The War for America's China Policy

Can a National Security Strategy Stop the Bleeding?

As world leaders gathered in New York for the 2025 UN General Assembly, hallway chatter was filled with the same question:

What the hell is going on with American policy toward China?

The confusion is understandable. The second Trump administration has assembled the most hawkish team of China advisors in American history, led by a president whose deal-making instincts and personal rapport with Xi Jinping often put him at odds with their counsel.

This tension has produced nine months of policy whiplash — tariffs escalating to 145 percent then plummeting to 30 percent, AI chip bans reversed for revenue-sharing arrangements, $400 million in Taiwan military aid blocked to smooth trade negotiations. Senior officials suggest sheepishly that all this flip-flopping might be a tactic “to keep the Chinese on their toes.” The truth is much uglier:

U.S. policy toward China in 2025 is not proceeding from a coherent strategy. It is best understood as the chaotic, real-time output of a power struggle unfolding across the U.S. interagency.

While Trump’s first administration was famous for assembling a “team of rivals,” Trump 2.0 takes the dynamic to new heights — featuring a bureaucratic civil war (and occasionally literal fist fights) between economic nationalists seeking to rebuild American industrial capacity, hard-power competitors determined to maintain technological and military superiority, and transactional restrainers pursuing concrete deals that reduce the cost of foreign entanglement.

The tragedy of Trump’s China policy is that each camp has legitimate goals and credible policy ideas to achieve them — but pursuing all three at once creates a strategic schizophrenia that leaves America weaker than committing fully to any single path.

The past nine months have delivered contradictory lurches on trade, technology, Taiwan, and American alliances in Asia. A coherent National Security Strategy — one that finally clarifies what the United States wants from China — is the administration’s best path out of this morass.

Three Warring Tribes

Many in Washington consider it gauche to discuss the influence of individuals in shaping policy. But for an issue set as tangled as American interests in China, understanding factions is essential:

The Economic Nationalists look at America’s hollowed-out industrial heartland and see the wages of naïveté. For decades, they argue, Washington treated trade as a technical matter for economists rather than a strategic choice with profound implications for national power — offshoring entire industries, gutting manufacturing communities, and nurturing a dangerous dependence on unreliable partners. Their worldview is simple but compelling: you cannot have national security without economic security, and you cannot have economic security when your adversary controls your supply chains. Tariffs are therefore an instrument of national survival, a way to rebuild the industrial capacity that once made America a superpower. If allies complain about disrupted supply chains, so be it; they have been free-riding on American sacrifice for long enough.

The Hard-Power Competitors look at the same landscape and see a different failure mode: decades of underinvestment in the military and technological capabilities needed to compete with a peer adversary. They recognize that China is not the Soviet Union — it is wealthier, more technologically sophisticated, and deeply integrated into global supply chains. Beijing is building the world’s largest navy, extending and weaponizing its foreign influence, and seeking to dominate the industries that will define 21st-century power. The hard-power view holds that only sustained American technological superiority, forward military presence, and a network of capable allies can deter Chinese aggression and preserve the peace in Asia. That means accepting lost commercial opportunities from export controls, friction with allies over burden-sharing, and sticker shock from sustained investment in national defense.

The Transactional Restrainers look at both approaches and see an unsustainable trajectory. They ask: How long can America afford to simultaneously confront China, subsidize European defense, garrison the Middle East, and maintain hundreds of overseas bases while running a $2 trillion deficit? This view rejects the premise that America must choose between nationalist autarky and endless strategic commitment. It argues instead for concrete deals that advance specific U.S. interests, burden-sharing arrangements that make allies pay their fair share, and a willingness to negotiate with adversaries when negotiation serves American interests. The transactional view maintains that, two decades past the unipolar moment, it is time for the United States to reckon honestly with the limits of its power. It calls for ruthless prioritization, but this requires political capital and diplomatic finesse that proves difficult to sustain. The result is less often a strategic rebalancing than a series of discrete deals pursued for immediate advantage — and the President himself is the purest embodiment of this worldview.

