Role of Nuclear Weapons in a Non-Interventionist Foreign Policy

I know some non-interventionists believe that strategic nuclear weapons are sufficient to deter all foreign aggression. For this to work, however, any attack (not only a nuclear attack) would have to be met with a nuclear response. I'll use an example to show why this is problematic. Suppose (in the not so distant future) that the Chinese decide they want Hawaii. The US has no conventional military, just a strategic nuclear force. A Chinese invasion fleet is moving toward Hawaii. How does the US respond? Is it going to launch a massive nuclear strike against China? No, that would be insane, since the Chinese have nuclear weapons as well and would retaliate in kind - leading to a result much worse than losing Hawaii. Moreover, the Chinese would know this and would therefore not be deterred from attacking Hawaii in the first place. Bottom line: no sane state is going to use nuclear weapons against another nuclear-armed state unless it's facing total destruction, which means that a US bereft of conventional military forces is vulnerable to death by a thousand cuts. First Hawaii, then the California, etc, etc. As long as the Chinese keep the threat below the threshold at which it would be rational for the US to use nuclear weapons (which is an extremely high threshold), there will be no nuclear response - and so no resistance at all.

Basically, strategic nuclear weapons are only useful at bullying non-nuclear states and preventing nuclear war between nuclear states. This is why it still makes sense to think about conventional warfare. Any war between the major powers in the future will be non-nuclear, even if all parties concerned have nuclear weapons, because it makes no sense for any of them to use them.

But what about tactical nuclear weapons? Those would be smaller nuclear weapons designed to attack military forces (e.g. a Chinese fleet approaching Hawaii or Soviet army corps driving through the Fulda Gap) rather than to annihilate an entire country. These could potentially be used without generating an all-out nuclear exchange (just as it would be irrational for the US to launch an all-out nuclear attack against China in response to an invasion of Hawaii, so it would be irrational for the Chinese to launch an all-out nuclear attack against the US in response to the US blowing up that fleet that tactical nuclear weapons). Both sides developed tactical nukes during the Cold War for precisely this reason. Once it became clear that no one could possibly "win" an all-out nuclear war, they started developing tactical nukes to augment their conventional forces. NATO knew it would be outnumbered if the Soviets invaded Western Europe, hence they stationed nuclear artillery and other tactical nukes in Germany to even the odds.

My quesiton is: why were these abandoned? Was it decided, through some game-theoretic exercise, that the risk of escalation was too high (i.e. that tactical nukes would still likely generate an all-out nuclear exchange), or what? Because it seems to me that these would be an extremely cost-effective solution to national defense (and hence an attractive option from a libertarian/non-intervention point of view). Maybe that's actually the reason they were abandoned? - the MIC didn't want to put itself out of business?

Thoughts?