The tariffs introduced on “Liberation Day” by Donald Trump have been unsettling global markets and reigniting concerns regarding a potential prolonged trade war. The U.S. president is reportedly considering revising some of the most impactful tariffs while hinting at the possibility of new agreements. However, threats of additional measures targeting goods such as semiconductors and pharmaceuticals remain as part of his efforts to disrupt the global trading framework.
The impact on China’s tech sector, which recently thrived on the success of DeepSeek’s AI model, is uncertain. Since Trump’s initial tariffs in 2018, China has been preparing for further U.S. restrictions. Anticipating tighter access to advanced technology, Beijing has been developing its technology supply chains, enhancing renewable energy capacity, expanding cloud computing through projects like East Data West Compute, and investing in lidar and battery technologies.
Rather than attempting to outdo U.S. innovation in AI infrastructure, Beijing is focusing on its strengths in manufacturing and advancing in areas like robotics and AI-enabled electric vehicles. Although China’s chip industry lags in cutting-edge technology, it has become more self-reliant since the U.S. began imposing stricter chip export controls five years ago. DeepSeek’s open-source AI models contribute to this shift by making affordable large language models possible.
Despite possible tariff reductions by Trump, the U.S. is expected to continue applying constraints on China’s tech sector, with bipartisan support for measures like chip export controls in Washington.
AI companies such as Alibaba, ByteDance, and DeepSeek have heavily depended on Nvidia’s H20 chip, a leading processor that was available for legal purchase in China. A full ban on such processors may compel Chinese technology giants to reconsider their chip strategies, potentially turning to alternatives like those offered by Huawei.
Analysts anticipate a significant revenue increase for Huawei as businesses pivot to its AI systems. Recent assessments suggest that Huawei’s latest offerings could outperform Nvidia’s in certain configurations.
The U.S., through export controls, targeted tariffs, and industrial policies, seeks to address strategic competition and enhance supply chain resilience, mirroring China’s approach.
Since 2018, many companies have moved manufacturing to countries like Vietnam, Bangladesh, and Thailand. However, China remains an essential part of the supply chain, as highlighted by Apple CEO Tim Cook, due to its unparalleled scale, labor skills, and infrastructure.
Trump’s tariffs are increasing costs for consumers and forcing U.S. tech companies to reassess long-standing supply chain strategies amid market unpredictability caused by policy changes like tariffs and export bans. Some Chinese firms temporarily pause dealings with the U.S., focusing on other markets and hedging against potential trade disruptions.
While tariffs indirectly impact China’s AI plans, they may alter the broader tech ecosystem dynamics. Cross-sector collaboration in AI, cloud computing, and semiconductors benefits from openness, despite strategic autonomy considerations.
The rise in anti-Chinese sentiment globally, intensified since the COVID pandemic, complicates matters, reducing trust and harming the social fabric vital to innovation. This shift is evidenced by the return of Chinese academics facing prejudice abroad.
As the U.S. continues using tariffs, subsidies, and export controls to maintain its tech dominance, China may be forced to further develop its tech capabilities. The ongoing trade tensions, even if leading to an agreement, are likely to drive China to invest more deeply in its technology sector, potentially diminishing the impact of future U.S. measures like the H20 chip ban.
While competition can be constructive, it shouldn’t lead to a breakdown in collaboration. Both nations face the challenge of ensuring national security while maintaining opportunities for cooperation in areas like climate tech, healthcare, AI safety, and open-source development.