Each of these three camps is seized with legitimate concerns about the future of American power. The challenge is that the tools best fit for each problem set often work at cross-purposes — and the President has proven unwilling, or perhaps entirely unable, to choose decisively from among competing priorities.

The result has been as damaging as it was predictable.

Nine Months of Chaos

Tariffs: Chasing Two Rabbits and Catching Neither

Trade policy is the simplest test of the administration’s strategy: Are tariffs leverage to extract concessions, or are they the policy objective itself?

For economic nationalists, the tariffs are the point. The goal is not to force China to change its behavior through temporary pressure, but to permanently restructure trade relationships and rebuild American industrial capacity. In this view, even if Beijing made every concession Washington demanded, significant tariffs should remain to protect domestic industries and workers. The April 2 “Liberation Day” rollout of a 10 percent universal baseline tariff, plus a 34 percent reciprocal tariff on China, was the purest distillation of this vision.

Transactional restrainers see tariffs quite differently — sticks used to generate leverage in negotiations on discrete issues like curbing the flow of fentanyl precursor chemicals, cracking down on illegal migration, or shuttering support for the Russian war effort. But the balance of economic sadism and masochism is easier struck in theory than practice. When tariffs peaked at 145 percent on Chinese goods in early April, markets panicked. The VIX hit levels not seen since 2008 and 2020. It was then that transactionalists saw an opportunity to advance their interpretation of tariffs-as-leverage. The May 12 Geneva agreement reduced tariffs to 30 percent for 90 days — stabilizing markets, resuming the flow of rare-earth magnets, and extending the window for further dealmaking.

Hard-power competitors grow frustrated with the entire debate. To them, trade policy should generally favor open markets that compound American economic power — with some exceptions to deny China the resources required for its military modernization. While it is true that shuttering viable export markets could succeed in destabilizing China’s economic development, tariffs that alienate European and Asian partners risk undermining the broader containment strategy.

Tariffs can be elegantly simple and devastatingly effective — but only when wielded toward a single, clear objective. If tariffs are leverage, they must eventually be lifted when China makes concessions — but economic nationalists will view any lifting as a betrayal of American reindustrialization. If tariffs are permanent policy, then what exactly is America negotiating for? And if the goal is strategic denial, why provide China with any outlet to sell its goods and sustain its economic rise?

The economic record reflects this confusion. The bilateral trade deficit with China has narrowed — which nationalists rightly highlight as progress. But China has adapted, and is heading toward a record $1.2 trillion global trade surplus. American farmers have lost market share as Beijing slashed purchases of soybeans. The Tax Foundation estimates GDP will shrink by 0.8 percent, over 800,000 jobs will be lost, and households will pay $1,300-$1,600 more annually. Perhaps most concerning is evidence of widespread tariff evasion — primarily via transshipment through Vietnam and Mexico — which undermines the entire regime.

Without a clear answer to whether tariffs are a policy goal or leverage in pursuit of something else, the administration cannot know when it is winning or losing.

Technology: Gambling Security for Prosperity

The battle over technology policy has produced the clearest fault line in the administration’s approach to China: whether to treat advanced chips as strategic assets to be denied, or as commercial products to be sold under terms that generate revenue for American tech companies and the U.S. government.

The administration began with hard-power priorities. In March, the Commerce Department added dozens of firms to its Entity List for supporting China’s AI, hypersonics, and quantum computing programs. Officials at first blocked the sale of NVIDIA’s lower-capability H20 chips to China, closing what they saw as a dangerous loophole in Biden-era export controls. In May, new restrictions on chip design software targeted a critical chokepoint in semiconductor development.

Then came the reversals. In August, the President authorized NVIDIA and AMD to resume sales of high-end AI chips under an unprecedented 15 percent revenue-sharing agreement with the U.S. government. The software ban was rescinded in July after China retaliated by restricting rare earth exports.

