17 December 2025
CO25244 | Seeking Sustainable Competition: The “Rebalance” in US-China Policy
SYNOPSIS
Recent developments in late 2025, specifically the “Kuala Lumpur Framework”, signal a structural rebalancing in the US’ China policy. Rather than a strategic reversal of the “Great Power Competition”, this shift represents a tactical calibration driven by domestic economic pressures. The US is moving toward a “tiered competition” model: easing general trade tensions to address inflation while fortifying the “hard core” of technology securitisation.
COMMENTARY
US China policy is currently signaling structural rebalancing. After nearly a decade of high-pressure manoeuvrings marked by comprehensive strategic competition, the conclusion of negotiations surrounding the US-China trade framework – the “Kuala Lumpur Framework” – in November 2025 creates a verifiable inflection point. The fundamental question for observers is whether this development signals a strategic shift in Washington’s worldview or merely a tactical adjustment in rhythm and means within the existing paradigm.
The Domestic Mandate
The rebalancing of US policy is rooted first in the changing structure of American public opinion. This change is not a simple return to friendliness; rather, it reflects a distinct shift in the temperature between general sentiment and specific policy preferences.
While the overall baseline remains cold – Pew Research Center data from April 2025 indicate that approximately 77 per cent of Americans still hold unfavourable views of China – the extremes have softened. The percentage of voters who view China as an enemy has dropped significantly, creating a more permissive environment for diplomacy. More importantly, public preferences are now split by issue.
According to July 2025 data from the Chicago Council on Global Affairs, a majority of Americans now oppose further tariff increases, a direct result of fatigue with inflation and the cost of living. Conversely, a bipartisan majority continues to support strict limits on high-tech exports to China. This divergence resolves a seeming paradox: The public demands relief from the direct pain of consumer inflation while simultaneously supporting the zero-cost toughness of technology bans.
This split provides the Trump administration with a specific social licence. Voters are effectively demanding a high-technology carve-out – they accept engagement on general goods to lower prices but demand strict containment on strategic technologies. This domestic pressure creates the political space for a transaction: swapping general trade peace for continued technology warfare.
The Return of Transactionalism
Domestic pressure has reshaped the Two-Level Game played by US elites. Conventionally, domestic opposition limits a negotiator’s flexibility. However, in 2025, the domestic intolerance for inflation has broadened the range of trade de-escalation steps the White House can defend domestically. The White House can now pursue pragmatic de-escalation in trade without being accused of appeasement, framing it instead as a necessary measure for economic relief.
This dynamic explains the logic of the “Kuala Lumpur Framework”. The agreement, which avoided catastrophic tariff hikes, represents a return to classic, problem-solving diplomacy over the performative hawkishness that characterised the previous decade. The administration effectively traded away a cumbersome policy tool – the “50 per cent look-through rule” imposed by the Bureau of Industry and Security (BIS) – in exchange for reciprocal concessions.
Crucially, pausing the “50 per cent look-through rule” was a tactical retreat, not a strategic concession. The rule, which had broad extraterritorial reach, had proven administratively costly and friction-heavy for US allies. By suspending a policy that was already struggling with compliance, Washington converted a bureaucratic liability into a diplomatic asset. This tactical withdrawal stabilised market expectations and bought the administration political breathing room, all without touching the hard core of US technology restrictions.
Simultaneously, this diplomatic thaw serves a hedging strategy. While stabilising ties with Beijing, the US has accelerated friend-shoring arrangements with Malaysia, Thailand, and Vietnam. The strategy is bifurcated: The deal with China is tactical while the engagement with Southeast Asia is strategic.
The Deep Structure
The durability of this rebalancing effort relies on how well it manages the internal fracture within the US political economy. Over the past decade, the US has engaged in a process of securitisation, transforming issues once considered low politics – trade, academic exchange, standards – into existential national security threats.
