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From Comprehensive Competition to Selective Rivalry: U.S.–China Relations After the 2025 NSS

by Benedicta Nathania Palit


“…the United States seeks to establish stable relations without trust, and maintaining a stable relationship with China is not equivalent to trusting China”- Jacob Helberg, Under Secretary of State for Economic Growth, Energy, and the Environment


“No country should fantasize that it can suppress China and maintain good relations with China at the same time.”

- Wang Yi, Foreign Minister of the People’s Republic of China


Introduction

These contrasting statements capture the prevailing tone of contemporary U.S.–China relations: a relationship defined not by partnership, but by managed distrust and strategic competition. The newly released National Security Strategy 2025 formalizes this shift, recalibrating Washington’s approach from comprehensive competition toward more targeted economic and technological rivalry against China. Since the Cold War, U.S. national security strategy has largely been shaped by liberal internationalism, which seeks to sustain American leadership through a rules-based international order that advances security, economic prosperity, and democratic values. The current U.S. administration however, argues that previous global strategies devoted excessive resources abroad while neglecting domestic development. The 29-page strategy paper confirmed the end of U.S. multilateral leadership and is replaced by a more specific, pragmatic and lasting "targeted containment" of its primary strategic competitors, mainly China. The strategy—further intensified by U.S.-China tensions—represents a structural shift toward competition over advanced technology supply chains, critical minerals, and military superiority in the Indo-Pacific. This recalibration becomes particularly evident in how China is framed throughout the NSS 2025.


China is the most frequently referenced country in the document, appearing 21 times and underscoring its central role in U.S. strategic calculations. More importantly, the framing of these references reflects a shift in the character of the two countries’ relationship—from comprehensive competition to strategic domains and from value-driven to interest-oriented, marking that the U.S. strategy towards Beijing has entered a significant adjustment window. This recalibration is particularly visible in the strategy’s emphasis on economic security, technological leadership, and supply chain resilience. Rather than abandoning strategic competition with China, the NSS 2025 narrows its focus toward targeted economic and technological rivalry while maintaining strategic deterrence in the Indo-Pacific.


Technological and Economic Rivalry

The recalibration of U.S. strategy is most visible in the economic and technological domain, where competition with China is increasingly concentrated. Compared with the previous positioning of China as the "most significant geopolitical challenge", most of China-related content in the NSS document focuses on economic, trade and technological issues such as trade deficit, access to critical mineral supply chain, the return of manufacturing and the leadership of scientific and technological innovation. The NSS 2025 emphasizes "reciprocity and fairness" and "rebalancing China-U.S. economic relations", advocating that in maintaining advantageous economic relations with China in sensitive areas, while reducing key dependence on China and achieving economic and trade rebalancing.


The U.S. strategy now focuses on the so-called "AI Stack," to secure the entire AI value chain, from critical minerals to basic models, with the goal of cutting off China's access to U.S. computing and cloud infrastructure. In 2025, a spiral of escalating trade policies endangers the global economy where the U.S. imposes sudden tariffs of up to 145 percentage points on Chinese goods, to which Beijing immediately retaliates by restricting exports of rare earth elements and permanent magnets According to IISS data, China produces over 90% of the world's permanent magnets, which are crucial for the global automotive industry. This export disruption led to the temporary closure of car factories worldwide, highlighting the extent of the interdependence that both sides are now trying to break. The U.S. has also imposed strict export controls on Electronic Design Automation (EDA) software essential for designing advanced chips. China has retaliated by ordering its domestic companies to stop purchasing U.S.-made AI chips, such as those produced by Nvidia and AMD, as part of its ambition to achieve full technological self-sufficiency.


This marks the transition of the main axis of the U.S.’ policy towards China from "comprehensive containment" to "economic competition", where the U.S. would restrict goods and Beijing retaliates with technology restrictions. This transformation shows that the U.S. is trying to focus its strategic resources and policy tools from the costly and ineffective ideological mobilization to the economic and technological power that has direct significance and still holds leverage. Its core is to focus on competition in key areas and avoid all-round confrontation risks, and try to maintain its own advantages in related fields with targeted strategies. Although the NSS 2025 narrates economic reciprocity with  China, it ignores the objective reality of deep economic and trade integration between the two countries.


Strategic Competition and the Taiwan Lever

At the strategic level, the rivalry is managed through deterrence and alliance coordination in the Indo-Pacific. This transformation is particularly prominent in the handling of the Taiwan issue. The strategy prioritizes “deterring conflict in the Taiwan Strait through military superiority. This move reveals that Washington is trying to turn the Taiwan issue more directly into a strategic lever to restrain mainland China, increase negotiation chips and consolidate its alliance system. This strategy, together with its policy of requiring allies to share more defence costs, reflects the tendency of the U.S. to adopt lower-cost and faster-responsive operational tools to replace the high institutional inputs required to maintain the global rule system against the background of relatively limited strength. From Beijing’s perspective, U.S. involvement in the Taiwan issue constitutes interference in China's internal affairs and risks destabilizing cross-strait relations. The strategic orientation of the competition between major countries however, has not changed. The overall strategy of the U.S. shrinks to focus on building “a fortress in the Western Hemisphere”, but it does not mean that it abandons the basic idea of great power competition, but essentially continues and deepens the core framework of great power competition in recent years. The strategy paper clearly points out that the Indo-Pacific region is a "key economic and geopolitical battlefield", and China is still the central target of its Indo-Pacific strategy.


