts increasingly advancing narratives suggesting the inevitability of great-power conflict.
The tenor of such discourse reflects legitimate concerns regarding escalatory dynamics, military modernization trajectories, and the absence of consensus regarding the normative ordering of the international system.
Yet the deterministic pessimism that undergirds much contemporary analysis—the presumption that conflict has become endemic to the bilateral relationship—rests upon an epistemologically flawed foundation.
History demonstrates that even the most intractable great-power rivalries remain susceptible to structural modification when incentive structures shift and elite coalitions converge around constraining strategies.
The present analysis proceeds from the proposition that alternative futures remain accessible and that policymakers benefit from rigorous examination of what coexistence—rather than dominance or annihilation—might realistically entail.
Historical Precedent and Strategic Context
The détente framework established by President Richard Nixon and National Security Advisor Henry Kissinger during the late 1960s and early 1970s provides an instructive historical parallel, though not a prescriptive blueprint. Soviet achievement of nuclear parity with the United States, combined with mutual recognition that continued escalatory spiraling imposed unsustainable strategic risks and economic costs, created the permissive conditions within which diplomatic reorientation became possible.
Neither superpower abandoned competition; rather, both accepted that their respective interests could be served through managed rivalry rather than perpetual confrontation.
The establishment of the "Basic Principles" of Soviet-American relations, landmark arms control agreements encompassing the Anti-Ballistic Missile Treaty and the Strategic Arms Limitation Treaty, and the normalization of economic relations through grain trade agreements, collectively functioned to stabilize a relationship that had previously moved toward the precipice of direct military confrontation.
Critically, détente did not terminate the Cold War, nor did it eliminate the fundamental ideological and systemic conflicts dividing the superpowers. Rather, it created an intervening period—roughly spanning 1970 to 1979—during which the acute risk of thermonuclear war diminished and lower-intensity competitive dynamics prevailed across peripheral lanscape.
When détente ultimately fractured following the Soviet invasion of Afghanistan in December 1979, the relationship had already provided sufficient stability and institutional structure to facilitate the later peaceful resolution of the Cold War without direct military conflict between the two superpowers.
The precedent demonstrates that stabilization, even if impermanent, confers substantial benefits and creates pathways for subsequent positive evolution.
The contemporary U.S.-China relationship exhibits structural similarities that render détente-adjacent arrangements plausible.
Both powers have achieved or are approaching nuclear parity; both confront substantial domestic economic pressures that consume leadership attention and capital; both recognize that military solutions to core strategic problems remain implausible; and both maintain sufficient material capacity to impose costs upon the other that would render great-power war catastrophic for the international system writ large.
The historical record does not suggest that such conditions inexorably generate conflict. Rather, it indicates that when political leadership coheres around strategies of restraint and reciprocal management, conflict prevention becomes achievable.
Current Status and Recent Developments
The period extending from January 2025 through January 2026 has witnessed significant oscillations in bilateral relations, reflecting both the deep structural tensions endemic to contemporary U.S.-China rivalry and the capacity for high-level diplomatic engagement when leadership prioritizes de-escalation.
The October 2025 meeting between President Donald Trump and President Xi Jinping in Busan, South Korea, culminated in a 1-year trade truce that substantially reduced tariff levels from the approximately 145% peaks attained during the preceding escalatory phase.
The subsequent modulation of tariff structures toward an effective 30% baseline, whilst remaining elevated relative to pre-2018 levels, nonetheless represents a material reduction in acute trade friction.
Announcements in January 2026 confirm that Trump will visit Beijing in April 2026, with reciprocal visits by Xi anticipated before year-end, potentially encompassing as many as 4 bilateral summits across 2026.
Treasury Secretary Scott Bessent has characterized the relationship as having achieved a "very good equilibrium," with high-level dialogue channels functioning to permit rapid de-escalation of tactical disputes.
