The ongoing rivalry between China and the United States is a “three-layered game” — on the surface, it appears to be a trade dispute; at the mid-level, it is a competition for global leadership; and at its core, it is a contest between governance systems. Understanding these layers is essential for China to respond strategically, avoid miscalculations, and pursue steady national development.
Surface-Level: More Than a Trade War
What appears as a trade war is, in fact, a strategic maneuver by the United States to maintain global hegemony amid declining competitiveness. As Japanese scholars have long observed, trade disputes are a tool Washington uses to suppress rising economies. In the 1980s, Japan faced similar pressure — and now, it is China’s turn.
China must prepare for long-term confrontation while responding with rational and pragmatic strategies:
First, it should strengthen ties with U.S. allies, preventing itself from being isolated. For example, more than 60% of the components in Chinese-made smartphones come from Japan. The trade war damages not only U.S.-China relations but also the interests of countries like Japan, the EU, and Canada. By reinforcing partnerships with these economies, China can reduce external risks.
Second, China should utilize international rules and precedents. Japan once imposed non-tariff barriers under the guise of food safety, protecting its domestic market. Similarly, Germany’s central bank maintained its monetary independence during the global pressure for interest rate cuts, avoiding the asset bubble that later consumed Japan. These lessons are worth learning.
Third, historical examples warn against emotional escalation. Japan’s attack on Pearl Harbor drew the U.S. into a full-scale war, resulting in a national catastrophe. In contrast, in the 1970s, Japan voluntarily ceded the textile industry in exchange for the return of Okinawa and redirected its resources toward the automotive and electronics sectors, achieving economic transformation. Taiwan’s pivot to IT industries under U.S. pressure in the 1980s also illustrates how tactical compromise can lead to long-term gains.
Lastly, China should seek to contain this rivalry within the economic sphere, avoiding the spread to technology, finance, and geopolitical confrontation. Turning external pressure into a driving force for domestic reform and industrial upgrading is the safest path forward.
Mid-Level: The Struggle for Global Leadership
Beneath the surface of trade disputes lies a deeper competition over global leadership. If mismanaged, the conflict could push the U.S. to fully institutionalize “containing China” as a long-term strategy, jeopardizing China’s peaceful development.
China has three strategic options in facing this challenge:
The first is a defensive strategy — strategic restraint. As Deng Xiaoping pointed out during his 1979 U.S. visit, nations that maintained sound relations with the United States after WWII generally enjoyed economic prosperity. China’s ability to reclaim Hong Kong and secure economic growth has benefited from this stability-first approach. This path remains wise.
The second is a balanced strategy — co-governance. Given the realities of nuclear deterrence and global interdependence, direct military conflict is unlikely. Economic and security complementarities offer the potential for a cooperative “G2” model, in which China and the U.S. share responsibilities in maintaining global order and reducing governance costs.
The third is a radical strategy — hegemonic transition. History shows few successful cases of hegemonic replacement. When the U.S. replaced Britain as the global leader, it did so not by direct confrontation but by supporting Britain through two world wars. Only after surpassing Britain economically and militarily did the U.S. become the undisputed global leader. For China, the priority is not to challenge U.S. hegemony but to improve governance, stabilize society, and enhance the quality of life for its people.
Core Level: Governance Systems in Competition
At the deepest level, national competition is about the quality of governance. The ability to achieve sustainable development amid a complex global environment depends on decision-making processes, the flow of accurate information, and the capacity for self-correction.
The U.S., particularly under the Trump administration, has shown remarkable agility in decision-making thanks to its flat organizational structure and the academic strength of its policy team. China’s hierarchical system, by contrast, risks delays and distortions in information flow, which can weaken the accuracy and timeliness of policy responses. Strengthening openness, feedback, and error-correction mechanisms is essential for modernizing China’s governance system.
Beware of Overconfidence
One must not confuse an opponent’s mistake for one’s own victory. Historical examples from Japan serve as a warning: after winning the First Sino-Japanese War and the Russo-Japanese War, Japan grew overconfident, misread international dynamics, and ultimately embarked on the disastrous path to Pearl Harbor.
Similarly, while the U.S. and Japan have endured financial crises, China faces its own unresolved risks, including weak domestic consumption, a shrinking service sector, and accumulating fiscal and financial vulnerabilities. Avoiding complacency is key to securing national stability.
Preventing Decoupling and Preserving the Peace Dividend
Economic decoupling between China and the U.S. would not only slow growth but also increase geopolitical risks. As early as the 2008 financial crisis, scholars warned that decoupling could escalate into military confrontation.
China’s development over the past four decades has been driven not only by its population dividend and reform dividend but, most importantly, by the peace dividend. Losing this foundation would inevitably derail its modernization efforts. Preventing decoupling and avoiding conflict are now vital for safeguarding China’s long-term interests and the well-being of its people.
Conclusion
The China-U.S. trade war is not a short-term quarrel but a long-term contest that will shape the future of global order. China must stand firm on its core interests while maintaining strategic flexibility, learning from history, and accelerating its own reforms to ensure stable and sustainable national development.
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