US-China Trade Tensions: Impact on the Tech Industry

The escalating trade tensions between the United States and China have significantly impacted the global technology sector. From electric vehicle (EV) tariffs to restrictions on semiconductor exports, these measures are reshaping the tech landscape.​

In May 2024, the Biden administration announced substantial tariff hikes on various Chinese imports, including electric vehicles, semiconductors, batteries, and steel. The tariff on Chinese-made EVs was increased to 100%, effectively blocking affordable Chinese EVs from entering the U.S. market. This move aimed to protect domestic manufacturers from cheaper Chinese alternatives. ​

By September 2024, these tariffs were finalized, with rates reaching 100% for electric vehicles, 50% for solar cells, and 25% for electric vehicle batteries, critical minerals, steel, and aluminum. These measures were part of a broader strategy to address concerns over China's trade practices, including intellectual property theft and market flooding with low-priced exports.

In response, China implemented its own set of measures. The Chinese government increased tariffs on all U.S. imports to 84% and blacklisted several American firms, including Shield AI and Sierra Nevada. Export controls on critical materials, regulatory probes, and intensified use of the "unreliable-entity" list targeting U.S. companies were also part of China's strategy. These actions aimed to exploit U.S. dependence on access to the Chinese market, especially for companies in defense and high-tech sectors.

Impact on Electric Vehicle Market

Chinese EV manufacturer BYD has emerged as a significant competitor to Tesla and traditional U.S. automakers. BYD's vertically integrated production and cost efficiencies have enabled it to offer EVs at prices below $10,000. However, the 100% tariff on Chinese EVs in the U.S. has prevented BYD from entering this market. Industry experts warn that such trade barriers could accelerate BYD's global expansion by making U.S. vehicles less competitive abroad. ​

The U.S. has imposed export restrictions on advanced semiconductor technologies to China, aiming to prevent the transfer of technologies that could enhance China's military capabilities, particularly in artificial intelligence. These measures have targeted chipmaking tools and advanced chips, including those from companies like Nvidia. Beijing has criticized these restrictions, stating they violate market principles and fair competition.

The trade conflict has led to a reevaluation of global supply chains, with companies seeking to diversify manufacturing bases outside of China to mitigate risks. This shift has significant implications for countries like Vietnam and Cambodia, which face secondary tariffs due to their role in exporting Chinese goods. The ongoing tensions have also spurred discussions about de-dollarization and the promotion of alternative trade currencies to reduce reliance on the U.S. dollar. ​

The trade measures between the U.S. and China are reshaping the global technology sector, with significant impacts on electric vehicles, semiconductors, and broader supply chains. As both nations navigate this complex economic landscape, the outcomes will have lasting effects on global trade dynamics and technological advancements.