Each faction views these moves through a different lens. The hard-power case maintains that denying chip access slows China’s progress in developing frontier AI capabilities. Even a 3-6 month gap could determine whether recursively self-improving algorithms first emerge in Hangzhou or San Francisco, with compounding strategic effects. And once China develops indigenous chip alternatives — as it has already spent hundreds of billions of dollars attempting — American leverage over its software trajectory will quickly erode. Best to choke China’s compute supply while we still can.

The transactional counter-argument questions the value proposition and capability timelines: Today’s export controls choke revenue for U.S. companies that would otherwise fund R&D for next-generation chips, potentially ceding long-term technological leadership. Transactionalists understand that China will eventually develop its own alternatives. Better to maintain market access and generate R&D dollars (and government revenue) while we still can. The alternative — complete restriction — forces Chinese self-sufficiency while imposing near-term costs on American firms, they say.

Economic nationalists find themselves divided. Some align with hard-power advocates, seeing tech denial as an effective means of economic warfare. Others worry that export controls, by forcing China to indigenize in 2025 rather than 2030 or 2035, ultimately create a more formidable competitor capable of flooding global markets earlier than expected.

The three factions cannot agree on what technology restrictions are meant to accomplish, which has allowed each to cherry-pick evidence that supports its claim to victory. Hard-power advocates measure success in the demonstrable delay export controls caused to China’s frontier software capabilities. Economic nationalists view expansive controls as a means of forcing permanent supply chain restructuring, evinced by the administration’s long-running plan to tariff foreign-made chips. Transactionalists, by contrast, see controls primarily as leverage — both against China and against America’s own tech companies — and have succeeded in negotiating them away for revenue-sharing deals or rare earth relief.

But controls that constantly shift between denial, monetization, and negotiating leverage ultimately risk becoming half-measures. By pursuing all three simultaneously, the Trump administration is unlikely to buy meaningful strategic time, generate sustainable revenue, or break the gravitational pull of Chinese manufacturing.

Taiwan: Clarity Undermined by Commerce

Taiwan stands the most to lose from the Trump administration’s factionalism.

In many ways, the tension between strategic commitment and burden-sharing mirrors the same dynamics found in any other debate about partnership management: Hard-power competitors urge stronger commitments to Taiwan to deter a Chinese invasion, while transactional restrainers question why America should defend Taiwan when it refuses to pay for its own protection.

It is the rise of the economic nationalists — who resent Taiwan’s simultaneous domination of the global semiconductor industry and inadequate defense spending — that risks disturbing this delicate equilibrium.

A clear victory for the hard-power faction came at the May 31 Shangri-La Dialogue, where War Secretary Pete Hegseth warned that “Communist China will not invade Taiwan on President Trump’s watch” and declared that if deterrence fails, the United States is “prepared to fight and win decisively.” His message was backed by an unprecedented tempo of military exercises in the Indo-Pacific, including a revived REFORPAC, expanded Balikatan, and record-setting Talisman Sabre drills.

Yet the President’s personal actions have systematically contradicted this posture. In September, he withheld over $400 million in military aid to Taiwan to facilitate trade negotiations with Beijing. He denied Taiwan President Lai Ching-te’s request to transit New York and has repeatedly lamented that Taiwan fails to pay for its protection.

The economic nationalists have added a third dimension to this tension that radically changes the character of American cross-Strait policy. In their view, Taiwan’s stranglehold on advanced semiconductor manufacturing represents a dangerous vulnerability that Taipei has weaponized for strategic protection. They point out that TSMC’s Arizona fab construction has lagged behind schedule, while Taipei has imposed technology transfer restrictions that limit what can be manufactured abroad. Meanwhile, Taiwan spends just 2.5 percent of GDP on defense while enjoying implicit American protection worth far more than its collective defense budget. The nationalists see this as extractive rent-seeking: Taiwan has built a “silicon shield” that forces American protection while refusing both adequate self-defense and the technology transfers that would reduce U.S. dependence. This worldview transforms Taiwan from a democratic partner under threat into a free-rider profiting from American vulnerability — a framing that makes abandonment thinkable in ways the traditional hard-power—transactionalist debate never could.

