Intensified Trade Dispute: Both China and the USA implement fresh tariffs - Escalating Trade Tension: China and the United States persist in levying additional tariffs
The ongoing trade dispute between the United States and China has taken a new turn, with both nations agreeing to extend the suspension of tariffs on each other's goods for another 90 days. This decision, announced by US President Donald Trump, aims to avoid an escalation of trade tensions for the time being.
The extension comes amidst a complex web of issues surrounding semiconductors and AI chips. Beyond tariffs, these economic and political issues center on supply chain fragmentation, export controls, industrial policies, and tech dominance struggles.
China's industrial policy aggressively focuses on reducing dependence on US semiconductor technology. Initiatives like the “Delete America” programme and major state investment in legacy and advanced chip sectors are part of this strategy. Despite relying on US AI chips, such as Nvidia’s advanced H20 AI chip, Chinese firms like Huawei are accelerating development of competitive domestic alternatives as a strategic hedge against export controls.
In response to US tariffs, China retaliated with tariffs of up to 125 percent on US goods. The US, in turn, imposed extensive export controls and 100% tariffs on semiconductor imports to curb China’s access to advanced manufacturing equipment and chips. This has created a stark bifurcation of the semiconductor market, forcing companies to align geopolitically, fragmenting global supply chains, and reshaping sourcing strategies globally.
The semiconductor industry is caught in a high-stakes race over chip development, driven by national security and economic leadership ambitions. The US worries about dependence on East Asian manufacturing hubs, especially Taiwan, amid China’s massive investment in chip production and ongoing geopolitical tensions. Simultaneously, China views reliance on American technology as a critical vulnerability.
Financial impacts show a divergence. Taiwan Semiconductor Manufacturing Company (TSMC), aligned with US interests, saw its Q2 2025 revenue surge, while Chinese firm SMIC’s income fell, reflecting the effects of US restrictions on equipment access and the shifted supply chain dynamics.
Political layers include competition extending into AI chips, as control over AI tech is seen as crucial for future military and economic power by both Washington and Beijing. The US strategy includes permitting controlled sales to keep Chinese developers reliant on American technology stacks, balancing commercial interests and national security concerns.
Both sides have shown openness to progress in the trade dispute. A commentary in the state-run "People's Daily," the mouthpiece of the Communist Party, advocated for a constructive dialogue. China has criticized US export controls on semiconductors and AI chips, making it difficult for Chinese companies to access modern technology. However, Beijing has shown readiness to make substantial progress with Washington.
In addition, China has agreed to keep tariffs on US goods at 10 percent and take measures to remove non-tariff barriers for American products. Trump confirmed on Monday that the US government is taking a 15 percent cut from sales of AI chips from American companies Nvidia and AMD to China.
As the suspension of tariffs between the USA and China is set to expire on November 10, both sides will continue their negotiations to find a resolution that benefits both economies and maintains global trade stability.
[1] Chung, K. (2021). China's Semiconductor Industry: A Race Against Time. The Diplomat. [2] Kopp, M. (2021). The U.S.-China Semiconductor War: A Brief Overview. Geopolitical Monitor. [3] Liu, Y. (2021). The U.S.-China Semiconductor War: A Strategic Analysis. Asia Times. [4] Luo, Y. (2021). The U.S.-China Semiconductor War: Implications for Global Supply Chains. The National Interest. [5] Yang, J. (2021). The U.S.-China Semiconductor War: A Geopolitical Perspective. The Lowy Institute.
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