China’s Trade War Strategy: Targeting U.S. Tech

For years, the trade war between the U.S. and China has seen tensions rise across various industries. While tariffs and economic sanctions have been the go-to weapons in this prolonged standoff, China is now shifting its focus to a new battleground—U.S. tech companies.

In an effort to gain leverage in negotiations with the U.S. government, Chinese officials are reportedly compiling a list of American tech giants they could target with antitrust investigations. The strategy aims to influence key figures in former President Donald Trump’s circle, many of whom are major players in the tech industry. The move signals Beijing’s intent to fight back against ongoing U.S. restrictions, but it also poses risks that could backfire on China’s long-term economic interests.

China’s Antitrust Crackdown: A Tactical Move

Beijing has already taken action against major U.S. tech firms, launching antitrust investigations into companies like Nvidia and Google. According to insiders, other tech giants such as Apple, Broadcom, and semiconductor design software vendor Synopsys are also in China’s crosshairs. The move comes as part of a broader effort to push back against U.S. trade policies, particularly the tariffs imposed during Trump’s presidency and further reinforced under President Biden.

Tom Nunlist, a Shanghai-based tech policy expert, compared the ongoing dispute to a high-stakes poker game. “China is on a chip-gathering exercise,” he said, emphasizing that Beijing wants bargaining power in negotiations with the U.S. As the trade war intensifies, China’s strategy appears to be rooted in building up leverage against its American counterpart, particularly in areas where U.S. tech companies hold substantial influence.

The Case of Google and Huawei: A Retaliatory Move

China has long held grievances over how U.S. policies have impacted its own tech firms, particularly Huawei. Back in 2019, Google, in compliance with U.S. sanctions, restricted Huawei from using its Android operating system. As a result, Huawei was forced to develop its own software ecosystem, significantly impacting its ability to compete globally.

Now, China is using similar tactics by opening an antitrust probe into Google. While officials claim it is a regulatory move, many view it as retaliation. This tit-for-tat strategy highlights the ongoing struggle between U.S. and Chinese tech firms, where business and politics are deeply intertwined.

Nvidia and the Semiconductor War

The Biden administration has been particularly aggressive in restricting China’s access to advanced semiconductor technology. The U.S. has tightened controls over the export of high-end AI chips to China, fearing that they could be used for military applications.

In response, China has launched an antitrust investigation into Nvidia, accusing the company of potential discrimination against Chinese businesses. The investigation focuses on whether Nvidia unfairly blocked Chinese firms from accessing key semiconductor technologies. Given that Nvidia plays a crucial role in AI development worldwide, this probe is a clear indication that China is willing to go after the most powerful players in the industry.

U.S. chip maker Broadcom’s takeover of VMware, valued at $61 billion when it was unveiled in May 2022, was in peril until a meeting between Biden and Chinese leader Xi Jinping in November 2023. The two leaders agreed to dial down tensions. Shortly afterward, China greenlighted the deal at the 11th hour with conditions, requiring Broadcom to ensure supply to Chinese customers.

Apple Under the Microscope: A New Front in the War

Apple, one of the most influential U.S. companies in China, is also finding itself in Beijing’s sights. While the iPhone remains popular in China, Apple’s business model has drawn criticism from local tech firms, particularly Tencent and ByteDance. These companies have long argued that Apple’s App Store fees are excessively high, limiting their ability to compete fairly.

Regulators in China had previously remained neutral on the issue, but recent developments suggest that Beijing is reconsidering its stance. As China looks for more bargaining chips, Apple’s policies and business operations in the country could become a focal point in the broader trade dispute.

China’s Growing Regulatory Arsenal

China has been steadily expanding its regulatory toolkit over the past few years. In 2020, it introduced an “unreliable entity list,” mimicking a similar U.S. list that blocked companies like Huawei from doing business with American firms. This list gives China the authority to penalize foreign businesses it deems a threat to national security or economic stability.

Additionally, in 2022, China tightened its antitrust laws, giving regulators more power to scrutinize mergers and market behavior. These new measures align with Beijing’s broader strategy of asserting control over both domestic and foreign companies operating within its borders.

The Risks of China’s Strategy

While China’s approach may seem like a strong negotiating tactic, it comes with significant risks. American tech companies today are less willing to advocate for China than they were during Trump’s first term. Many businesses have already started diversifying their supply chains to reduce reliance on China, and aggressive regulatory actions could accelerate this trend.

Furthermore, China’s economy has been struggling with slowing growth, a real estate crisis, and declining foreign investment. If Beijing pushes too hard against U.S. tech firms, it could discourage further investment in China, undermining its long-term economic goals.

The Future of China-U.S. Tech Relations

The trade war between the U.S. and China is unlikely to end anytime soon. Both countries continue to use economic tools to exert influence over one another, and technology remains at the center of this power struggle.

For China, targeting American tech giants is a calculated risk. While it may provide leverage in negotiations, it also sends a message to foreign companies that doing business in China comes with significant regulatory uncertainties. As tensions persist, businesses will have to navigate an increasingly complex landscape where political maneuvering plays a critical role in shaping the future of global trade.