These diplomatic developments parallel publication of the 2026 National Defense Strategy, which conspicuously abandons the "great power competition" framing that dominated the preceding decade's strategic discourse, instead emphasizing "deter China in the Indo-Pacific through strength, not confrontation" and repositioning homeland defense and hemispheric security as primary strategic priorities.
Economic Dimension: Parity and Interdependence
Forecasts regarding relative economic scale have undergone significant revision since the period 2015-2020, when extrapolation of China's antecedent growth trajectories suggested potential Chinese surpassing of American economic output within 15-20 years.
Current consensus analysis, incorporating revised growth projections and structural headwinds including persistent property-sector malfunction, aging population dynamics, and slowing productivity growth, anticipates that the United States and China will maintain approximate economic parity through the 2030s. Goldman Sachs Research projects Chinese 2026 GDP growth at 4.8%, with consensus forecasts ranging between 4.5%-5%.
International Monetary Fund projections anticipate decline from 5% growth in 2024 to approximately 3% by 2029. Under these trajectories, China would likely not surpass American GDP until approximately 2050, and then only marginally—by perhaps 15%. Should American growth stagnate whilst Chinese growth remains elevated, earlier convergence is mathematically possible; however, current evidence suggests such asymmetric trajectories remain improbable.
The moderation of relative Chinese economic performance confers strategic advantages upon scenarios emphasizing coexistence. Hegemonic war becomes substantially less probable when rising powers lack reasonable expectation of eventual material supremacy that might justify extraordinary risks.
Conversely, moderated growth projections may themselves generate Chinese determination to utilize the contemporary period of relative strength to establish regional hegemony prior to the emergence of relative constraint. Such contradictory incentive structures are not unprecedented; diplomatic skill and institutional design become determinative.
The bilateral economic relationship remains substantial despite elevated tariff barriers. United States merchandise exports to China approximated $154 billion in 2022, positioning China as the third-largest American export destination. Notwithstanding the Trump administration's imposition of approximately 40% effective tariff rates on Chinese imports, bilateral trade continues to flow, reflecting complementarities that neither structural decoupling nor punitive measures have fully eliminated.
China's dependence upon access to American and allied markets to sustain domestic growth, particularly in the context of persistent deflationary pressures and weak domestic consumption, provides material incentive to avoid military adventurism that would disrupt these commercial relationships.
The United States, conversely, retains interest in preserving sufficient economic interdependence to maintain leverage over Chinese decision-making and to preserve the economic rents that bilateral commerce generates.
The technological dimension of economic relations has become increasingly fraught, particularly regarding semiconductors, artificial intelligence, and rare earth elements.
The Biden administration instituted export controls targeting advanced semiconductors with applications in artificial intelligence, whilst China implemented restrictions on rare earth element exports in retaliation to American tariffs. These measures reflect genuine security concerns on both sides; however, the marginal security gains from incremental technological restrictions decline as both powers invest in achieving technological autarky.
Current analysis suggests that technology restrictions have likely approached their strategic limits—additional restrictions address capabilities of declining relevance to core military or economic objectives, whilst China's native technological development capabilities have matured sufficiently to permit incremental technological advancement even under restrictive conditions.
The announced availability of Nvidia H200 processors to Chinese firms under January 2026 export control modifications suggests recognition by the Trump administration that restrictions have become counterproductive beyond a narrow band of truly sensitive technologies.
Military Dimension: East Asian Balance and Nuclear Deterrence
The military balance in East Asia constitutes the most volatile component of contemporary U.S.-China relations. China's military modernization programs have proceeded at a sustained tempo exceeding American capacity to match in specific theaters; the People's Liberation Army Navy now fields more ships than the United States Navy, and Chinese missile capabilities have achieved sufficient sophistication to render forward-deployed American air and naval bases increasingly vulnerable.
These material developments have generated justified concern among American policymakers and regional allies regarding the sustainability of American deterrence architecture throughout the region.
