They’re going to keep trying to beat that military Keynesian horse. Every government spending program will be justified as being to “beat the Chinese”. This will keep the defense intelligentsia happy. The use of defense spending for industrial policy will increase, because it’s a big source of manufacturing and STEM jobs that congressmen can direct to their district. They’ll keep doing this whether it works or not. Eventually China will “beat” the US in the arms race, but that’s not going to break the iron triangle.

US power isn’t going to collapse, other countries will just gradually start to ignore the US more. The US will still try to quixotically pursue unilateralism in a multilateral world, but no one outside the anglosphere will give a shit. I don’t think there will be some showdown with China, US policy is merely delaying their technological advancement by a decade and countries which export equipment China like Germany aren’t going to compromise a productive trade relationship to contain a country which poses little threat to them.