Too much expectation is being loaded on the prospect that one dinner in Buenos Aires between US President Donald Trump and China’s President Xi Jinping will solve the many differences in trade and global outlook between the two nations.

There is at least the promise of good progress, which is the most sober way to interpret Trump’s hyperbolic statement that the dinner ‘was an amazing and productive meeting with unlimited possibilities for both the United States and China’.

The leaders agreed there would be a temporary halt in plans to increase tariffs on Chinese exports to the US on 1 January. That is significant—the prospect was for a further US$250 billion worth of tariffs placed on Chinese exports.

But the halt of tariff increases depends on further talks and will surely require real progress to reduce China’s massive trade imbalance with the US, stop forced technology transfers and end Beijing’s cyber-enabled theft of US intellectual property. These are much harder tests to satisfy.

The onus will be on China to demonstrate that it’s willing, for example, to cease its industrial-scale cyber hacking of US businesses, universities and government systems. And it will need to put flesh on the bones of promises to buy a ‘very substantial … amount of agricultural, energy, industrial, and other product from the United States’.

In September 2015, then president Barack Obama extracted from Xi a commitment that China would not ‘conduct or knowingly support cyber-enabled theft of intellectual property’ and a promise that ‘China does not intend to pursue militarisation’ of the South China Sea. Of course, neither undertaking lasted.

Obama’s China policy failed because the US never applied believable red lines to stop Beijing’s bad behaviour or apply costs to punish cyber spying and illegal ­island building.

By contrast, Trump’s China policy has been more successful. Even before Trump was sworn in, he was rattling Beijing by musing about US support for the ‘one-China policy’ and taking an unprecedented phone call from Taiwan’s President Tsai Ing-wen.

Trump’s imposition of tariffs on Chinese exports offends trade purists, but the fact is the US economy is in a stronger position to withstand a trade war with China. The risks for Beijing are greater: China’s economy is more vulnerable, and that plays on the deep-seated fears of the Communist Party that its iron control over its people will be challenged if it can’t meet expectations for growth and relative prosperity.

Broader than trade, a bipartisan US consensus has emerged that China is now its biggest strategic competitor and that Beijing’s challenges to the international rules-based order in the South China Sea, and in the Pacific and globally via the Belt and Road strategy, need to be resisted.

For once, Trump’s gut instincts are helping. He holds out to Xi the possibility of better relations—‘We’re going to end up doing something which is great for China and great for the United States’—at the same time as the US makes clear it is unafraid of open competition with China on the economic, strategic, military and cyber fronts.

Trump at best is an awkward champion of the rules-based order. But the most striking feature of the G20 summit is just how broad the challenge is to the stability of the international system that the US, Australia and Europe all promote. Look at the roll call of G20 leaders: Vladimir Putin attends at the same time as Russia fires on and illegally holds Ukrainian sailors and ships; Saudi Arabia’s Crown Prince Mohammed bin Salman rubs shoulders with global leaders, just weeks after Riyadh’s flagrant assassination in Turkey of regime critic Jamal Khashoggi; Xi signs the G20 declaration supporting ‘the free flow of information, ideas and knowledge, while respecting … intellectual property rights protection’ at the same time as China controls all information domestically and is the biggest international cyber spy.

The delivery of a G20 communiqué where leaders could find common ground in the face of such basic differences on the international rules of the road is a minor miracle. Trump should take some credit for putting more pressure on the bad behaviour of Russia and China.

The best outcome from the dinner was Xi’s promise to place harsher legal penalties on Chinese illegal shipments of the opioid ­fentanyl to the US. The test will be if Xi’s commitment is any more believable than the broken undertakings he gave Obama in 2015 on cyber spying and militarising the South China Sea.

There has long been talk that the strategic rivalry emerging between the United States and China in recent years could one day give way to confrontation. That moment has arrived. Welcome to the Cold War 2.0.

The standard narrative about the Sino-American conflict is that it pits two distinct systems against each other. To the US, China is a big-data dictatorship that has detained a million Uyghurs in concentration camps, cracked down on Christians, curtailed civil rights and destroyed the environment—all while building up its military and threatening America’s regional allies. In the view of many Chinese, the US is an exponent of interventionism and imperialism and the Trump administration’s trade war is merely the opening shot in a larger economic, military and ideological contest for supremacy.

