Beyond Tariffs: How the US-China Tech War is Reshaping Global Supply Chains

Updated: May 08 2025 09:21

AI Summary: The escalating US-China tech rivalry, intensified by a new Trump administration, is driving a wedge between global technology ecosystems, as highlighted by experts discussing the semiconductor race, Huawei's resilience, and the emerging biotech battleground; while upcoming US-China talks offer potential for limited trade relief, deep-seated mistrust and diverging technological paths suggest a future of increasing polarization and bifurcated supply chains, forcing businesses and third-party nations to navigate a complex landscape of competing standards and geopolitical considerations.

As President Trump and UK Prime Minister Starmer prepare to announce a deal to cut tariffs later today, another high-stakes economic drama continues to unfold between the world's two largest economies. The US-China tech rivalry, which intensified during Trump's first term and continued through the Biden administration, has now entered a new phase with Trump's return to office.

The recent South China Morning Post webinar brought together three industry experts to dissect one of today's most consequential geopolitical and economic developments: the intensifying technological competition between the United States and China in the second Trump administration. As Washington and Beijing prepare for trade talks in Switzerland, the stakes couldn't be higher for global supply chains, technological innovation, and market access across key sectors.

Gary Ng, a senior economist at Natixis corporate investment bank, Bien Perez, a veteran tech journalist with decades of experience covering Asia's technology landscape, and Xinmei Shen, a biotech reporter at S&P, provided invaluable insights into how the tech war is evolving beyond mere tariffs into a fundamental restructuring of global technology ecosystems.



The upcoming talks in Switzerland between Chinese Vice Premier He Lifeng and US officials (Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer) mark the first high-level interaction since Trump's inauguration. However, expectations should be tempered.

As Gary pointed out during the webinar, "It is a very difficult one... for the case of China, it has been a long-standing stance that the Chinese government is willing to talk to the US, but it needs to be held on ground that the government is willing to assert."

The pressure points driving both sides to the negotiating table are clear: for China, it's employment; for the US, inflation. Yet the complexity of the issues, particularly around technology, makes any comprehensive deal unlikely. As Gary noted, we may see "a partial deal on certain issues" but nothing comparable to the "round one deal which probably no one remembers what is there already."


Perhaps no sector better illustrates the high stakes of this tech competition than semiconductors. China's dependence on foreign-made chips remains a significant vulnerability, with the country spending more annually on importing integrated circuits than crude oil.

Yet Ben highlighted how dramatically the timeline for China's semiconductor independence has compressed:

In 2024 when then Intel CEO said something that China is about 10 years behind in the semiconductor industry. Well, after all the things we've seen over the past two years, I think that timeline has shortened. It's about five years now.

This accelerated progress stems from China's comprehensive approach to semiconductor development, encompassing:

• Integrated device manufacturers like Yangtze Memory Technologies
• Pure-play foundries such as SMIC
• Outsourced semiconductor test and assembly facilities
• Massive investment in research and development

Gary confirmed this technological leap, noting that China's R&D spending has jumped from around 2% of GDP in 2018 to 2.6% today—surpassing the entire EU-27 both in percentage of GDP and absolute amount. This investment surge directly responds to US export restrictions, creating what Gary described as "a vacuum of no competition" that forces Chinese firms to innovate domestically.


No company better exemplifies China's tech resilience than Huawei. Once severely impacted by US sanctions that crippled its smartphone business, Huawei has engineered a remarkable comeback that offers a blueprint for Chinese tech independence.

Ben described Huawei's journey as the embodiment of innovation under pressure: "If you look at the encyclopedia, so to speak, about being innovative, you can put Huawei's picture there." After being blacklisted in 2019, Huawei surprised the world in 2023 by quietly releasing its own 5G smartphone for the domestic market, featuring a domestically developed 5G chip that many experts thought impossible under sanctions.

Today, Huawei has become a viable alternative supplier of advanced graphics processors for AI training and development in Chinese data centers, partially filling the gap left by restricted access to NVIDIA and AMD chips. Perhaps more importantly, Huawei's success has lifted the entire Chinese semiconductor ecosystem, with companies like Nau becoming leading domestic wafer fabrication equipment suppliers.


