I think the trade war against china is fine, we should be propping up capitalist states not autocratic communist states. If we continue giving more money to china and trading with china directly then we lose influence in the region (just as you said). If we keep the pressure on them economically then we can usurp their influence since they'll be too busy trying to maintain the unrest in Tibet, Xinjiang, Hong Kong, Taiwan, and Macau. Although you are right they have increasing national pride but that's the inner regions of China, those regions where indoctrination and political manipulation is predominant is where the highest amounts of National Pride are.

Yet there is still a call for liberty in the region and we should instead trade directly with the autonomous regions and return our support to Taiwan while delegitimizing the Communist Party of China and their system.

We lose if we continue letting the communists expand their influence.