US President Donald Trump’s visit to China—amid tensions in West Asia, growing friction over Taiwan and an ongoing trade and technology war between Washington and Beijing—raises an important question: Are we witnessing a strategic reset for a multilateral global order, or merely another phase of transactional diplomacy? More importantly, what does this shifting dynamic mean for China-India relations, and consequently for Nepal?

Many foreign policy observers believe President Trump is shifting toward détente and transactional dealmaking aimed at economic stabilisation. In return, this recalibration, is expected to encourage China’s involvement in addressing conflicts in West Asia. Some analysts describe this evolving relationship as ‘cold peace’—a limited, practical re-engagement to secure specific national interests.

Concurrently, Beijing is projecting itself as an indispensable global actor from a position of strength. By hosting a steady strem of foreign leaders rather than outbound state visits, China is signalling confidence. This positions Beijing as a diplomatic centre of gravity, managing competition with the US while maintaining a robust strategic partnership with Russia in a multipolar fashion.

Interestingly, Washington and Beijing are offering differing narratives of the May 14 Trump-Xi summit. China emphasises managed competition, strategic stability, a firm position on Taiwan, and continuity in its economic openness to American businesses. The US, by contrast, focuses on reciprocal trade, securing the Strait of Hormuz and protecting American technological leadership.

This major power competition directly impacts South Asia, a region vital to Indo-Pacific competition, Eurasian politics, and Indian Ocean trade routes. India faces a particularly triangle: It relies on Russia for defence, competes with China for regional leadership, and seeks cooperation with the US. If US–China tensions soften, New Delhi worries about losing strategic leverage. If Beijing and Moscow deepen ties, India faces a tighter northern geopolitical environment. Consequently, India will likely double down on ‘multi-alignment’, rather than choosing sides.

Smaller South Asian states, global rivalries offer more room for hedging but also increase pressure to align with security agendas. While a less confrontational US-China phase could boost Nepal’s exports, tourism and investment flows, a hardening rivalry risks pushing the region into ‘friend-shoring’ and entangling Nepal’s domestic politics.

The challenge for Kathmandu is leveraging economic benefits without becoming a geopolitical instrument. Led by new progressive actors following the Gen Z revolution, Nepal’s current government is shifting toward pragmatic nationalism over ideological lines. The Balen-led government appears focused on concrete benefits rather than drifting into symbolic geopolitics, BRI hype, or Millennium Challenge Corporation (MCC) polarisation of earlier governments.

Given the greater global geopolitical rivalries and competition, two implications are obvious. First, the greater powers are likely to put their interests above and ignore any third countries’ concerns, as shown by India and China’s agreement on opening up Lipulekh even with Nepal’s persistent protests through diplomatic notes. Within this context, Nepal should continue resisting any perceived external interference, whether from Delhi, Beijing, Washington or multilateral institutions.

On the other hand, Nepal cannot afford to tilt in one camp or the other and, thus, needs a stricter strategic balancing among India, China, the US and others by avoiding formal alignment with any bloc. The right approach is to engage with all without drifting into anyone’s proxy.

Yet, Nepal’s ‘neighbour-first’ policy should remain central as both India and China remain Nepal’s unavoidable strategic priorities, particularly in the areas of trade, tourism, investment and connectivity. The other major implication of big countries’ rivalries is that Nepal’s economic diplomacy should become more explicit and should be a major foreign policy priority even within the existing political and other disputes, such as the border disputes with India.

Given the challenging geopolitical situations, many developing countries in the world now shift toward a more pronounced foreign policy to get infrastructure funding, investment, technology transfer, energy exports, jobs, logistics and market access. The current government’s framing of Nepal as an economic ‘bridge’ rather than a passive buffer is the right messaging, even though political pundits have criticised the use of ‘buffer’ as undermining Nepal’s sovereignty.

Particularly on development projects of superpowers that are likely to be linked with security and other goals, such as geopolitical branding, Nepal should ask these relevant questions for more scrutiny: Is financing sustainable? What are the debt terms? Does Nepal retain control over the project? Is there a measurable economic return?

Kathmandu should utilise any geopolitical breathing space created by a reset in major power relations to advance economic development, trade and investment. Ultimately, Nepal’s success will depend on whether it can avoid playing the ‘China card’ or the ‘India card’ for short-term political balancing and instead pursue a pragmatic, issue-based foreign policy firmly rooted in national interest.