Yet this framing gets things backwards. The new Sino-American confrontation is rooted not in the two countries’ differences, but in their growing similarity. China and America used to be the yin and yang of the global economy, with America playing the role of consumer and China that of manufacturer. For years, China funnelled its surpluses back into the purchase of US Treasury bills, thus underwriting American profligacy and forging a symbiotic arrangement that the historian Niall Ferguson has called ‘Chimerica’.

But Chimerica is now a thing of the past. With his ‘Made in China 2025’ policy, Chinese president Xi Jinping is moving his country up the global value chain, in the hope of becoming a world leader in artificial intelligence and other cutting-edge technologies. To that end, China has curtailed Western companies’ access to its markets, making it conditional on their transfer of technology and intellectual property to domestic ‘partners’.

At the same time that China has been reorienting its economic-development model, the US has replaced its traditional laissez-faire approach with an industrial strategy of its own. Behind Donald Trump’s trade war is a desire to rebalance the economic playing field and ‘decouple’ the US from China. And with both countries now locked in a zero-sum competition, Team GAFAM (Google, Apple, Facebook, Amazon, Microsoft) and Team BATX (Baidu, Alibaba, Tencent, Xiaomi) are waging a war of technical know-how and data access on a global scale.

Yet by trying to outcompete each other in the same areas, the US and Chinese strategies are becoming more alike. In response to former US president Barack Obama’s efforts to create a Pacific-rim trade bloc to contain China, Xi launched his Belt and Road Initiative (BRI), which is now being met by an American-led Indo-Pacific initiative under Trump.

The two countries are also on similar paths militarily. Though China still has a lot of catching up to do, its total defence spending is already second only to the US. It has built and launched its first aircraft carrier and has plans to launch more. It is developing and deploying anti-access/area-denial defence systems. And by establishing its first overseas military base in Djibouti, it has signalled that it has global—not merely regional—ambitions.

China and the US also increasingly share a predilection for interventionism. For China, this represents a stark break from decades of treating non-intervention as a quasi-religious doctrine. But China’s changing attitude makes sense. As Yan Xuetong of Tsinghua University explained to me shortly after the US invasion of Iraq, a country’s support for intervention reflects a recognition of its own power. He predicted that as China built up its military forces, it would become more open to exerting its influence abroad.

Chinese citizens and many others around the world now expect precisely that. After evacuating hundreds of its citizens from Libya in 2014, China increased its participation in United Nations peacekeeping missions. And, following a series of attacks in Pakistan, it created a special security force (mostly of private contractors) to protect Chinese interests along the ‘new silk road’ of BRI projects.

Another area of Sino-American convergence concerns the multilateral system. In his 2005 ‘responsible stakeholder’ speech, then-US deputy secretary of state Robert Zoellick told the West that global governance institutions must include China or risk being overturned. But to the Chinese, international engagement was never a binary choice. So, rather than becoming a responsible stakeholder in the US-led order, China is now developing what might be described as internationalism with Chinese characteristics.

Accordingly, China has taken advantage of membership in Western-dominated institutions while simultaneously defanging them and building a parallel system of its own. But, as the structure of the BRI shows, the world order China envisions is based not on multilateralism, but on bilateral relations. By dealing with other governments one on one, China can negotiate from a position of strength and impose its own terms.

Trump’s ‘America First’ doctrine embodies the same vision for the US. Both he and Xi have embraced a message of national rejuvenation. This has led Xi to replace China’s longstanding foreign policy of moderation and tactical cooperation with one based on the pursuit of national greatness. And both leaders have increasingly taken decisions into their own hands, while undercutting their respective countries’ systems of checks and balances.

Although ‘Cold War 2.0’ does not feature the same clash of utopian ideologies as the original, the metaphor is fitting nonetheless. Like its predecessor, this one will feature two superpowers that disagree on how the world should be organised, but agree that there can be only one winner.

