A New US-China Tech War Has Begun
Washington and Beijing are getting bloody again
As you read this, a myriad of crises are besieging the world, all stemming from the Iran war. Alongside exploding energy prices, which have forced Sri Lanka to introduce a QR-code system to ration fuel at the pump, there is a dangerous food emergency brewing, forcing countries like India to pay double for compounds like urea, as some fertilizer options rise 50% or even 100%.
In the backdrop of this, the US-China standoff has been pushed aside. Not because it is less important, but because the fragile truce, inked last October in South Korea, has continued to hold. Put simply, Washington and Beijing have not been getting bloody.
Except, now they are - and it all centers around technology. Yet another crisis is surrounding the globe, as the world’s two superpowers collide after months of “calm.”
Over the past two weeks, a flurry of technology-related events has occurred:
US strikes: The White House has formally accused China of stealing American AI models, which is being called “reverse distillation” or “adversarial distillation,” where Chinese firms input huge numbers of prompts in US AI models (i.e., Claude, ChatGPT), and train their own systems on the answers.
China strikes: China is restricting US investments in its leading tech firms and startups. Already, state agencies have told “several” Chinese firms to reject US capital. However, it is not clear whether this affects Chinese firms listing on US exchanges or the growing number of Chinese firms “repackaging themselves” as Singaporean to access US funding. It comes as a new 2025 survey from the US-China Business Council (USCBC) finds that only 48% of companies plan to invest in China, a drop from 80% in 2024.
US strikes: In a rare instance of bipartisanship, a bill sponsored by both Democrats and Republicans has entered the US Congress (American Security Robotics Act), seeking to restrict Chinese robots in US society, like ground robots or humanoid robots, starting with US government procurement.
China strikes: Citing national security, China is forcing Meta to divest its purchase of Manus, the Chinese AI company. The $2 billion acquisition inked last December has been in the crosshairs of Beijing for months, including a “probe” announced in January, and a separate ruling in March that banned Manus co-founders from leaving China while the state probe was ongoing.
US strikes: The FCC has banned all new foreign-made consumer routers in the US, citing significant cybersecurity and national security risks (current routers on the market or already sold are exempt). The target is clearly China, as TP-Link, a single company, manufactures approximately 65% of home routers in the US. The ban applies to any router or hotspot that is “produced, assembled, designed, or developed” outside the US. Surprisingly, most foreign routers in the US are not manufactured in China, as Chinese firms have moved production to Vietnam, Mexico, and elsewhere.
In the backdrop of all this, DeepSeek, the infamous Chinese AI company that upended how the world thinks about funding —> R&D, has announced a new model that will be entirely powered by Huawei chips, a new milestone in China’s tech-sovereignty journey. The DeepSeek-Huawei tieup is quite significant. The Huawei chip in question is the Ascend 950PR, a chipset developed explicitly to match and replace American options, specifically Nvidia’s H200, which the US has greenlit for exports, but not a single chip has actually moved.
These “strikes” make it clear: the US-China are getting bloody again. But it is not over soybeans, autos, or even TikTok. It is over the key technologies and supply chains that power societies, like AI or home routers.
Without a doubt, a new US-China tech war is beginning. Alongside Iran, it is the single biggest threat to the ongoing superpower truce and US President Donald Trump’s visit to China next month.
In this new US-China tech war, several things are occurring at once:
China is building new “technology walls” against America, compounding with the existing walls that Washington has imposed under the banner of America First (i.e., increased outbound investment restrictions).
The new “finger-pointing” is not coming from commerce, treasury, or the US intelligence community. It is coming directly from the White House, making it unofficially the new US geopolitics.
China is clawing back control of its most critical AI companies, fearful that America will gain leverage through M&A - exactly the outlook the US has had of China for decades.
Fears are snowballing in the US (and West) that China controls the tech backbone of societies (i.e., routers), and could weaponize this in a future conflict (like over Taiwan or the Philippines).
Perhaps the biggest takeaway: the US and China are clear-eyed that the differences (or chasms) between them are far, far too great to overcome. Even if China buys 500% more soybeans or the US pauses arms flows to Taiwan, the US and China are on a collision course in practically every domain, particularly technology.
However, there is a strange paradox here.
The US and China are clearly battling one another with technology. But, this does not necessarily mean the US-China fight that ignited last April with Liberation Day tariffs is about to restart. The global economy is far too wobbly. Investors are far too skittish. The wiggle room, runway, and reserves are rapidly being exhausted.
It is possible that President Trump and President Xi sign a range of deals in the backdrop of the new US-China tech war. And, that few of these deals actually result in long-term stability. What is beginning is a new US-China tech war that could rage in the backdrop of broader US-China stability. Of course, the other side of the coin, is that “something” triggers America to slap tariffs or sanctions across the Chinese export economy, such as what I have consistently pointed out as a “red line”: China supplying Iran with satellites and AI to help Tehran attack American forces in the Middle East. So far, Washington has overlooked this (to my surprise).
As technology becomes key to future global power, the US and China are not taking any chances. In the blink of an eye, robotics has become a new battlefield, even before they are rolled out across the globe. And, with the router ban, the US is telling individuals that the very devices they have installed could together give China a huge advantage over America if tensions explode. None of this is familiar. More than Taiwan or overcapacity, technology is now driving the US-China relationship.
-Abishur Prakash aka “Mr. Geopolitics”
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