How Trump's tariffs may alter the future landscape for Chinese technology companies.

      ### Concept of the USA and China Trade War

      On January 20, President Donald Trump was inaugurated for his second term at the US Capitol. Among the foreign dignitaries present was Chinese Vice President Han Zheng, acting as a special envoy for President Xi Jinping and accompanied by China's ambassador to the US, Xie Feng. Right before the ceremony, US Vice President J.D. Vance and Tesla CEO Elon Musk met in closed sessions with Han. Then, Trump made an unexpected announcement: he intended to visit China within his first 100 days in office, indicating a potentially gentler approach toward China during his second term. However, that expectation was proven incorrect.

      On April 2, which Trump has since labeled “Liberation Day,” a new round of tariffs was introduced. The US imposed a sweeping 10% tariff on nearly all imports and announced “reciprocal tariffs” affecting key trade partners: Japan's overall tariff rate jumped to 24% and the EU's to 20%. China faced an effective tariff rate that soared to 145%.

      What implications does this have for China's tech sector?

      **Stock Markets**

      According to Bloomberg, Bush Chu, a portfolio manager at Aberdeen Investments, cautioned that recent US actions—such as investment restrictions and potential sanctions—pose “serious risks” to Chinese tech companies. There are also rumors that Chinese firms listed in the US might be forcibly delisted, raising concerns about stricter access for Chinese tech enterprises.

      The global markets reacted swiftly to Trump's tariffs on April 3: Germany's DAX and France's CAC 40 each fell by over 3%, while the UK's FTSE 100 dropped 1.55%. In Asia, Japan’s Nikkei 225 decreased by 2.77%, and South Korea’s KOSPI declined by 0.76%. However, China's markets exhibited notable resilience, with the Shanghai Composite easing by only 0.24%.

      To bolster investor confidence, the Chinese government intervened. Estimates from Caijing indicated that the sovereign wealth fund Central Huijin purchased more than RMB 100 billion (approximately $13.8 billion) in Chinese stocks and ETFs between April 7 and 8. The outcome was a significant rebound. From April 8 to 14, major indexes surged: the Beijing 50 jumped 21%, the STAR 200 increased by 9%, and the CSI 300 rose by 4%.

      Looking ahead, one clear takeaway is that volatility will be the only certainty for China's markets. As Trump's trade and tech agenda continues to evolve, expect the stock market to experience fluctuations with little predictability.

      **Investor Confidence**

      On April 8, President Trump proposed new tariffs on high-performance computing chips used in smartphones and various tech products, just two days after his administration had announced exclusions for a wide array of electronics in the most recent round of tariffs on Chinese imports.

      Behind the scenes, Trump's top economic advisers were racing to clarify a rapidly changing and often contradictory policy stance. For weeks, the administration had asserted that no company or sector would be exempt from tariffs, emphasizing that a hardline approach was essential for reshaping America's trade relationship with China.

      As of April 2, semiconductors remained exempt from reciprocal tariffs. However, the erratic changes in tariff rules and exemptions have increased uncertainty for companies heavily reliant on trade with China. Some CEOs and investors welcomed the temporary exclusion of electronics, especially since these products account for approximately a quarter of all US imports from China. Nevertheless, Trump's unpredictable tariff strategy is undermining investor confidence and reinforcing a tougher stance toward China.

      **Cross-Border E-Commerce**

      As the US-China trade war intensifies, popular fast fashion platforms Shein and Temu are encountering challenges in the American market. These platforms, known for offering a wide range of products from clothing to furniture at extremely low prices—often with free shipping—have attracted US consumers interested in bulk buying.

      A Congressional Research Service report published in February highlighted the rise of platforms like Shein and Temu, linking it to the dramatic increase in low-value parcel exports from China, which soared to $66 billion in 2023—up from just $5.3 billion in 2018—much of which was directed toward the US. The report also noted that together, Shein and Temu made up 17% of the American discount retail market in 2023. However, with the US government tightening its focus on Chinese e-commerce players and increasing scrutiny over tax, trade, and data practices, these platforms may face more significant challenges in the future.