However, capability differentials do not automatically translate into strategic advantage. The United States maintains substantial technological advantages in air and naval warfare, operates from more numerous and dispersed basing infrastructure, and retains capacity to project force from geographically distant locations.
A plausible military balance in East Asia need not entail exact symmetry; rather, it requires that neither power can confidently anticipate decisive military victory in hypothetical conflict scenarios.
American strategy increasingly emphasizes "defense dominance"—a posture wherein forward-deployed forces possess robust capabilities to defeat attacks rather than to execute offensive operations. Such posturing inherently suggests restraint and reduces the salience of offensive military advantage, thereby contributing to stabilization.
The nuclear dimension presents both challenges and opportunities. Pentagon estimates indicate that China will field approximately 1,500 operational nuclear warheads by 2035, approaching parity with American and Russian arsenals. This trajectory necessitates bilateral engagement regarding strategic stability, crisis communication, and arms control frameworks.
Precedent from the Cold War demonstrates that great powers operating under conditions of approximate nuclear parity can negotiate binding and verified arms control agreements—provided that political leadership commits resources to technical negotiation and accepts verification mechanisms.
Current U.S.-China military dialogue remains functionally moribund; restoration of military-to-military communication channels focused specifically upon nuclear risk reduction represents a prerequisite for stabilization.
Taiwan constitutes the most acute flashpoint within the military dimension. The People's Liberation Army has conducted extensive military exercises throughout 2025-2026 simulating cross-strait military operations, including decapitation strikes targeting Taiwan's political leadership and amphibious assault capabilities.
Contemporaneously, Taiwan has initiated military force modernization and defense spending augmentation, with defense expenditures targeted to reach 5% of GDP by 2030. A coexistence scenario does not require that Beijing renounce military options regarding Taiwan; rather, it requires Chinese restraint from attempting to alter the territorial status quo through coercive means whilst simultaneously not constituting formal acknowledgment of Taiwan's independence.
Such ambiguity, though superficially unsatisfying to legal purists, has characterized the cross-strait relationship for decades and has permitted continued peace. A fourth Sino-American communique addressing Taiwan, updating understandings from the 1970s and 1980s, could provide the diplomatic architecture through which both sides might ratify their respective commitments to the status quo.
World Order, Global Governance, and Cooperative Frameworks
The international system lacks consensus regarding the principles through which global authority should be distributed and the mechanisms through which disputes among major powers should be resolved.
American preferences have historically centered upon liberal international order institutional structures—including the United Nations, the World Trade Organization, and various treaty regimes—that reflect mid-20th century American dominance and encode particular preferences regarding property rights, capital flows, and democratic governance.
China perceives these arrangements as constraints upon its potential and as vehicles through which American hegemonic preferences are institutionalized. Chinese preferences increasingly emphasize state sovereignty, civilizational heterogeneity, and multipolarity.
A coexistence scenario does not require convergence upon these fundamental questions. Rather, it requires that both powers accept that neither can unilaterally dictate the trajectory of global institutional evolution and that mutual coercion regarding world order preferences generates symmetrical costs.
Concretely, such acceptance might entail American acknowledgment that China will construct alternative institutional arrangements in Asia—the Asian Infrastructure Investment Bank, the Belt and Road Initiative, the Shanghai Cooperation Organization—without American participation and without these arrangements constituting challenges to American interests per se.
Reciprocally, China would accept American maintenance of security alliances and institutional arrangements in the Indo-Pacific and would refrain from efforts to forcibly dismantle these structures.
Cooperation across domains where interests align remains feasible and valuable. Both powers confront acute pressures from climate change, pandemic disease emergence, artificial intelligence governance challenges, and nuclear weapons proliferation.
Bilateral and multilateral cooperation on these issues would generate mutual benefits and create institutional scaffolding that might preserve dialogue channels even during periods of acute tension. The Carnegie Endowment analysis identifies these domains as "islands of consensus" upon which cooperative relationships might be constructed.
