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Illustration: Lazaro Gamio/Axios

Even as businesses continue to protest the growing U.S.-China trade war, the tariffs are already causing companies in both countries to rethink how and where they do business.

Why it matters: For all their differences, the U.S. and Chinese tech industries remain very interdependent — each country contributes a great deal of business to the other's economy.

Where it stands: What tech companies want most is an end to hostilities, as evidenced by a letter issued Wednesday by more than 150 business groups calling for an end to the tariffs. However, the ongoing trade war has both sides eyeing how to lessen their dependence on the other.

  • Historically nearly all smartphones and most other consumer electronics have been made in China, but that is starting to shift. Google, for example, is joining the electronics makers looking at Vietnam as an alternative.
  • China is also likely to explore ways to reduce its dependence on U.S. technology for everything from software to chips and the tools to make them.

Yes, but: In the short term, there is a lot of pain for companies in both countries.

  • Apple remains highly dependent on China for manufacturing and it is also a key market for iPhone sales. Nearly all iPhones are made there, with the exception of phones sold in Brazil and India, where laws impose huge tariffs on imported electronics.
  • Huawei, subject to a near-total ban on business with the U.S., finds itself not only shut out of a key market, but scrambling to find new options for chips and operating systems, among other components. The company faces the prospect of launching its first high-end smartphone without Google's apps and services.
  • Meanwhile, more than 130 companies have asked the Commerce Department for permission to continue selling components to Huawei, Reuters reported this week.

Between the lines: Trump has repeatedly argued that Apple and other tech companies should return manufacturing to the U.S. But that's considered wildly unrealistic, a point that Tim Cook has no doubt tried to make during his meetings with President Trump.

  • U.S. unemployment rates are already at record lows, the Trump administration's immigration policies actively discourage expanding the domestic labor force, and efforts (like Foxconn's deal with Wisconsin) to get overseas manufacturers to build new U.S. factories have been overhyped.
  • More importantly, the U.S. just doesn't have the type of workforce concentration that would allow for devices to be made at the kind of scale Apple and others need for smartphones. At most, tariffs will cause manufacturers to move production from China to other countries.

The bottom line: The tech industry's global supply chain took years to assemble, and it will not dissolve overnight. But even if the Trump administration's most bellicose trade-war scenarios don't materialize, the tariff fight has added a deep layer of uncertainty to how companies operate globally.

  • Wide-open world trade was the rock-solid foundation for decades of tech expansion. With that condition no longer a given, more defensive behavior and slower growth are likely.

Go deeper: China tariffs will hit fall shoppers despite Trump's postponement

Go deeper

Updated 5 hours ago - Politics & Policy

Omicron dashboard

Illustration: Brendan Lynch/Axios

  1. Health: Pfizer and Moderna boosters overwhelmingly prevent Omicron hospitalizations, CDC finds — Omicron pushes COVID deaths toward 2,000 per day — The pandemic-proof health care giant.
  2. Vaccines: The case for Operation Warp Speed 2.0 — Starbucks drops worker vaccine or test requirement after SCOTUS ruling — Kids' COVID vaccination rates are particularly low in rural America.
  3. Politics: Biden concedes U.S. should have done more testing — Arizona says it "will not be intimidated" by Biden on anti-mask school policies — Federal judge blocks Biden's vaccine mandate for federal workers.
  4. World: American Airlines flight to London forced to turn around over mask dispute — WHO: COVID health emergency could end this year — Greece imposes vaccine mandate for people 60 and older — Austria approves COVID vaccine mandate for adults.
  5. Variant tracker

Arizona governor sues Biden administration over COVID funds tied to mandates

A teacher prepares a hallway barrier to help students maintain social distancing at John B. Wright Elementary School in Tucson, Arizona, on Aug. 14, 2020. Photo: Cheney Orr/Bloomberg via Getty Images

Arizona Gov. Doug Ducey (R) filed a lawsuit Friday against the Biden administration for ordering the state to stop allocating federal COVID relief funds to schools that don't comply with public health recommendations such as masking, the Arizona Republic reports.

Why it matters: The Treasury Department said last week that the state would have to pay back the money if Ducey does not redesignate the $173 million programs to ensure they don't "undermine efforts to stop the spread of COVID-19."

Federal judge blocks Biden's vaccine mandate for federal workers

President Biden speaking from Eisenhower Executive Office Building on Jan. 21. Photo: Yuri Gripas/Abaca/Bloomberg via Getty Images

A federal judge in Texas blocked the Biden administration from enforcing its coronavirus vaccine mandate for federal workers on Friday, citing the outcome of last week's Supreme Court ruling that nullified the administration's vaccine-or-test requirement for large employers.

Why it matters: It's a blow to President Biden's efforts to increase the U.S.' vaccination rates, though much of the federal workforce has already been vaccinated against the virus.