U.S.-China Relations in 2026: A New Cold War or Managed Competition?

The relationship between the United States and China has settled into a pattern that analysts are increasingly describing as "managed competition" — a state of sustained rivalry across economic, technological, and geopolitical domains, punctuated by selective cooperation on issues of shared interest such as climate change and pandemic preparedness.

The Technology Decoupling

The most consequential dimension of U.S.-China competition is the ongoing effort to decouple the two countries' technology sectors. U.S. export controls on advanced semiconductors and semiconductor manufacturing equipment have significantly constrained China's ability to develop cutting-edge AI chips, forcing Chinese technology companies to work around the restrictions through a combination of stockpiling, domestic development, and acquisition of less-restricted chips.

China's response has been to accelerate domestic semiconductor development, with SMIC and other domestic chipmakers making significant progress in manufacturing chips at 7nm and below. The progress has been slower than Chinese authorities had hoped, but the trajectory suggests that China will achieve meaningful semiconductor independence within five to ten years.

The Taiwan Question

Taiwan remains the most acute flashpoint in U.S.-China relations. China's military modernization has continued apace, with the People's Liberation Army conducting regular exercises that simulate blockade and amphibious assault scenarios. The United States has responded by strengthening defense relationships with Taiwan, Japan, the Philippines, and other regional partners.

The economic interdependence between the U.S. and China — bilateral trade exceeds $600 billion annually — creates powerful incentives for both sides to avoid military conflict. However, the historical record suggests that economic interdependence is not a reliable deterrent when core national interests are at stake.

Areas of Cooperation

Despite the competitive dynamics, the two countries have maintained cooperation in several areas. Climate change negotiations have continued, with both countries participating in the COP31 framework. Fentanyl precursor controls have been a focus of bilateral discussions, with China taking some steps to restrict the export of precursor chemicals to Mexico. Scientific cooperation, while reduced from its peak, continues in areas such as pandemic preparedness and basic research.