Arthur B. Culvahouse Jr has been nominated by Donald Trump to be the new US ambassador to Australia.

He will need to be ‘confirmed’ by Congress before he takes up the appointment, a process that could take up to several months.

If Australia got to choose a US ambassador and ran the selection process, we’d probably have three key things we’d like to see in a candidate.

Our top priority would be that Washington’s envoy in Canberra be directly connected to the US president—so that when she or he calls, the president not only picks up the phone, but listens.

Second, to be effective it’s essential that America’s top diplomat in Australia understands and can work the Washington policy machine and can connect to the US business, technology and education sectors to achieve outcomes.

Third, a US ambassador must understand the depth and value of the Australia–US alliance, and the Australia–US economic and social connection—and be driven to deepen them, not just maintain or let them coast. We don’t want paeans of praise for 100 years of mateship. We want an ambassador who is restless and full of energy to show what we can do together next, across the breadth of the strategic and economic relationship.

The good news is that Donald Trump’s nominee, A.B. Culvahouse, has all these attributes.

He’s been closely connected to the highest levels of US presidential administrations since 1976, serving in Ronald Reagan’s White House, as well as on various defence, intelligence, and foreign and public policy advisory boards. He’s also on the board of trustees of the Brookings Institution—one of the best US think tanks.

His long career in the law, peaking with leading law firm O’Melveny & Myers LLP, gives him a huge professional network across the US technology sector, the broader US corporate community, and into the US higher education sector—all areas that are key to building on the US alliance at this particular time in global affairs. He’ll have a fat rolodex and a well-connected smart phone.

Even more than Trump’s original nominee, Admiral Harry Harris, Culvahouse is well equipped to understand that Australian and American prosperity, freedom and security are built on much more than military-to-military, diplomatic and intelligence relationships. While these are crucial, we now need an agenda across a much broader strategic, economic and research landscape and we need to forge closer connections across these sectors between our two countries.

An amusing sidelight, maybe showing a bit of his character, was his line to then senator and presidential candidate John McCain during the 2008 election campaign. Running the vetting process that offered up Sarah Palin as a VP candidate for McCain to consider, he said she was ‘high risk, high reward’. McCain took the risk. Culvahouse’s judgement was right—with the risk side dominating.

From his experience in the defence and intelligence world, he will have an appreciation of bilateral security matters. He has visited Australia and spent time meeting people involved in national security policymaking—who I understand found him intelligent, informed and engaged, if low key in approach.

What’s new for him in the role? He’ll need to develop a public voice that works in the Australian political and domestic context, but that’s normal for newly appointed ambassadors. Others—like John Berry, the immediate past occupant of the post from 2013 to 2016—faced this challenge and did it well.

Any US ambassador also needs to be able to work with Australian ministers, other parliamentarians (notably the opposition) and officials as partners, and speak with frankness and clarity about where our national interests differ and where they overlap deeply.

Of course, he’ll be very well briefed by James Carouso, long-serving chargé d’affaires at the embassy, who has worked to create momentum in the alliance, and who knows Australia so well. Carouso hands over a going concern rather than a renovator’s dream, so Culvahouse will be able to get off to a running start.

I don’t see any real risks for his confirmation: he’s likely to have support from both sides of Congress. And he certainly understands what’s involved in a vetting and confirmation process, so he’ll be well prepared.

This is good news for the Australian–American relationship—not just in national security terms but across the broad strategic and economic landscape.

America’s greatest error was not the Iraq war, calamitous self-inflicted wound though it was. Rather, it was adopting Francis Fukuyama’s now discredited idea that the end of the Cold War marked ‘the universalization of Western liberal democracy as the final form of human government’.

That proposition rested on the notion that individual liberty, supported by mature democratic institutions, is a prerequisite for long-term social stability and national economic prosperity. It is a falsehood sustained for decades by an admirable truism of the American soul: the belief that everyone, deep down, is secretly an American—that if you’re just given the right opportunities, institutions and freedoms, you too will hold the same values, dreams and ideals.