Future Steps and Policy Implications
Achieving the coexistence scenario outlined above requires deliberate action along multiple dimensions. First, political leadership in both Washington and Beijing must clarify domestic constituencies regarding the distinction between acceptable competition and unacceptable conflict.
Political and military elites in both capitals harbor assumptions regarding the intransigence of their counterparts and the impossibility of mutually advantageous arrangements.
These cognitions are partially self-fulfilling; expectations of betrayal generate defensive measures that are themselves perceived as threatening, thereby ratifying initial expectations.
Breaking this cycle requires leaders to communicate costly signals of commitment—for instance, restraint from low-level military operations in the Taiwan Strait despite domestic pressures to demonstrate strength, or reciprocal restraint in technology export controls despite domestic constituencies demanding absolute economic autarky.
Second, the infrastructure of military communication and crisis management must be restored and expanded.
Current U.S.-China military dialogue has atrophied; the Joint Staff Dialogue Mechanism, established in 2017, was subsequently disbanded. Restoration and expansion of these channels, specifically focused upon nuclear risk reduction, rules of engagement for air and maritime encounters, and protocols for managing Taiwan Strait incidents, represents a prerequisite for preventing accidents from escalating into conflicts.
Third, economic interdependence requires deliberate maintenance. Whilst complete decoupling is neither possible nor desirable, both powers must resist pressures toward autarkic strategies that would eliminate mutual economic interests in peace.
Restoration of executive visa programs suspended during the pandemic, expansion of airline capacity, and maintenance of high-technology trade in non-sensitive sectors would serve this objective. Neither power should view trade reductions as inherently advantageous; rather, both should recognize economic exchange as a stabilizing factor that creates constituencies supporting continued peace.
Fourth, Taiwan requires a new bilateral understanding. The current framework, enshrined in the "Three Communiques" from the 1970s and 1980s, has become inadequate to address contemporary circumstances.
A fourth communique, negotiated by Trump and Xi during their April 2026 summit, that explicitly addresses Taiwan's military capabilities, cross-strait military operations, and mutual commitments to preserving the status quo could provide the diplomatic foundation for decades of continued peace. Such an arrangement need not constitute formal resolution of the Taiwan question; rather, it would ratify the existing equilibrium as temporary but stable.
Conclusion
The proposition that U.S.-China relations are destined to terminate in great-power war rests upon analytical foundations that privilege extrapolation over contingency and determinism over agency.
History demonstrates that even the most intractable rivalries remain susceptible to structural modification when political leadership prioritizes de-escalation and when economic and military incentive structures support restraint.
The coexistence scenario examined above is neither certain nor even probable; multiple pathways toward escalation and conflict remain plausible. However, the scenario is neither utopian nor requiring transformative changes in either power's fundamental values or interests. Rather, it posits that both the United States and
China possess material interests in avoiding direct military confrontation, possess sufficient institutional capacity to manage their relationship through negotiated frameworks, and face sufficiently permissive international circumstances that détente-adjacent arrangements become achievable.
The window of opportunity for establishing such arrangements may be narrow.
Domestic political pressures within both countries—nationalist sentiment in China, China-skepticism across American political parties—create headwinds against restraint.
Military modernization trajectories, particularly Chinese nuclear buildup and American technological advancement, generate incentives for preemptive action. Taiwan, the South China Sea, and other territorial disputes remain flashpoints where miscalculation could generate unintended escalation.
Yet the historical record suggests that even during periods of acute tension, leadership decisions retain determinative capacity. The détente period of the Cold War emerged not because tensions had diminished, but because leaders prioritized their management.
The Trump administration's apparent shift toward greater diplomatic engagement with China, evidenced through planned 2026 summits and moderated tariff structures, suggests that a permissive moment for negotiation exists.
Whether this moment will be utilized constructively or squandered remains fundamentally a question of political choice—in both Washington and Beijing.
