China situation is interesting. Western policy-makers basically want and have wanted for decades (via soft power) a liberalised China. But a liberalised China would equate to a giant super China with GDP double or triple the US, over the long-run (**see note 1). I.e. we will see in-effect China as the dominant global power, but the West wouldn't mind this as long as China stays within and upholds the Western created liberal order. This has always been the thinking for the past many decades. But it is an idea that is idealistic. Which is exactly what Liberalism IR theory is, it's an idealistic theory / worldview.
**note 1 (Note that such a large China (double or triple the US over the long-run), as we see in WEF forecasts etc, is based on this premise, the premise of an economically Liberalised free-trading China, those long-run WEF type forecasts are based on convergence theory, which itself is based on the premise that nations converge per capita providing they adhere to free-trade, i.e. emerging markets will grow faster and benefit more from free-trade in zero-sum terms than advanced economies. Liberalism IR states this is fine as it would be 'win / win' as nations idealistically become interconnected to one another and an almost 'world peace' emerges as they converge per capita and international institutions become more and more dominant, i.e. a liberalised / Liberalism IR / Liberal world order maintains)
The dilemma (excluding the fact that Liberalism IR is a highly idealistic approach), is that in the present China since 2008, but in particular since 2012 with the Xi Jingping reign (leader for life in effect), China have been very transparent in saying they do not intend to liberalise thus adhere to the Liberal / Liberalism IR order. Thus raises the dilemma with the West and Western distrust of China. Many in the West still expect or want China to liberalise, if only the West were to continue using international institutions or soft power (which hasn't worked to date), it would work, or so some still argue, mostly influenced by allegiance to Liberalism IR thought, or due to influence from various Western myopic self-interests. The fact that China is no longer interested or intends to Liberalise, and has been incredibly transparent about this in CCP statements, in OBOR, in Made in China 2025, and in their general activities and breaches against the WTO standards etc (WTO is highly ineffective mind-you, knowing people who worked in / with WTO, it takes years to process disputes / cases with the end result most of the time not achieving anything in regards to stop behaviors etc), the reality of today is that it's more in Western interests for a deal not to be acheived. At least geopolitically / in terms of Realism IR.
But domestic politics and domestic elections we see warp / skew that. This decision by Trump admin is but one example. It's no longer in US long-run geopolitical interests to have a trade deal with China. The original list of demands the US sent to China are impossible to agree for China. They require complete structural reforms in the economy of China that politically will be untenable to the CCP (some of the requests are even impossible to police / monitor). Nor is China per their transparent statements and actions going to liberalise, the sooner the West realises this is absolute the better (and the sooner they realise it's based on completely idealistic premises anyhow the better). Many in the Western policy-making (the US in particular) have already identified this. Apparent by the rise in Realism IR thinking we have seen again in the last few years, after decades of hibernation from thought / debate after the collapse of the USSR. But that doesn't prevent it also being in the US (and Western) short-run economic and political interests to turn a semi-blind eye and continue as normal, with weak platitudes of 'future reform' (kicking the can down the road and continuing the already decade long failure policy approach, which benefits the short-term at the cost of the future). This option is naturally supported by self-interested businesses and consumers. Which will win? The short-term myopic interests (that benefits businesses, consumers, etc), or the long-run interests (that benefits the nation geopolitically and macroeconomically in the long-run)? Or is the answer to try and toe-the-line of both, or to see conflict among both? I think what we're seeing are these two divergent interests pushing and pulling both ways, hence the scrambled / confused US approach (and the same applies in other Western nations, confused / ineffectual policy towards China, thus is the China dilemma).