While semiconductors have dominated headlines, biotech has emerged as a new battleground in the US-China tech war. Xinmei explained how global pharmaceutical giants are already responding to potential tariff extensions by shifting manufacturing capacity to the United States—a move that could threaten Chinese contract service providers like WuXi AppTec.

The congressional commission's recent characterization of WuXi AppTec as "the Huawei of biotech" underscores the growing American concerns about Chinese influence in pharmaceutical supply chains. With over 60% of WuXi AppTec's revenue coming from the US market, these companies face significant exposure to political headwinds.

Yet Chinese biotech innovation continues to accelerate. As Xinmei noted:

Five years ago, probably less than 5% of all big pharma transactions involved drugs coming out of China. But last year, that number has jumped to 30%.

This progress has made Chinese pharmaceutical firms increasingly influential globally, with companies like Akeso developing cancer drugs that have become core assets for major US biotechs like Summit Therapeutics.

Last week, WuXi AppTes reports strong US revenue despite Washington scrutiny with US revenue jump 28 per cent in the first quarter, compared with 21 per cent globally.


Perhaps the most significant long-term implication of the US-China tech war is the emergence of parallel technology ecosystems. Gary predicted that "whether there would be a deal or not or what kind of deal it is, we need to be ready to see a world that will be increasingly polarized and with the bifurcation in supply chains."

This separation extends beyond manufacturing to encompass:

• Operating systems (like Huawei's HarmonyOS as an alternative to Android)
• AI development frameworks (such as China's Deepseek open-source alternatives)
• Data flows and standards
• Investment patterns

China's electric vehicle industry offers a preview of this future, having created its own distinct supply chain and technology ecosystem that now exports globally. As Chinese manufacturers continue to innovate in batteries and autonomous driving systems, even European automakers find themselves needing to cooperate with Chinese firms to access cutting-edge technology.


For countries outside the US and China, particularly in Southeast Asia, Latin America, and Africa, the tech war presents both challenges and opportunities. When asked if these nations must choose sides, Ben offered a pragmatic view: "They can't actually choose sides, but they can have both... Why corner yourself with a limited choice?" This approach makes economic sense. As Ben explained:

If you want more cost-efficient ways of doing stuff, that would be Alibaba, open source, Qwen for AI... If you can't afford an iPhone, there are plenty of other Android phones from Chinese manufacturers. Same thing with EV. If you're not into Tesla, you can use BYD.

China is actively exploiting these opportunities, expanding into markets where its products haven't traditionally dominated, including parts of Africa, Southeast Asia, and Europe.



Looking ahead to 2035, the panelists envision a more polarized world with bifurcated supply chains affecting manufacturing, data flows, and investment. As Gary noted, "I totally agree that in the future, if someone wants to tap into the Chinese market, it will be something that is made in China, and then if you need to want to tap on the rest of the world, then obviously there's different restriction that will make you not produce in China and somewhere else."

The fundamental issue, according to Gary, is trust: "Whether there would be a deal, whether the deal will be, or whether the tariff will actually come back 3 months later after a deal is signed... will make the upcoming prediction or even the development of negotiation between the two countries very very difficult."

For countries like Japan and South Korea, maintaining balance will be challenging. They have high exposure to US demand but also considerable reliance on Chinese intermediate inputs. Security considerations may ultimately push them closer to the US camp, though all are "trying very hard to find a balance."


As the US and UK prepare to announce their tariff deal today, businesses worldwide must adapt to this new reality of technological bifurcation. The implications extend far beyond trade negotiations:

• Supply chain diversification becomes essential, with different production strategies for different markets
• R&D investments must account for divergent technology standards and ecosystems
• Market entry strategies need careful calibration based on geopolitical alignment
• Technology procurement decisions increasingly carry geopolitical implications

While short-term tariff relief may come from ongoing negotiations, the structural shift toward two competing tech ecosystems is "unstoppable." Businesses that recognize and adapt to this new reality will be better positioned to navigate the complex landscape of global technology in the coming decade.