Introduction
The relationship between the United States and the People’s Republic of China has long been defined by trade, investment and interdependence. But in recent years, what began as a “trade war” has increasingly morphed into a “tech war” — where tariffs and goods are being replaced by export controls, supply‑chain re‑shoring, critical mineral restrictions and national‑security controls.
This transformation matters not only for Washington and Beijing, but for global companies, supply chains and the worldwide economy.
In this article we’ll explore:
- the origins of the US‑China trade war;
- how and why the tech war emerged;
- key battlegrounds (semiconductors, rare earths, 5G/AI);
- what both countries are trying to achieve;
- global implications; and
- possible scenarios ahead.
1. The roots: Trade war 1.0 – tariffs, deficits & manufacturing
1.1 Why trade tensions exploded
The US had for decades run large goods‑trade deficits with China. Chinese manufacturing export prowess, and US concerns over intellectual property (IP), forced technology transfer, state subsidies and market access all contributed. For example, the report by Chatham House notes: “The current dispute … goes far beyond trade tariffs … the underlying driver is a race for global technological supremacy.” Chatham House+1
1.2 The first phase: Tariffs and retaliation
Starting around 2018, the US imposed tariffs on hundreds of billions of dollars’ worth of Chinese goods; China retaliated. The goal was to change China’s trade practices. But the tariffs also revealed how deeply integrated both economies were (and still are). The Boston Consulting Group (BCG) analysis noted that China accounts for nearly half of global exports of electronic devices; the US depends on China for many finished consumer‑electronics goods. Boston Consulting Group+1
1.3 The limits of a goods‑based war
Yet, as the BCG piece explains, simply imposing tariffs on consumer electronics is unlikely to solve structural issues (IP, investment, state subsidies). The “technology trade deficit” between US and China is baked into global value chains. Boston Consulting Group+1
Thus, by about 2019‑20, analysts were already speaking of a “trade war plus” — moving into areas of technology, supply chains and national security.
2. Transition to Tech War: What changed & why
2.1 What is the “tech war”?
The term refers to the competition between the US and China over high‑technology leadership: semiconductors, 5G, artificial intelligence (AI), critical minerals, supply‑chain dominance, export controls, 5G/6G networks, data flows and the embedding of technology in national security frameworks. The Oxford Academic “Introduction to the Special Section on Making Sense of the US–China ‘Tech War’” states: “US and Chinese policies are increasingly promoting forms of ‘great‑power competition’, with technologies playing a significant role.” OUP Academic
2.2 Why the shift from tariffs to tech?
- Strategic value of technology: Advanced chips, AI, 5G/6G underpin not just consumer products, but military, intelligence and economic capabilities.
- Supply‑chain leverage: The US and China both realise that dominating the upstream (materials, tools, machines) and downstream (products, applications) confers power. For example, the US analysis warns: “Technology value chains are global … To compete, U.S. companies … need reliable access to critical and cost‑competitive inputs.” CSIS
- Limits of tariffs: As noted, tariffs can hurt, but they don’t easily change structural issues (IP theft, state subsidies, transfer of know‑how). The tech war allows targeting upstream chokepoints (rare earths, chip‑making tools) and export controls (e.g., high‑end chips to China).
- Mutual fear of decoupling: Both sides worry that the other will leap ahead or force decoupling, so they seek to maintain advantage. The Wilson Center notes that the US may have “overestimated the leverage of their technological advantage and weaponization and underestimated the interdependence along the value chain.” Wilson Center
2.3 Early signs & key milestones
- US restrictions on Huawei Technologies Co., Ltd. starting around 2019‑20 (chip access, Google Android access) as a key turning point. Econovis+1
- China’s increased investment in domestic semiconductor manufacturing, critical minerals, “Made in China 2025” strategy and emphasis on self‑sufficiency.
- Broader actions: export controls by US on high‑end chips, China restricting exports of rare earths or critical materials. For example: “China’s ban on key high‑tech materials could have broad impact on industries, economy.” AP News
3. Key battlegrounds
3.1 Semiconductors & advanced chips
Semiconductors are often called the “new oil”. The US has sought to restrict exports of high‑end chips and chip‑making equipment to China; China has tried to build domestic capability.
As Cohen and others note, although China is integrated, the US still supplies machines, tools and design. But China wants to shift from being downstream assembler to upstream designer/manufacturer. Coface
These restrictions matter because chips power AI, weapons, data centres and advanced consumer devices.
3.2 Rare earths & critical minerals
Rare earth elements and other critical minerals (gallium, germanium, antimony etc) are vital for semiconductors, magnets, defence systems, green energy supply. China dominates processing of many of these.
For instance:
“China’s exports of essential materials like gallium, germanium and antimony … in retaliation for U.S. expanding export controls on Chinese companies.” AP News
Also:
The US warned that China’s new export controls on rare‑earth elements could lead to global decoupling. Financial Times
3.3 Supply‑chain reallocation & “China+1” strategies
Because companies fear tariffs, export controls or geopolitical disruption, many are rethinking supply chains. This means some manufacturing and assembly is shifting out of China (“China + 1” model, e.g., Vietnam, India, Mexico) while still relying on Chinese upstream inputs. For example, a study finds:
“China’s exports remained robust, expanded across global markets … Meanwhile, U.S. imports increasingly shifted toward ‘China+1’ partners … whose trade structures remain closely tied to Chinese upstream supply chains.” arXiv
Coface also observes supply‑chain interdependence remains high despite tensions. Coface
3.4 5G/6G, AI, telecom networks & data flows
The battle over next‑gen telecom and digital infrastructure is intense. The US has sought to exclude or restrict Chinese firms from its networks citing national‑security risk (e.g., telecom gear). China aims to deploy 5G/6G domestically and globally (via Belt & Road) and champion its tech firms. The tech war is as much about standards, data governance, encryption and control of digital flows as it is about hardware.
