US-China trade tensions threaten tech partnerships

Trade tensions between the US and China have escalated again as the world’s two largest economies accuse each other of breaching the 90-day trade truce agreed upon in May. On Monday (June 2), Beijing accused the US of breaching the agreement after US President Donald Trump said China had “ totally violated ” it.

The Chinese Commerce Ministry said that while China had upheld the deal, the US introduced “discriminatory and restrictive measures” that “severely undermine” the agreement.

Tech decoupling in full swing

One of the many fallouts of this trade tussle is that the tech partnership between the two countries is falling apart. Last month, the Trump administration intensified its crackdown on Huawei , saying that the use of the Chinese technology giant’s artificial intelligence (AI) chips could trigger criminal penalties under US export control laws.

In a statement, the US Department of Commerce’s Bureau of Industry and Security (BIS) said, “Using Huawei Ascend chips anywhere in the world violates US export controls.” The BIS maintains that the chips are “likely to have been designed with certain US software or technology or produced with semiconductor manufacturing equipment that is the direct product of certain US-origin software or technology, or both.”

Meanwhile, Reuters reported last month that Washington has ordered a broad swathe of companies to stop shipping goods to China without a license and revoked licenses already granted to certain suppliers.

Several US firms have received letters from the Trump administration over the past few weeks, highlighting the new restrictions.

The agency quoted sources as saying the letters were sent to firms shipping electronic design automation (EDA) software for semiconductors.

China forcing Apple Intelligence rollout delays

There are allegations that China might also be doubling down on punitive measures against US firms as trade war leverage.

According to media reports, Apple’s rollout of intelligence services in China is being held up by regulators. Apple is working with Alibaba to launch Apple Intelligence for Chinese users. The software would also be embedded in Alibaba devices. However, China’s internet authority is sitting over approval requests.

Experts are linking the approval delays to trade tensions between the two nations.

Apple’s business interests have been hit hard as these restrictions put local competitors Huawei, Xiaomi, Oppo and Vivo in an advantageous position.

The firm’s business is already shrinking in the world’s second-largest economy. At the start of 2023, Apple dominated the Chinese smartphone market with a 70 per cent share, while Huawei languished at 13 per cent. However, by the first quarter of this year, Apple’s share dropped to below 50 per cent while Huawei’s rose to 35 per cent.

Trump-Xi talks soon

This tech decoupling is expected to continue as long as trade tensions simmer. Trump is expected to talk to China’s Xi Jinping in the coming days, as confirmed by US Treasury Secretary Scott Bessent.

“Maybe it’s a glitch in the Chinese system; maybe it’s intentional. We’ll see after the president speaks with the party chairman,” Bessent said, referring to Xi.

Kevin Hassett, director of the National Economic Council, also hoped that the two leaders would have a “wonderful conversation”.

“President Trump, we expect, is going to have a wonderful conversation about the trade negotiations this week with President Xi,” he said on the ABC News program “This Week.”