Yet, this process of securitisation is far from monolithic. It encounters structural resistance from the Global Business Base – comprising Wall Street and Silicon Valley firms dependent on Chinese markets – which advocates for circumscribing the scope of restrictions. In sharp contrast, the National Security Innovation Base, anchored by defence contractors and security-centric tech firms, pushes for maximal separation to ensure military-technical overmatch.
This 2025 rebalancing is an attempt to find a new equilibrium between rival domestic interests. The administration addresses this through a bifurcated strategy of tiered competition: serving as a pressure valve by easing general trade tensions to assuage the business sector and inflation-weary public, while simultaneously manning The Fortress – reinforcing the “Small Yard, High Fence” around critical technologies to satisfy the security establishment.
By allowing the soft economic relationship to function as a pressure valve, the US ensures that the hard security containment remains politically and economically viable. The suspension of peripheral, noisy sanctions allows the system to focus resources on the core export controls that truly matter for long-term competition.
Conclusion
The “Kuala Lumpur Framework” and the associated shift in tone do not mark the end of the US-China strategic rivalry. Instead, they signal the maturation of that rivalry into a more sustainable phase.
The era of comprehensive pressure, in which every interaction was viewed through a lens of conflict, proved too costly for the US domestic economy and too alienated from the needs of allies. The emerging phase is one of sustainable competition. In this new paradigm, the US distinguishes between economic-cost logic and security-threat logic.
For policymakers in the region, the implication is clear: Do not mistake a tactical thaw for a strategic reversal. The US is not removing the fence; it is merely mowing the grass around it to ensure the structure stands for the long haul. We are entering a period of high-resolution competition, where cooperation on inflation and general trade serves as the necessary foundation for a prolonged, high-stakes contest for technological supremacy.
About the Author
Li Yaqi is an MSc (International Relations) candidate at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University (NTU), Singapore, and a scholarship-funded student research assistant. He focuses on US-China policymaking, economic statecraft, and technology governance. He has worked with the Shanghai Institute of American Studies, Fudan Development Institute, and Intellisia Institute.
SYNOPSIS
Recent developments in late 2025, specifically the “Kuala Lumpur Framework”, signal a structural rebalancing in the US’ China policy. Rather than a strategic reversal of the “Great Power Competition”, this shift represents a tactical calibration driven by domestic economic pressures. The US is moving toward a “tiered competition” model: easing general trade tensions to address inflation while fortifying the “hard core” of technology securitisation.
COMMENTARY
US China policy is currently signaling structural rebalancing. After nearly a decade of high-pressure manoeuvrings marked by comprehensive strategic competition, the conclusion of negotiations surrounding the US-China trade framework – the “Kuala Lumpur Framework” – in November 2025 creates a verifiable inflection point. The fundamental question for observers is whether this development signals a strategic shift in Washington’s worldview or merely a tactical adjustment in rhythm and means within the existing paradigm.
The Domestic Mandate
The rebalancing of US policy is rooted first in the changing structure of American public opinion. This change is not a simple return to friendliness; rather, it reflects a distinct shift in the temperature between general sentiment and specific policy preferences.
While the overall baseline remains cold – Pew Research Center data from April 2025 indicate that approximately 77 per cent of Americans still hold unfavourable views of China – the extremes have softened. The percentage of voters who view China as an enemy has dropped significantly, creating a more permissive environment for diplomacy. More importantly, public preferences are now split by issue.
According to July 2025 data from the Chicago Council on Global Affairs, a majority of Americans now oppose further tariff increases, a direct result of fatigue with inflation and the cost of living. Conversely, a bipartisan majority continues to support strict limits on high-tech exports to China. This divergence resolves a seeming paradox: The public demands relief from the direct pain of consumer inflation while simultaneously supporting the zero-cost toughness of technology bans.
This split provides the Trump administration with a specific social licence. Voters are effectively demanding a high-technology carve-out – they accept engagement on general goods to lower prices but demand strict containment on strategic technologies. This domestic pressure creates the political space for a transaction: swapping general trade peace for continued technology warfare.