3.5 Intellectual Property (IP), forced tech transfer & investment controls
The US accuses China of forcing foreign firms to transfer technology in exchange for market access, theft of IP, and massive subsidisation of domestic firms. These structural dimensions underlie the war. LinkedIn
4. What each side is trying to achieve
4.1 U.S. objectives
- Preserve technological leadership (AI, chips, telecom) and national‑security advantages.
- Limit China’s access to the most advanced technologies, especially where dual‑use (civilian + military) is possible.
- Strengthen alliances and partner with other democracies/like‑minded states (Japan, South Korea, EU) to resist technological rivalry and supply‑chain risk.
- Encourage reshoring and diversification of supply chains away from China or at least reduce concentration.
For example, the CSIS commentary argues: “With allies, the United States should seek reliable access to low‑cost inputs … deep and secure R&D partnerships, greater coordination on focused export and investment controls.” CSIS
4.2 China’s objectives
- Achieve technological self‑sufficiency (especially in semiconductors, AI, telecom infrastructure) so as to avoid vulnerability to US export controls.
- Maintain growth, employment, global market share and leadership in future‑facing industries.
- Extend global influence via tech infrastructure (e.g., 5G networks) and global trade/investment (Belt & Road).
- Leverage its strengths: large scale manufacturing, large domestic market, state coordination, rapid move from lab to market. For instance: “China’s strengths: quality scientific research, prodigious STEM talent, ability to move rapidly from ‘lab to market’.” CSIS
4.3 The interplay & strategic paradox
Despite the rivalry, the two economies are still deeply interlinked: The US needs parts, machines and manufacturing from Asia/China; China needs advanced design, software, global markets. As Coface points out: “Despite rising tensions … economic cooperation between these two giants remains essential.” Coface
This gives rise to a paradox: the more one side tries to decouple, the harder it is practically; but doing nothing risks being left behind.
5. Global implications & winners/losers
5.1 For global companies & supply chains
- Corporations must navigate increased risks: export controls, sanctions, changing rules, dual‑use restrictions, investment screening.
- Many may adopt “China + 1” diversification strategies (Vietnam, India, Mexico) but limitations remain (infrastructure, scale, cost). gsdn.live
- Cost increases may be passed to consumers. Some predicted that tariffs and supply disruptions raise prices of electronics, cars, etc.
5.2 For other countries & “third‑party” states
- Countries in Asia, Europe, Africa face pressure to pick sides or navigate between US and China (especially in tech infrastructure).
- Emerging economies may benefit from relocation of manufacturing.
- But fragmentation risks: global value chains may become fragmented, raising inefficiency, duplication, cost.
5.3 For global economy & growth
- The International Monetary Fund (IMF) warns that sustained US–China tensions (in trade/tech) pose risk to global growth. Reuters
- Any major disruption in critical inputs (chips, minerals) could ripple across many sectors.
- Fragmentation of standards and supply chains could reduce efficiency, innovation and raise costs.
5.4 Potential winners and losers
- Winners: Countries/companies that adapt quickly (diversify supply chains, invest in R&D, innovate).
- Losers: Those overly reliant on one supply‑chain, or caught in between the US‑China divide; consumers facing higher prices; smaller firms unable to absorb regulatory/compliance burdens.
- China may gain in certain sectors (domestic market, infrastructure) but still lags in many advanced chip segments. The BCG/Chatham House research highlight that China has only a small share of global electronics industry profits so far. Coface+1
6. Possible scenarios ahead
Scenario A: Managed competition/partial détente
Both sides negotiate some deals on technology export controls, establish norms for investment, IP, data flows, and avoid a full decoupling. Supply chains remain linked, though with more redundancies. In this scenario global growth remains more stable, and companies adapt.
Scenario B: Deep tech decoupling
US and China erect major barriers: export bans, separate tech ecosystems, competing standards, supply‑chain bifurcation. This leads to higher costs, slower innovation, more duplication and possibly smaller global growth. Companies may have to build parallel supply chains (West vs China).
Scenario C: Escalation/Conflict spillover
If the tech war merges with military/security competition (e.g., over Taiwan, South China Sea, cyber‑warfare), the risk of major disruption increases. A severe supply‑chain crisis (e.g., sudden cut‑off of rare earths, chips) could trigger global recession. The academic literature warns of the possibility of a “technology cold war”. Wilson Center+1
What to watch:
- New US or Chinese export controls (especially on chips, AI hardware, tool machines)
- China’s domestic chip production progress (3nm, 2nm, etc)
- Rare‑earth or critical‑minerals policy (China restricting exports; US & allies building new sources)
- Supply‑chain announcements by major tech firms (e.g., moving factories out of China)
- Diplomatic/strategic developments (summits, alliances, agreements)
- Standards & infrastructure decisions (5G/6G roll‑outs, who builds the global networks)
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8. Conclusion
The transition from a US–China trade war to a tech war marks a fundamental shift in how the two global powers compete. While tariffs and goods were the early battleground, today the fight is over chips, minerals, supply chains, standards and technology leadership. Because the world is so interconnected, the outcome will impact not just Washington and Beijing — but global companies, smaller economies and everyday consumers.
Whether the world moves toward managed competition or deeper blocs remains uncertain. What is clear: businesses, policymakers and investors must prepare for a more complex, fragmented technological landscape. The winners will be those who adapt, diversify and invest in innovation; the losers will be those stuck in outdated models or unable to navigate the shifting terrain.
