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Technologies That May Shape Potential Trade War Under Donald Trump’s Presidency

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James Morales
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Key Takeaways

  • Donald Trump is expected to escalate the U.S.–China trade war once he enters office.
  • Certain technologies are the focus of tensions between the two countries.
  • Semiconductors, AI, batteries, and electric vehicles could get caught up in trade restrictions.

After decades of promoting free trade and open markets, American economic policy is expected to take a protectionist turn once Donald Trump takes office on Jan. 20.

Already the subject of severe U.S. trade restrictions, the incoming Trump administration is likely to target China with additional tariffs.

But unlike during his first term, technology—including semiconductors, AI, batteries and electric vehicles (EV)—could take center stage in a potential U.S.–China trade war.

Semiconductors

For the global semiconductor industry, inhibitions on the free flow of goods have been a reality ever since Biden imposed the first export controls of high-tech chips and manufacturing equipment.

Although Trump opposes subsidizing domestic manufacturing on ideological grounds, his overall posture is likely to continue Biden-era hostilities.

Meanwhile, the threat of further restrictions and the lure of loosening existing ones could both be powerful bargaining chips in any trade negotiations between the two superpowers.

Beyond China, tariffs on semiconductors could hurt major Asian chipmakers like the Taiwan Semiconductor Company (TSMC). This prospect has injected new urgency into TSMC and its peers’ efforts to build new manufacturing facilities in the U.S.

However, tariffs on Chinese goods are expected to have the biggest impact on global supply chains.

In recent weeks, Beijing has retaliated against American chip sanctions by banning the export of gallium, germanium, antimony, and so-called superhard materials, like tungsten, to the U.S.

China’s near-total monopoly on rare earth metals is arguably its most powerful lever in the ongoing semiconductor standoff. However, U.S. firms mostly rely on semi-processed materials from third countries, limiting the direct impact of the export bans.

Beijing also has other weapons at its disposal. Using legal means to fight back against U.S. trade restrictions, China’s competition regulator recently opened a probe into Nvidia.

The case highlights how multinational manufacturers are especially vulnerable to geopolitical conflict, which can create tensions between their business interests in one market versus another.

Artificial Intelligence

If semiconductor firms are on the front lines of an escalating U.S.–China supply chain war, the battle is being fueled by an artificial intelligence (AI) arms race.

In comments on the topic, Trump has expressed his view that the United States’ continued AI dominance is threatened by Chinese competition.

Warning that “China’s going to take over” if the U.S. doesn’t double its energy production, he vowed to support the expansion of fossil fuel and nuclear electricity generation to support surging demand from the AI industry.

“For AI,” Trump observed  earlier this year, “you’ll need to double the energy that we produce right now just for that one industry if we’re going to be the big player and dominant. If the U.S. doesn’t secure its AI leadership, then China’s going to take over.”

As things stand, industrial electricity pricing is relatively cheap in China, giving the country’s AI developers a critical edge. If Trump uses industrial policy to drive down prices in the U.S. Beijing could respond in like.

This could set off an AI price war as each country tries to undercut the other.

Another option available to Trump would be to double down on restrictions limiting which Chinese startups American venture capital (VC) firms can invest in.

In October, the Treasury Department introduced new measures  to stop American VCs from funding the development of Chinese AI models. Expanding on these rules could curb investment further.

Batteries and Electric Vehicles

While the U.S. may have the power to choke Chinese firms’ supply of high-tech computer chips, when it comes to batteries, the balance is in China’s favor.

According to an analysis  by Nikkei, in 2023, Chinese companies made up almost 40 percent of the suppliers for materials used in Tesla’s electric vehicle (EV) batteries.

Meanwhile, the company’s range of energy storage solutions is even more reliant on Chinese cells. Tesla sources  100% of the cells used in its Megapack batteries from China’s BYD and CATL.

Beijing has already shown that it is willing and able to cut off American firms’ battery supply. In October, it blacklisted the California-based drone manufacturer Skydio, prohibiting battery makers from supplying the company and forcing it to find alternative suppliers elsewhere.

As for manufactured EVs, trade between China and the U.S. is already severely restricted. However, the rising dominance of BYD and other manufacturers could hurt Tesla’s sales overseas.

Meanwhile, for Detroit’s legacy automakers, which have struggled to find a foothold in the EV sector, tariffs or no tariffs, catching up with the Chinese competition increasingly looks like an unattainable pipe dream.

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James Morales

Although his background is in crypto and FinTech news, these days, James likes to roam across CCN’s editorial breadth, focusing mostly on digital technology. Having always been fascinated by the latest innovations, he uses his platform as a journalist to explore how new technologies work, why they matter and how they might shape our future.
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