Sign up for our daily briefing
Make your busy days simpler with Axios AM/PM. Catch up on what's new and why it matters in just 5 minutes.
Stay on top of the latest market trends
Subscribe to Axios Markets for the latest market trends and economic insights. Sign up for free.
Sports news worthy of your time
Binge on the stats and stories that drive the sports world with Axios Sports. Sign up for free.
Tech news worthy of your time
Get our smart take on technology from the Valley and D.C. with Axios Login. Sign up for free.
Get the inside stories
Get an insider's guide to the new White House with Axios Sneak Peek. Sign up for free.
Catch up on coronavirus stories and special reports, curated by Mike Allen everyday
Catch up on coronavirus stories and special reports, curated by Mike Allen everyday
Want a daily digest of the top Denver news?
Get a daily digest of the most important stories affecting your hometown with Axios Denver
Want a daily digest of the top Des Moines news?
Get a daily digest of the most important stories affecting your hometown with Axios Des Moines
Want a daily digest of the top Twin Cities news?
Get a daily digest of the most important stories affecting your hometown with Axios Twin Cities
Want a daily digest of the top Tampa Bay news?
Get a daily digest of the most important stories affecting your hometown with Axios Tampa Bay
Want a daily digest of the top Charlotte news?
Get a daily digest of the most important stories affecting your hometown with Axios Charlotte
Illustration: Aïda Amer/Axios
The march toward a tech Cold War between the U.S. and China is continuing, but both sides are ignoring the reality of just how much they need each other. The 2 nations certainly would like to be independent, but today neither one's vast tech economy can function without the other.
Why it matters: A continued trade impasse will likely mean lots of pain on both sides of the Pacific.
- The U.S. relies to a vast degree on China to manufacture many key products.
- China, on the other hand, depends on software and chips from the U.S. for its devices and data centers.
Between the lines: People think of China's internet as mostly separate from ours, not only because of the language/alphabet differences but also because of different laws, different culture and a separate set of dominant internet firms (like Baidu and Tencent).
- Yes, but: That separation masks just how interconnected the 2 countries' technology industries are, particularly at the hardware level.
By the numbers: According to CompTIA, the U.S. exported $19.3 billion in tech products and services to China last year, accounting directly for more than 52,000 jobs.
- And while China exports far more technology to the U.S. — an estimated $187.7 billion worth — those products include gear that is designed in the U.S., including Apple iPhones, Amazon Echos and Google Nest thermostats.
The latest: The Trump administration's ban on business with Huawei has highlighted those ties, with the global telecom industry facing a significant quandary.
- The goal is to keep Huawei from being a part of 5G networks, but 5G is built on top of existing 4G gear.
- And lots of networks outside the U.S. — and even some rural networks here — already include Huawei equipment. Ripping out that gear would cost a fortune and significantly delay the rollout of 5G.
At the same time, the trade war has sent U.S. companies scrambling to find other countries to produce their gear, hurting one of China's largest tech industries.
- Already earlier this year, companies including Cisco, Nokia and GoPro, were looking to diversify their manufacturing to avoid being a casualty in the trade war. The shift is already taking a toll on Chinese tech manufacturers, I'm told.
Meanwhile, tensions continue to escalate.
- The New York Times reported late Tuesday that the administration is considering whether to ban Hikvision, a giant Chinese manufacturer of video surveillance equipment, from buying U.S. components. Several other Chinese firms could also face a ban, per Bloomberg.
- U.K.-based ARM is cutting Huawei off as well, according to the BBC. ARM's designs underlie most modern mobile chips, and without access to them, Huawei's plans to replace U.S.-made chips with its own could falter.
What they're saying: While U.S. tech giants are staying largely quiet on the latest escalation, leading trade groups representing those companies told Axios they are urging both sides to come to the negotiating table.
- Semiconductor Industry Association CEO John Neuffer: “We’re uneasy about rising tensions and the setback in negotiations, but it’s clearly in the interest of both sides to get back to the negotiating table, right the ship, and strike a productive deal."
- CompTIA VP Stefanie Holland: "We’re certainly urging the administration to reach an agreement." Holland said that increased tariffs have been counterproductive, with member companies largely finding themselves unable to pass along the cost to consumers.
Go deeper: