The most important event of last week’s U.S.-China summit in Washington was the two countries’ decision to reaffirm their commitment to a relationship of strategic stability based on fairness and reciprocity.

That, of course, does not mean that such an agreement is a magic wand that will automatically solve many unresolved issues between the two superpowers operating under very different socio-political systems and economic policies.

Trade with China, for example, remains a difficult problem because the U.S. considers it a systemic issue. During a recent meeting, chaired by the U.S., of G20 finance ministers and central bank governors the joint statement could not be issued because China opposed the conclusion that its “non-market policies” and “cheap exports” were causing global trade imbalances.

The U.S. believes that China’s systemic differences lead to policies offering competitive advantages that are unacceptable in a trading system of market economies.

Those fundamental disagreements largely explain why the U.S.-China trade keeps shrinking. Last year’s 29 percent decline has been followed by a 15 percent drop during the first seven months of this year. A similar pattern is also observed in trade balances: In 2025 China’s surplus on U.S. trades fell 32 percent, with another 29 percent decline recorded in this year’s January-July interval.

A fair burden sharing

The declining American trade deficit with China is a positive development, but the entire burden of that trade adjustment is falling on the U.S. American exports to China in the first seven months of this year had zero growth while Chinese exports to the U.S. soared 24 percent.

And there is worse: What China sold in the U.S. over that period was nearly three times larger than what the U.S. sold to China.

There may be American structural causes to this imbalance, but the U.S. should still be getting a better deal through economic cooperation compatible with the mutually agreed concept of “fairness and reciprocity.” Last week’s agreed bilateral tariff cuts should not be allowed to perpetuate this unfair trade burden on the U.S. side.

The U.S.-China agreement to jointly monitor artificial intelligence developments is also part of bilateral trade relations due to trades in software, microprocessors and memory chips.

The American refusal to slow down the progress of what it calls “super intelligence” is acceptable, provided safeguards are in place to maintain a safe, orderly and productive development of that epochal industry.

On war and peace issues, the status of Taiwan, a self-governed island, is a real powder keg. Beijing justifiably claims that this is a historic province of China, while America’s Taiwan Act, passed in 1979, mandates Washington to provide the island with defensive arms and to oppose any attempt to change its status by non-peaceful means.

The MAD beats “Thucydides trap”

A flammable case if there ever was one: U.S. arming and de facto maintaining diplomatic relations with what China considers its own province.

China keeps warning that this is a latent casus belli because such U.S. acts support Taiwan’s independence forces and obstruct what China calls an overdue national reunification.

The 1953 armistice on the Korean Peninsula and Japan’s administration of China claimed Senkaku/Diaoyu islands in the East China Sea are two other currently active flashpoints. Their importance is highlighted by the fact that the Camp Humphreys in South Korea is America’s largest overseas military base, while the disputed islands are part of Japan, a U.S. treaty ally Washington is legally obligated to defend.

Most of China’s maritime borders are also contested overlapping territorial claims. China wants to discuss them on a bilateral basis – without foreign (i.e., U.S.) interference – according to the Code of Conduct that’s been under discussion since 1992 but is unlikely to be ready for this year’s deadline. China and the Philippines – another U.S. treaty ally -- are constantly clashing in what Manila considers its exclusive economic zone.

The U.S. is directly involved in this situation by conducting Freedom of Navigation Operations (FONOPs) following provisions of the United Nations Convention on the Law of the Sea (UNCLOS), but China condemns those actions for violating its territorial integrity.

This is the background to the two countries’ pledge to maintain strategic stability, after years of China’s quest for “win-win cooperation” and a U.S. partnership instead of rivalry.

As a result of that, China is warning that the stability will depend on whether the two countries on different economic growth trajectories will be able to peacefully and patiently manage their competition.

That is the point China’s President Xi Jinping raised with President Donald Trump last May in Beijing, and repeated last week in Washington, with reference to the Peloponnesian War in the 5th century BCE.

In his work on that war, the Athenian historian Thucydides concluded: "What made war inevitable was the growth of Athenian power and the fear which this caused in Sparta."

China seems to believe that this proverbial “Thucydides trap” can be avoided because in the world of MAD (Mutual Assured Destruction) doctrine the U.S. must build a constructive relationship with a large nuclear armed adversary.