This attitude sustained American foreign policy towards Beijing for 40 years. Washington actively fostered China’s rise, thinking that as people grew more educated and prosperous they would invariably demand and achieve greater political freedom—and that in the end, prosperity would socialise a newly democratic China as a ‘responsible stakeholder’ in the US-led global order.

When this process began, China’s economy was roughly the same size as Australia’s. Since 1979, China’s economy has grown 50-fold. Instead of democratic reform, Chinese President Xi Jinping has centralised authority, changed the constitution and extended his term indefinitely. Meanwhile, China’s government is rolling out a so-called social credit system profiling every citizen’s financial records, social media, purchasing behaviour and political affiliation—extending absolute control under an AI dystopia, in real time.

America’s policy of fostering Chinese growth has led the United States to near disaster. In Vice President Mike Pence’s speech on China, however, there was at last a formal declaration of failure:

After the fall of the Soviet Union, we assumed that a free China was inevitable. Heady with optimism at the turn of the 21st century, America agreed to give Beijing open access to our economy, and we brought China into the World Trade Organization.

Previous administrations made this choice in the hope that freedom in China would expand in all of its forms—not just economically, but politically, with a newfound respect for classical liberal principles, private property, personal liberty, religious freedom—the entire family of human rights. But that hope has gone unfulfilled.

Minus the theatrical flair, this was the Iron Curtain speech of the 21st century. The post–Cold War era is over. The China–US struggle has now begun.

During my lifetime, no political and strategic analysis has been so reliably abysmal as commentary on President Donald Trump and his administration. One source of constant headaches is the misinterpretation of his ‘America First’ foreign policy. Put simply, Trump’s approach can be summarised in six guiding principles:

• Sovereignty is the highest priority.
• Self-interest trumps ideology.
• The United States is a country like any other.
• Trade must be reciprocal.
• Alliances are policy and strategy, not identity.
• Commerce is not zero-sum, but power is.

Some have interpreted this to mean that Trump’s America is withdrawing from Asia in some kind of neo-isolationism. In fact, the exact opposite is true.

At its core, ‘America First’ is the consequence of a strategic rivalry between two great powers decoupled from any global ideological struggle. Americans rightly believe that democracy and individual liberty are superior to Confucian dictatorship for human wellbeing. What ‘America First’ discounts, however, is the belief that Western liberalism is necessarily more successful with regard to governance, economic growth or social harmony. After all, despite the questions surrounding the CCP’s legitimacy, the American political system is currently consumed by ideological division and deepening partisan hatred.

The China–US cold war contrasts with the struggle against the Soviet Union, where American defeat meant the collapse of global capitalism and classical liberalism. It resulted in an alliance framework organised by geography yet fused by ideology. This time around, however, American defeat means, well, American defeat. This fact, more than any other, guarantees that ‘America First’ will continue to attract adherents domestically and dominate American foreign policy thinking long after Trump himself leaves office.

All this has major implications for Australia. As a Western US ally marooned on the Asian periphery, surviving the new US–China cold war will easily be the most challenging foreign policy trial our nation has ever faced. And while the motivating cause has been misdiagnosed—something that risks further miscalculations down the line—it is heartening to see commentators from across Australia’s strategic traditions calling for a revised doctrine to respond to our rapidly deteriorating environment. Goodness knows we need it.

It might sound odd, but interstate behaviour turns out to be something that can be understood by modelling it as a complex system. Our modelling of interstate interactions over a very long timeframe seems to be robust enough to show the patterns of decline and fall of states. As an example, it’s solid enough to model the post–World War II period of prosperity and growth—and show the dominance of the US along with the rise of other powers we have experienced.

Looking ahead, it even seems able to indicate some important attributes that the interstate system might have as a result of the direction in which President Donald Trump is taking the United States.

A disturbing but not particularly surprising insight from the modelling is that Trump’s ‘America First’ agenda may well result in the US being the strongest nation—but mainly by creating a poorer and less capable future world—one where all nations lose, but other nations lose more than the US does. In other words, it’s not a ‘win–win’ world where all prosper, but a more selfish, narrower world.

Whether he realises it or not, Trump is trading off national wealth for global power. That’s because his isolationist policies seek to create events that are qualitatively different from the great run of historical events.

