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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

Kendall Baker, author of Sports
32 mins ago - Sports

European soccer is at war

Liverpool celebrating its 2019 Champions League victory. Photo: Nigel Roddis/Getty Images

Europe's biggest soccer clubs have established The Super League, a new midweek tournament that would compete with — and threaten the very existence of — the Champions League.

Why it matters: This new league, set to start in 2023, "would bring about the most significant restructuring of elite European soccer since the 1950s, and could herald the largest transfer of wealth to a small set of teams in modern sports history," writes NYT's Tariq Panja.

Dion Rabouin, author of Markets
1 hour ago - Economy & Business

2021's expected earnings blowout begins

JPMorgan CEO Jamie Dimon. Photo: Mark Kauzlarich/Bloomberg via Getty Images

First-quarter earnings so far have been very strong, outpacing even the rosy expectations from Wall Street and that's a trend that's expected to continue for all of 2021. S&P 500 companies are on pace for one of the best quarters of positive earnings surprises on record, according to FactSet.

Why it matters: The results show that not only has the earnings recession ended for U.S. companies, but firms are performing better than expected and the economy may be justifying all the hype.

NASA's Mars helicopter takes flight as first aircraft piloted on another planet

Ingenuity on the surface of Mars, filmed by NASA's Perseverance rover. Photo: NASA Jet Propulsion Laboratory

NASA successfully piloted the Ingenuity Mars helicopter for its first experimental flight on Monday, briefly hovering the aircraft as NASA's Perseverance rover collected data.

Why it matters: Ingenuity's short flight marks the first time a human-built aircraft has flown on a world other than Earth, opening the door to new means of exploring planets far from our own.