The possibility that Taiwan could become a bargaining chip in a broader U.S.-China détente goes largely unspoken in diplomatic circles, yet allied behavior suggests the fear is real. European leaders are pursuing “strategic autonomy” with urgency, while Southeast Asian nations are intensifying their hedging between the superpowers. Across multiple theaters, U.S. partners are quietly preparing for scenarios where American security guarantees become negotiable — not because of any single policy shift, but because Washington’s position in nearly every bilateral relationship has grown wildly unpredictable. Beijing watches these hedging behaviors carefully, understanding that allied doubt about U.S. resolve is nearly as valuable as any direct American concession regarding Taiwan.

Beijing is exploiting both the incoherence in U.S. cross-Strait policy and the cracks it is generating with partners. The People’s Liberation Army has escalated its activities in a manner INDOPACOM Commander Paparo describes as “dress rehearsals for forced unification.” These have included a 300 percent increase in ADIZ incursions, subsea cable sabotage, and development of specialized deep-sea cable-cutting vessels. Beijing continues to escalate its lawfare campaign, falsely claiming that UN General Assembly Resolution 2758 resolved Taiwan’s ultimate political status, and pressuring international organizations and companies to accept this interpretation. Meanwhile, America’s regional partners watch Washington withhold aid from Taiwan while demanding they provide their own commitments to defend it.

Again, the tragedy is that each faction within the Trump administration is working to address real problems in America’s Taiwan policy. Transactionalists rightly ask whether current defense arrangements are sustainable; hard-power advocates understand that Taiwan’s importance to regional security and global economic stability demands greater investment in its defense; and economic nationalists raise legitimate concerns about Taiwan’s vulnerability and technological protectionism.

The challenge is that attempting to resolve all three problems at once creates the worst of all worlds: From Beijing’s perspective, U.S. commitments appear contingent and negotiable. From Taipei’s perspective, defense planning becomes nearly impossible when American support turns on a dime. For regional partners, the lack of a coherent U.S. approach to Taiwan undermines the message that they must invest more to defend it.

Allies: Failing An Impossible Loyalty Test

A version of the contradictory demands facing Taiwan now extends to several other U.S. allies in Asia. The hard-power faction correctly recognizes that alliances constitute America’s key asymmetric advantage over China, and presses them to adopt a more assertive posture. Transactional restrainers raise legitimate questions about burden-sharing and whether decades-old arrangements still serve American interests, while economic nationalists see in some allies competitors who have benefited disproportionately from access to U.S. markets and a global trading system no longer fit for purpose.

The challenge has been reconciling these perspectives in practice. While many tensions over burden-sharing and technology transfer predate this administration, the pattern that has emerged under Trump 2.0 involves demanding allies simultaneously strengthen their commitment to collective defense against China while negotiating hard on trade and defense cost-sharing — competing pressures that undermine trust and invite Chinese coercion.

Consider Japan, which has embarked on its largest defense buildup since World War II, committing to 2 percent of GDP and acquiring capabilities like Tomahawk cruise missiles — exactly what hard-power advocates have long requested. Yet when Tokyo sought to co-develop next-generation fighter aircraft with integrated American systems, Washington refused to share certain advanced avionics and stealth technology, fearing that today’s co-development partners might become tomorrow’s competitors in global defense markets. Meanwhile, despite negotiating a massive $550 billion trade and investment package, Japan still faces 15 percent baseline tariffs and continued pressure for additional burden sharing.

The same contradiction appears with Australia under AUKUS. The landmark agreement is exactly what hard-power strategists fought so hard to achieve: a close ally making a multi-decade, hundred billion dollar commitment to buy nuclear-powered submarines that would significantly enhance deterrence. The submarines will even be built in American shipyards — precisely what economic nationalists demand. Yet this achievement created its own problem: U.S. submarine shipyards cannot build boats fast enough to meet the U.S. Navy’s requirements, let alone Australia’s. A months-long Pentagon review of the production bottleneck undermined confidence in American reliability.