Militarily, the NSS 2025 identifies the Indo-Pacific as a "decisive theater" for competition. The U.S. is committed to maintaining military superiority along the First Island Chain and the South China Sea through a "Collective Denial" strategy. The Military Balance 2026 report highlights that China continues to accelerate its military modernization, particularly at the Bohai shipyard, which is fueling a surge in submarine production. China's defense budget is estimated at CNY 1.81 trillion (approximately USD 251.3 billion), accounting for nearly 44% of total defense spending in the Asian region. China's neighbors' concerns about Beijing's strategic intentions have prompted U.S. allies like Australia, Japan, and South Korea to significantly increase their military spending.


These dynamics are reshaping the broader strategic environment of the Indo-Pacific. As U.S.–China rivalry intensifies, security cooperation among U.S. partners is deepening through arrangements such as the Quadrilateral Security Dialogue and AUKUS, while regional institutions like Association of Southeast Asian Nations face increasing pressure to navigate great-power competition. At the same time, the growing securitization of technology and supply chains—particularly in semiconductors, critical minerals, and advanced manufacturing—has accelerated the formation of competing economic and strategic blocs. For middle powers in the region, including Indonesia, this evolving landscape presents a strategic dilemma: balancing deep economic ties with China against expanding security cooperation with the U.S. and its partners. Managing this tension will remain a defining challenge for Indo-Pacific states as the region becomes the primary arena of contemporary great-power competition.


Fragmentation in Alliances and Shift in Global World Order

Beyond the Indo-Pacific, these strategic adjustments also reflect deeper transformations in the structure of the international system. Amid the U.S. strategic shift toward the Indo-Pacific, middle powers such as India have gained greater strategic space. Washington increasingly views India as a regional security multiplier in the Indian Ocean, particularly in balancing Chinese influence. However, India continues to uphold its principle of strategic autonomy, avoiding formal alliances in order to preserve flexibility in its foreign policy.


This dynamic reflects a broader transformation toward a more multipolar order centered around several major powers—including the U.S., China, Russia, India, and Japan. In this evolving system, security is no longer treated as a global public good guaranteed by a single dominant power, but increasingly as a strategic commodity negotiated through individual contributions and partnerships. The gradual erosion of the U.S.’ role as the primary guarantor of global security has encouraged many countries to adopt hedging strategies—balancing relations with major powers while strengthening their domestic capabilities. As a result, the post-NSS 2025 trajectory of U.S.–China relations not only reflects intensifying strategic competition between the two powers, but also acts as a catalyst for a broader restructuring of the international order.


Conclusion

The 2025 National Security Strategy reflects not a retreat from great power competition but its recalibration. By concentrating rivalry in critical economic and technological domains while sustaining military deterrence in the Indo-Pacific, Washington seeks to manage competition with China without escalating toward comprehensive confrontation. Whether this approach stabilizes the relationship or intensifies selective forms of conflict will shape the Indo-Pacific’s strategic landscape in the coming decade. In this environment, middle powers such as Indonesia will face growing pressure to balance economic ties with China against expanding security cooperation with the U.S. and its partners, while regional institutions including ASEAN and groupings such as the Quadrilateral Security Dialogue may become increasingly important platforms for managing competition and preserving regional stability.


References:

  • Bown, Chad P. “Negotiating a Win-Win End to the Lose-Lose US-China Trade War over Technology and Critical Minerals.” PIIE Working Paper 26-5, March 2026.

  • China Briefing. “Trump Raises Tariffs on China to 145%: Overview and Trade Implications.” China Briefing. Diakses dari China Briefing

  • McGerty, Fenella, and Karl Dewey. “Global Defence Spending Continues to Grow amid Geopolitical Uncertainty.” Military Balance Blog, 24 March 2026.

  • Ministry of Foreign Affairs of the People’s Republic of China. “Wang Yi Meets the Press.” 7 March 2025. Diakses dari Ministry of Foreign Affairs of the People’s Republic of China

  • Reuters. “China Bans Foreign AI Chips from State-Funded Data Centres, Sources Say.” Reuters, 5 November 2025. Diakses dari Reuters

  • South China Morning Post. “US Seeks ‘Healthy’ Trade Relations with China but Does Not Trust It, Lawmakers Clarify.” South China Morning Post. Diakses dari South China Morning Post

  • Sohu. Diakses dari Sohu

  • The White House. “2025 National Security Strategy.” December 2025. Diakses dari The White House

  • The White House. “Promoting the Export of the American AI Technology Stack.” 2025. Diakses dari The White House

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About Authors:

Benedicta Nathania Palit is a Research Analyst at Indo-Pacific Strategic Intelligence (ISI), a Jakarta-based defence think-tank. She holds a B.Soc.Sc from Universitas Indonesia in International Relations.

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