Ongoing trade friction as the American administration levies fresh import taxes on goods arriving from China
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The ongoing trade conflict between the U.S. and China has taken a new turn, focusing on semiconductors and AI chips. This deepening rivalry, which began in 2025, has significantly reshaped global supply chains and investment priorities.
The U.S. has imposed 100% tariffs on semiconductor imports from China and tightened export controls to limit Chinese firms' access to advanced chipmaking equipment and AI chip technologies. These measures aim to restrict China's ability to develop cutting-edge semiconductors critical for AI applications.
In response, China has enacted export restrictions on rare earth minerals and critical materials such as gallium and germanium, essential inputs for semiconductor manufacturing. These Chinese export controls have increased costs for semiconductor components by 30-50% globally.
The trade tensions have created a bifurcated semiconductor market. Companies aligned with U.S. and allied countries, like TSMC, have seen revenue surges, while Chinese semiconductor firms like SMIC face declining revenues and challenges due to equipment access restrictions.
The rivalry also drives a shift to friend-shoring and geographic diversification of semiconductor supply chains. Companies are accelerating R&D on advanced 5nm and 3nm process nodes and establishing manufacturing bases in U.S.-friendly nations to maintain market access.
Beyond tariffs, both nations are competing for technological superiority in AI chips, which are increasingly vital for artificial intelligence–powered supply chains, defense, and economic leadership. This includes intensified government intervention like revenue-sharing models and balancing commercial interests with national security agendas for company operations.
The U.S. also imposes tariffs and export controls on related components such as semi-finished copper products used in electronics, further complicating supply chains.
Despite the escalating tensions, both sides have continued talks, with delegations meeting in Stockholm, London, and Geneva to discuss the trade conflict. The U.S. has extended the increased tariffs on Chinese imports until November 10th at 00:01 AM (Washington time).
China has shown openness to progress in its dialogue with the U.S., and a direct conversation between Presidents Trump and Xi Jinping could take place at a later date. A commentary in the state-run "People's Daily" indicates that Beijing is ready to achieve substantial progress with Washington.
The U.S.-China trade tensions are a complex issue, involving more than just tariffs. They extend to export controls on critical technologies and materials, supply chain decoupling, strategic investment shifts, and government interventions designed to protect national security and technological leadership in this pivotal sector.
[1] Semiconductor Industry Association. (2025). U.S.-China Semiconductor Trade Tensions: An Overview. Retrieved from www.semiconductors.org/us-china-tensions
[2] International Trade Administration. (2025). U.S. Semiconductor Export Controls and Their Impact on the Global Industry. Retrieved from www.trade.gov/us-semiconductor-controls
[3] Office of the U.S. Trade Representative. (2025). Section 301 Investigations into China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation. Retrieved from www.ustr.gov/301investigations
[4] U.S.-China Economic and Security Review Commission. (2025). Annual Report to Congress. Retrieved from www.uscc.gov/annual-report
[5] European Chamber of Commerce in China. (2025). The Impact of U.S.-China Trade Tensions on European Businesses in China. Retrieved from www.europeanchamber.com.cn/us-china-tensions
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