REPORT: The U.S.-China Relationship Heads Toward Stabilization

By Susan Thornton and Emily Sparkman
June 2026

In May 2026, NCAFP convened American and Chinese experts for its annual U.S.-China Track II to assess the state of bilateral relations just ahead of the delayed Trump-Xi summit in Beijing and to identify opportunities to reduce the risks of long-term strategic competition. Although participants differed on the causes of current tensions and the appropriate path forward, stabilization emerged as the most realistic and achievable near-term objective for the relationship. Both sides recognized that competition would persist and agreed that an unmanaged rivalry carries far too many significant geopolitical, economic, and military risks.

Economic security has become a central arena of competition, as both governments increasingly view trade, technology, and investment through a national security lens. Regional security risks, especially over Taiwan, continue to pose the greatest threat to regional stability, while miscommunication and misperceptions increase the risk of crisis escalation. Despite these challenges, participants identified several areas where cooperation remains not only possible, but desirable, including the significant economic relationship, AI safety, crisis management, military-to-military communications, and fentanyl enforcement. The conference underscored that major breakthroughs are unlikely, even as they welcomed the steadying effects of multiple envisioned leader-level bilateral meetings in 2026.

Key Takeaways and Recommendations

• Competition must be managed to avoid worst-case outcomes.
  • Mutual misperceptions and inadequate communication are increasing the risk of escalation.
  • Institutionalize economic, diplomatic, and security communication channels that can survive political transitions.
  • Establish high-level communication channels for maritime, space, cyber, and AI-related incidents.
  • Key to managing competition is to reestablish guardrails and find areas of constructive collaboration. 

• Taiwan remains the most dangerous source of potential U.S.-China conflict, but experts do not expect a direct confrontation in the short term.
  • U.S. executive branch rhetoric on this issue has been more toned-down and disciplined.
  • Expand military-to-military communication and crisis-management mechanisms, as existing ones remain insufficient.
  • Enhance channels for managing spillover effects from third-country tensions (Japan)

• Trade and economic issues are likely to remain the dominant focus of diplomacy.
  • Commerce remains the obvious de facto area of collaboration and needs focus beyond “managed trade.”
  • Prioritize achievable agreements on trade and fentanyl enforcement.
  • Expand bilateral cooperation on AI safety, governance, and crisis prevention.
  • Increase transparency regarding export controls and investment restrictions.
  • Distinguish clearly between genuine national security concerns and broader commercial competition.