US-China Relations: Thucydides Trap and Path to Coexistence

GS Paper II: Effect of policies and politics of developed and developing countries on India’s interests.

Context: The September 2026 Washington visit of the Chinese President to meet the U.S. President  reflected an attempt to stabilise bilateral relations despite continuing competition over technology, trade, Taiwan and strategic resources.

From Thucydides Trap to Competitive Coexistence

• Thucydides Trap: The concept refers to the risk of conflict when a rising power challenges an established power.
• Emerging Reality: The U.S.–China relationship demonstrates that strategic rivalry can coexist with economic interdependence and selective cooperation.
• Competitive Interdependence: The relationship is increasingly characterised by competition, negotiation, risk management and issue-specific cooperation, rather than complete confrontation.

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Why Both Sides Seek Stability

• Economic Interdependence: The two economies remain deeply connected through trade, investment and global supply chains.
• Trade Management: The September 2026 visit operationalised the U.S.–China Boards of Trade and Investment, while the two sides agreed on tariff treatment for $30 billion of non-sensitive goods in each direction, according to the White House.
• Avoiding Escalation: Direct leader-level engagement provides channels for managing disputes and preventing competition from escalating into broader confrontation.
• Global Economic Impact: Instability between the world’s two largest economies can affect trade, technology, commodities, supply chains and financial markets.

Areas of Continuing Competition

• Semiconductors: The U.S. continues to protect its technological edge in advanced semiconductor technologies, while China seeks greater technological self-reliance.
• Rare Earths: China remains central to global rare-earth processing and supply chains, making critical minerals an important strategic issue.
• Taiwan: Taiwan remains a major geopolitical fault line in U.S.–China relations.
• Artificial Intelligence: Both countries are simultaneously competing for technological leadership while exploring mechanisms for AI-related dialogue and risk management.

The New Equilibrium

• Managed Rivalry: The emerging pattern is neither full cooperation nor complete decoupling, but managed strategic competition.
• Issue-Based Cooperation: Cooperation may occur where interests overlap, even while competition continues in technology and security.
• Strategic Communication: Regular leader-level meetings can reduce the risk of miscalculation and unintended escalation.
• Economic Pragmatism: Both sides have incentives to prevent strategic rivalry from completely disrupting economic relations.

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Implications for India

• China+1 Opportunity: Persistent U.S.–China competition can encourage multinational companies to diversify supply chains towards India and other economies.
• Risk of Strategic Convergence: If Washington and Beijing stabilise relations, India cannot assume that U.S.–China rivalry will automatically expand India’s strategic space.
• Need for Strategic Autonomy: India must pursue its interests independently through multi-alignment, diversified partnerships and indigenous capabilities.
• Supply-Chain Resilience: India should continue strengthening domestic capabilities in semiconductors, critical minerals, electronics, defence and advanced technologies.
• Indo-Pacific Balance: India’s partnerships with the U.S., Japan, Australia, Europe and other Indo-Pacific partners remain important, but should operate alongside India’s broader diplomatic engagement.

Way Forward for India

• Avoid Overdependence on Rivalry: India’s rise should be based on its own economic and technological capabilities, not merely on tensions between major powers.
• Deepen Economic Competitiveness: Improve infrastructure, skills, logistics and ease of doing business to attract diversified global supply chains.
• Build Technology Sovereignty: Strengthen domestic capacity in AI, semiconductors, telecommunications and critical technologies.
• Diversify Strategic Partnerships: Maintain productive relations across major power centres.
• Strengthen Multilateralism: Support institutions and mechanisms that encourage rules-based cooperation and crisis management.

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Conclusion

The U.S.–China relationship is increasingly characterised by “cooperation amid competition”. For India, the central lesson is to remain prepared for both outcomes: continued strategic rivalry as well as periods of U.S.–China stabilisation.

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