U.S.-China tensions are expected to increase further under Donald Trump’s presidency. Major Chinese companies, including CATL, a key Tesla supplier, are already facing stricter U.S. regulations.
As trade restrictions and sanctions intensify, experts warn of potential global economic impacts in 2025, with uncertainty surrounding future trade relations and technology collaborations between the two nations.
A key Tesla supplier, CATL, criticized the U.S. government for designating it a “Chinese military company” amid rising tensions between the two nations.
The Department of Defense added CATL, the world’s largest EV battery maker, and Tencent to its list of companies allegedly linked to the Chinese military.
Both companies denied the claims and vowed legal action.
CATL dominates the global battery market, supplying major EV makers like Tesla and Ford. While the designation doesn’t directly affect business operations, it could deter U.S. companies and pave the way for tougher sanctions.
The move follows other regulatory measures by the Biden administration targeting Chinese industries, including 100% tariffs on Chinese EVs and proposed bans on Chinese software in U.S. cars.
Tencent stock was heavily hit by the U.S. Department of Defense’s inclusion in its updated “Chinese military companies” list. The list of firms allegedly aiding China’s military also included Huawei and Yangtze Memory Technologies.
Under U.S. law, companies on the list may face goods or services bans, though this isn’t always enforced. The updated list removed six firms, including Beijing Megvii Technology and China Railway Construction, citing changed circumstances.
Tencent denied the allegations, calling their inclusion an error. Tencent stated , “We are neither a military company nor a military supplier.”
The company pledged to work with U.S. authorities to address the issue.
The designation has immediate reputational impacts, as evidenced by Tencent’s stock drop , and may discourage U.S. firms from partnering with listed companies.
To counter U.S. rules on export, ByteDance plans to sidestep U.S. restrictions on AI chip export by acquiring Nvidia GPUs for data centers outside China, such as in Southeast Asia.
Despite relying heavily on Nvidia, ByteDance also turns to Chinese firms for high-performance chips. The company uses Huawei’s Ascend 910B for training AI models and plans to spend $7 billion on Nvidia chips in 2025, becoming a top global Nvidia chip owner.
To comply with U.S. regulations, ByteDance avoids importing chips directly to China, instead storing them in overseas data centers. A spokesperson confirmed adherence to export rules , stating the company hasn’t purchased restricted Nvidia chips for U.S. data centers since the sanctions took effect.
While ByteDance explores alternatives, Chinese firms like Huawei are advancing chip technology, with Huawei’s Ascend 910B and upcoming 910C offering competitive performance.
ByteDance is also working with Broadcom to develop custom GPUs, which are expected by 2026.
The Peterson Institute for International Economics warns that rising U.S.-China tensions could increase U.S. inflation, lower GDP, and hit technology firms hardest.
Barclays estimates proposed tariffs and retaliations could reduce S&P 500 earnings by 2.8% . It also added that the tech and manufacturing sectors are especially at risk.
Experts at East Asia Forum highlight significant risks to global stability in 2025 following Donald Trump’s re-election and his proposed blanket tariffs on Chinese imports and other global partners.
According to EAF, these measures could harm global trade, impoverish the U.S., and cut incomes in China and Asia, with Southeast Asia facing potential income drops of up to 11%.
Retaliation and a global trade war could collapse the WTO trade system, threatening decades of growth. According to the EAF, Trump’s promise to exit the Paris Climate Agreement, which undermines international climate efforts, further complicates the situation.
Furthermore, tensions over Taiwan deepen uncertainty. The decline of U.S. global leadership post-Trump 1.0 amplifies risks, while Beijing’s need for stronger global ties adds pressure.
As the world navigates these challenges, careful diplomacy in Europe and Asia will be essential for mitigating the fallout from fractured U.S.-China relations and climate policy disputes.
Despite uncertainties, hope remains for better-than-expected outcomes and effective action on manageable risks.