The Return of Transactionalism
Domestic pressure has reshaped the Two-Level Game played by US elites. Conventionally, domestic opposition limits a negotiator’s flexibility. However, in 2025, the domestic intolerance for inflation has broadened the range of trade de-escalation steps the White House can defend domestically. The White House can now pursue pragmatic de-escalation in trade without being accused of appeasement, framing it instead as a necessary measure for economic relief.
This dynamic explains the logic of the “Kuala Lumpur Framework”. The agreement, which avoided catastrophic tariff hikes, represents a return to classic, problem-solving diplomacy over the performative hawkishness that characterised the previous decade. The administration effectively traded away a cumbersome policy tool – the “50 per cent look-through rule” imposed by the Bureau of Industry and Security (BIS) – in exchange for reciprocal concessions.
Crucially, pausing the “50 per cent look-through rule” was a tactical retreat, not a strategic concession. The rule, which had broad extraterritorial reach, had proven administratively costly and friction-heavy for US allies. By suspending a policy that was already struggling with compliance, Washington converted a bureaucratic liability into a diplomatic asset. This tactical withdrawal stabilised market expectations and bought the administration political breathing room, all without touching the hard core of US technology restrictions.
Simultaneously, this diplomatic thaw serves a hedging strategy. While stabilising ties with Beijing, the US has accelerated friend-shoring arrangements with Malaysia, Thailand, and Vietnam. The strategy is bifurcated: The deal with China is tactical while the engagement with Southeast Asia is strategic.
The Deep Structure
The durability of this rebalancing effort relies on how well it manages the internal fracture within the US political economy. Over the past decade, the US has engaged in a process of securitisation, transforming issues once considered low politics – trade, academic exchange, standards – into existential national security threats.
Yet, this process of securitisation is far from monolithic. It encounters structural resistance from the Global Business Base – comprising Wall Street and Silicon Valley firms dependent on Chinese markets – which advocates for circumscribing the scope of restrictions. In sharp contrast, the National Security Innovation Base, anchored by defence contractors and security-centric tech firms, pushes for maximal separation to ensure military-technical overmatch.
This 2025 rebalancing is an attempt to find a new equilibrium between rival domestic interests. The administration addresses this through a bifurcated strategy of tiered competition: serving as a pressure valve by easing general trade tensions to assuage the business sector and inflation-weary public, while simultaneously manning The Fortress – reinforcing the “Small Yard, High Fence” around critical technologies to satisfy the security establishment.
By allowing the soft economic relationship to function as a pressure valve, the US ensures that the hard security containment remains politically and economically viable. The suspension of peripheral, noisy sanctions allows the system to focus resources on the core export controls that truly matter for long-term competition.
Conclusion
The “Kuala Lumpur Framework” and the associated shift in tone do not mark the end of the US-China strategic rivalry. Instead, they signal the maturation of that rivalry into a more sustainable phase.
The era of comprehensive pressure, in which every interaction was viewed through a lens of conflict, proved too costly for the US domestic economy and too alienated from the needs of allies. The emerging phase is one of sustainable competition. In this new paradigm, the US distinguishes between economic-cost logic and security-threat logic.
For policymakers in the region, the implication is clear: Do not mistake a tactical thaw for a strategic reversal. The US is not removing the fence; it is merely mowing the grass around it to ensure the structure stands for the long haul. We are entering a period of high-resolution competition, where cooperation on inflation and general trade serves as the necessary foundation for a prolonged, high-stakes contest for technological supremacy.
About the Author
Li Yaqi is an MSc (International Relations) candidate at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University (NTU), Singapore, and a scholarship-funded student research assistant. He focuses on US-China policymaking, economic statecraft, and technology governance. He has worked with the Shanghai Institute of American Studies, Fudan Development Institute, and Intellisia Institute.