Those events—world wars, depressions, even the collapse of the Soviet Union—are, from a complex systems perspective, merely the working though of perturbations to the global system, the ensemble of competing and cooperating nation-states. Broadly, the system absorbs these perturbations over a relatively short period of time and returns to its trajectory.

But Trump seeks, instead, to reset the fundamental parameters of the world order rather than merely perturb them—and that will have consequences for the world’s balance of power.

We’ve modelled the ensemble of nation-states as a complex system, allowing us to examine the emergence and evolution of both wealth and power under different conditions of cooperation and competition. These models can be tuned for the different domains—such as land, sea, air, space and cyberspace—in which states interact. And, like all models of complex systems, they don’t purport to show precise behaviour, but rather the general classes of behaviour of the system—in this case, the classes of behaviour reachable by a system of real states that cooperate and compete with each other.

The graphs below shows some of our results with the model tuned for the physical domains, rather than the cyber domain. In these traditional domains, cooperation is manifested as trade in physical goods, and competition, in the limit, is manifested as kinetic warfare. We can see how the wealth (and hence power) of an interacting suite of initially equal states rises and falls over time for different levels of cooperation and competition. The upper graph shows a world where international competition rather than cooperation is the norm—a world not unlike that which existed in the lead-up to World War II. The lower graph shows a world with a bias to cooperation—not unlike the post-war world.

Changes in the wealth of states that emerge over time for model runs with two different levels of cooperation

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In the competitive world of the upper graph, a persistent structure to the international order emerges spontaneously. The structure consists of a long-lived hegemon of vast wealth, a relatively few middle powers whose wealth (or power) together don’t rise to the level of the hegemon and whose longevity is conspicuously less than the hegemon’s, and a tail of small, weak and relatively short-lived powers.

In earlier times, we saw these structures arise regionally, the Roman Empire being a case in point. But in more recent times the structure has become global, and today’s hegemon is, obviously, the US.

In the model, as in the real world, competitive challenges to the hegemon from rising powers are more often than not rebuffed, as can be seen at about time step 1600 in the competitive world of the upper graph in the figure. Thucydides’ Trap is a risky place for the challenger, as history shows. But such challenges are more likely to succeed in the cooperative world of the lower graph, as can be seen at about time steps 1500 and 1750. However, while these are successful transitions, the challengers don’t upset the system, but merely take the hegemon’s place in the same overall structure.

The two graphs capture the essence of the US’s strategic choices. In the aftermath of World War II, the US, the world hegemon, reset the international balance distinctly towards cooperation through the Bretton Woods agreement. It created a world with a bias towards international cooperation that ushered in 70 years of economic growth.

The Bretton Woods reset corresponds in the model to pushing the ensemble of nation-states from low levels of cooperation to higher levels—that is, from the system in the upper graph to the system in the lower graph. When that happens, global wealth rises, but with it more states rise in wealth, creating a significant number of wealthy middle powers (where before there had been few).

After Bretton Woods, the US rode on the top of the rising tide and remained the hegemon throughout the creation of what we now call ‘the rules-based international order’. But that allowed the emergence over time of a group of rising powers that could potentially challenge its hegemony, including Japan, the EU and, of course, China. That reset greatly advantaged the US, allowing it to grow richer and more powerful than it otherwise would have. But it also created a pool of possible challengers to its hegemony, and so created the catalyst for Trump’s reset—‘America First’.

There’s a certain logic in Trump’s agenda, even if it is not witting. It seeks to undo Bretton Woods and push the world’s ensemble of nation-states back to the low levels of cooperation seen in the upper graph.

This reset would have several distinct effects. First, all states, including the hegemon, would be poorer than they otherwise would have been. But the reset would have a second, more subtle effect. It would disproportionally impoverish the middle powers immediately below the hegemon in the pecking order, as can be seen in the upper graph. Thus, it would make it harder for other powers to rise and challenge the hegemon, extending the duration of US hegemony.

Can Trump’s perverse logic of narrow self-interest really be seen as a grand strategy? Or has he merely stumbled upon a policy setting that has vast strategic consequences? We may never know, but we will certainly experience the consequences.