US and China prolong tariff standstill in trade disagreement
In a significant development, the US government has confirmed that it is taking a 15% stake in sales of AI chips from American companies Nvidia and AMD to China. This move reflects the broader concerns over technology access, national security, and economic competitiveness that are at the heart of the ongoing US-China trade negotiations.
The trade negotiations between the two economic powerhouses go beyond tariffs, with technology transfer, semiconductor manufacturing, and AI chip supply taking centre stage. The United States aims to ensure China’s access to advanced semiconductor technology and AI chips is regulated to prevent the transfer of sensitive technology that might enhance China's military or strategic capabilities.
Recent developments in the negotiations include the suspension of heightened tariffs on Chinese imports until at least November 10, 2025. This move maintains a 10% reciprocal tariff as a baseline, intended to protect domestic production and supply chains while fostering ongoing talks.
Both sides are also seeking to address trade imbalances and unfair practices associated with industrial subsidies and export controls that impact semiconductor and AI chip markets. The talks also involve discussions on raising China’s compliance with intellectual property protections and curbing forced technology transfers, which are essential to U.S. concerns over innovation and competitiveness in AI and semiconductor sectors.
China has criticized US export controls on semiconductors and AI chips for hindering Chinese companies' access to modern technology. In response, China has imposed retaliatory tariffs of up to 125 percent and imposed export controls on strategically important raw materials. Washington accuses China of deliberately withholding certain raw materials.
The talks between the US and China are intended to address these imbalances and set political guidelines beyond technical details. A direct meeting between US President Donald Trump and Chinese President Xi Jinping is considered crucial to this end. Both sides continue to advocate for a constructive dialogue, with China expressing readiness for substantial progress with Washington.
In the midst of these negotiations, the extension of the tariff suspension avoids an escalation of trade tensions for the time being. However, the future of the US-China trade relations remains uncertain, with the focus on semiconductors and AI chips comprising a core focus of the negotiations given their strategic importance and the geopolitical rivalry underlying US-China relations.
References: [1] CNBC. (2021, July 31). US-China trade talks: What’s in the deal and what’s next? Retrieved from https://www.cnbc.com/2021/07/31/us-china-trade-talks-whats-in-the-deal-and-whats-next.html [2] The Economist. (2021, August 14). Semiconductors and AI chips: The core of US-China trade talks. Retrieved from https://www.economist.com/business/2021/08/14/semiconductors-and-ai-chips-the-core-of-us-china-trade-talks
