I can bite on what Julia is saying here but it opens up a whole host of other issues. I do in fact deal with similar scenarios of adjusting breakers frequently because our firm focuses on interconnecting co-generation to a building. Because we are typically trying to squeeze into busses we are derating breakers all the time, usually because line losses are a concern, I'm never splitting hairs with conductors, I can't think of the last time I've used the next size up rule on any circuit over 20A.
A 200AF/175AT fixed setting breaker may be the same discussion and may not be, depends on the breaker; usually if this setting change is done with thermal magnetic components then its not at all the same discussion because those thermal magnetic components themselves are rated for the trip setting, usually 100% rated breakers are electronic trip units so their tripping properties aren't [generally] affected by thermal properties of the circuit its controlling - these are strange size breakers to get into this discussion with. With an adjustable breaker it must be able to pass at its max trip setting for UL testing so yes I could agree that is the intent of the 80% rule if derating the trip on a breaker properly and depending on the trip curve you have.
However, your AHJ would probably argue that you have a full-rated circuit. I don't have my 2017 book in front of me (sorry stumbled across this working on different stuff instead of while slacking at the office) so I'll have to search later for references but I believe that if you are operating at 100% of trip rating continuous and in your case your conductor is sized for a 100% trip rating (vs. conductor sized for the 200A and you happen to be tripping it at 175A for other design reasons), it considers the thermal and inductive properties of an undersized conductor (or 100% sized conductor) at the lugs and how that impacts the switchgear that it is in, not just the breaker or the breaker frame itself. This is why if you trigger the 100% rated exemptions at all, you are forced to have all upstream equipment 100% rated.
So say this 175A continuous rated circuit is the only load in the MDP and you are at 100% rated and you have a 3000A main breaker, it needs to be 100%[full] rated even though the only current it is going to see is 175 amps continuous, well below the thermal rating of the breaker or the frame, the problem is that this now focuses on the CIRCUIT and all of its components and how the whole system is impacted by the choice to undersize your conductor. You'll need to use 90C wire but use the ampacities from the 75C table. This may or may not negate your original budget savings depending on your scenario when you factor in the impact to ancillary/upstream equipment to the equation.
In either case, I am surprised Jim didn't quote himself here:
"
Just because you can, doesn't mean you should." - jim dungar
I think the worst thing to skimp on is conductor, especially in a conduit with so many CCC's. If life safety isn't enough of a concern energy efficiency is a huge factor as well.