South Korea illustrates the full trilemma: committed to $350 billion in U.S. investments, while facing demands to raise defense spending to 5 percent of GDP (one of the world’s highest), and a 15 percent base tariff intended to protect American manufacturing. From Seoul’s perspective, this creates an impossible bind: spend more on defense, invest massively in the U.S. economy, absorb tariffs on its exports, and do it all while Washington questions its commitment.

India reveals how the factional objectives in other domains can work at cross-purposes when applied to China. Critical to the Quad framework championed by hard-power advocates, India has been hit with tariffs for its refusal to stop buying Russian energy — a transactional tool meant to pressure Putin instead undermines a partnership central to countering Beijing. The President’s decision to forgo a planned Quad summit compounded the signal that India’s value in balancing against China ranks below other American priorities. Some observers now warn the administration sees New Delhi as “a rival, not a partner” — a nightmare for China hawks.

The administration’s contradictory demands have made for an impossible balancing act across foreign capitals: Washington wants allies to be capable enough to deter China but not so capable they compete with the United States; wealthy enough to increase defense spending but willing to direct that spending primarily to American firms; and assertive enough to confront Beijing but deferential enough to accept American leadership.

Allied confidence in American leadership has cratered. A Lowy Institute poll found that only 36 percent of Australians now believe the United States will act responsibly in the world — a 20-point decline from last year. In Europe, only 22 percent of respondents now consider the United States an “ally” — down from over half just 18 months earlier — with most now viewing it merely as a “necessary partner.” Meanwhile, Japan and South Korea have held unprecedented bilateral summits to coordinate their approaches to American unpredictability.

Within the Trump administration, transactionalists are right that America pays too much for alliance defense while allies pay too little. Nationalists are right that channeling allied investment into the American industrial base serves U.S. interests. Hard-power advocates are right that capable allies multiply American strength. But pressing all three demands simultaneously creates an impossible loyalty test: allies cannot spend more, buy American, and build capable independent forces at the same time. The result is not enhanced burden-sharing but alienated allies with inadequate defense capabilities.

How China Sees It: Exploiting the Chaos

China’s strategy for managing the Trump administration is to divide and profit. Beijing ensures hawks must demand more resources to contest an increasingly capable adversary, then offers nationalists narrowed trade deficits and transactionalists dealmaking opportunities — keeping the factions at odds with each other rather than united against China.

This strategy has involved aggressive forum shopping and remarkable flexibility:

Countering the nationalists through diversification. China has relentlessly diversified its trade, blunting U.S. tariffs by deepening ties with ASEAN, the EU, and the Global South. At forums like the Shanghai Cooperation Organization summit, Xi frames China as the champion of multilateralism against American unilateralism. The China-Japan-ROK trilateral — once a toothless façade — is now an attractive instrument for all three countries to dangle as they push back against U.S. protectionism.

Appealing to transactionalists with calibrated retaliation. Beijing has demonstrated both capacity to inflict tremendous pain with 125 percent tariffs and rare-earth magnet bans; and willingness to de-escalate when deals are on the table, as during the Geneva truce. Xi’s messaging to Trump mixes cooperative language with specific demands, creating off-ramps for the President to declare tactical “wins” that cost China little strategically but open the door to potential American concessions on its core interests.

Bypassing hard-power restrictions through asymmetric innovation. Rather than competing directly in areas where U.S. tech controls are most effective, China is pursuing a “changing lanes” strategy — accelerating development of non-silicon transistors and alternative computing architectures to bypass American chokepoints. DeepSeek’s R1 model rivaling Western AI systems at a fraction of the cost demonstrated the power of its innovation ecosystem, and reminded hawks that they are running out of leverage.

Perhaps most significantly, Beijing has positioned itself as the responsible steward of global governance — at the exact moment Washington appears to be abandoning that role. In the past nine months, China has increased its funding for UN agencies, secured leadership roles in key international organizations, and still championed BRICS, SCO, and AIIB as alternatives to the international order the United States leaves behind.

