Trade war between China and the US

The trade war between the United States and China began in 2018 when the Trump administration imposed tariffs on imported Chinese goods, citing concerns about intellectual property theft and trade imbalances. In response, China imposed tariffs on U.S. goods, and the two countries have since engaged in a series of tit-for-tat tariffs, with each side escalating and expanding the range of products subject to tariffs. The trade war has had significant impacts on both countries’ economies, as well as on global trade and financial markets. Although some progress has been made in recent years, tensions between the U.S. and China remain high, and the outcome of the trade war remains uncertain.

Facts and Figures:

-> The US is the leader in designing Microchips (Intel, Micron, Qulacomm)

-> Taiwan is the leader in chip production (TSMC) -> 60% of world chips and 95% of advanced chips are produced in Taiwan by TSMC

-> 50% of global demand for chips comes from China

-> China imports 70% of its semiconductors

-> China’s government is not happy about this foreign dependance

-> Made in China 2025 strategy: make China self-sufficient in all strategic important sectors including Semiconductors

-> SMIC (the largest Chinese semiconductor producer) has made huge advances towards designing of advanced chips and increase in production what has irritated the US

-> The US sees the the on-shoring of semiconductors as a strategy to invade Taiwan at some point

Development of the US Sanctions:

2019: Restrictions of American semiconductors to Huawei (was unsuccessful because China bought parts from other countries)

2020: FDP (Foreign Direct Product) Rule: Any foreign company dealing with Huawei wouldn‘t be allowed to buy American made Technology Trump expanded these restrictions to various Chinese companies incl SMIC

2022: Biden administration expanded the Export Control Reform Act of 2018 which now bans the export of certain microchips to China and they banned US citizen from working in the Chinese semiconductor industry. These are the most severe sanctions so far against China.

However, these sanctions are disputed. On the one hand, China has a massive pool of domestic talent, China has twice the nr of graduates of US On the other hand, China relied on US executives and engineers. If America can convince South Corea and Taiwan to follow suit, this would seriously damage the Chinese semiconductor industry.