This creates a dilemma that the administration has yet to grapple with: Does Washington welcome China shouldering more of the burdens of global governance, consistent with the transactional view that America is overextended? Or does it view any expansion of Chinese influence in international institutions as a threat to be contested, as hard-power advocates have long maintained? The nationalist faction, meanwhile, views multilateral institutions as constraints on American sovereignty, and so is largely indifferent to their leadership. As things stand, Beijing benefits from the Trump administration’s contradictions. To the developing world, China presents itself as a reliable partner, in contrast to an America that cannot decide whether it wants to lead, follow, or exit.

Each of the factions driving U.S. China policy today can claim small victories. Nationalists point to narrowed bilateral deficits, transactionalists to tactical dealmaking, hard-power advocates to a more muscular defense posture — while China advances the only strategy that matters: preventing the development of a unified policy that might contest its growing power.

Four Questions a National Security Strategy Must Answer

The chaos of the last nine months is not the product of a failed strategy, but the absence of one. The forthcoming National Security Strategy (NSS) is the most straightforward way to impose coherence on a fractured policy. To do so, it must define a theory of victory that answers four questions:

1. What Should the United States Want from China? Is the goal a managed competition with limited areas of compelled cooperation, or is it a comprehensive confrontation aimed at weakening the Chinese Communist Party? The transactional faction sees potential for deals on fentanyl, migration, or Russian armaments; while the hard-power faction views any cooperation as a dangerous illusion that legitimizes the regime. The NSS must clarify whether any “guardrails” are possible or desirable, or if the only objective is to win a zero-sum contest.

2. What are the Bounds of Economic and Tech Competition with China? Is the objective to surgically protect specific military-adjacent technologies, or is it to wage a broader economic war to thwart China’s rise? If the goal is comprehensive decoupling, as the economic nationalists desire, the NSS must define the price the U.S. is willing to pay in consumer costs, allied friction, and market disruption. As the tug-of-war over rare-earth magnets has revealed, the U.S. economy is not currently structured for such a fight. The NSS must define an end state: is it about winning market share for U.S. companies or permanently denying capability to Chinese ones?

3. What Role Should China to Play in the World? As the United States sheds the burdensome mantle of global governance, to what degree should it resist China’s efforts to pick it up? Is a China that provides public goods and mediates conflicts a threat to U.S. primacy or a welcome burden-sharer? The hard-power faction sees any increase in Chinese global influence as a direct threat, while transactional restrainers may very well see it as a welcome reduction in U.S. costs. The NSS must articulate a vision for America’s role in a future global order — and China’s place within or outside it.

4. What Kind of China Can the United States Live With? Does the United States still have a vested interest in the political and human rights of people in Hong Kong, Xinjiang, Tibet, and Taiwan? Or has the competition become a purely realist struggle where values are secondary to interests? It is true that defending these values incurs real costs, clashing with the transactionalists’ desire for deals and the restrainers’ desire to avoid entanglement. The NSS must be clear about what price, if any, America is willing to pay to defend the dignity of individuals in their struggle against an authoritarian machine.

The Default Trajectory

Without a decisive National Security Strategy that answers these questions, the default trajectory of American power is not a stalemate but strategic erosion.

The Trump administration will likely continue to achieve tactical, transactional “wins” that feel like successes in the moment but mask a deeper loss of strategic ground. The current pattern — policy shifts driven by nationalists and hard-power hawks, followed by market panic and a tactical retreat engineered by transactionalists — costs precious time, resources, and relationships with allies.

This approach could stumble into “catastrophic success” by provoking China into a premature overreach that galvanizes hawks and triggers allied balancing. More likely, however, is a path of “successful catastrophe” — superficial wins like a reduced bilateral deficit or a temporary trade truce — that mask the reality of allies growing more alienated, China accelerating its technological self-sufficiency, and the American public tiring of the economic rollercoaster.

America is not competing with China because it cannot agree on what that competition should entail. The greatest risk for the Trump administration is not that any one of its internal factions will win the war for its China policy, but that their continued conflict will ensure America loses.