Angela Zhang is a law professor at the University of Southern California Gould School of Law. Zhang is an expert on technology regulation and antitrust in China, and her research focus has recently been on artificial intelligence oversight. This interview first appeared in SCMP Plus. For other interviews in the Open Questions series, click here.
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How will the new US-China tariff war affect the Chinese technology sector and competition between the two countries on artificial intelligence?
Tariffs can affect the Chinese tech sector in two main ways.
First, there are the direct effects. Higher tariffs make it harder for Chinese tech products to compete in the US market. If the tariffs stay relatively modest – like the levels we saw before “Liberation Day” – Chinese suppliers might absorb some of the extra costs. Prices would go up a bit, but their products might still be competitive. But if the tariffs go up dramatically – say, to the 145 per cent that President [Donald] Trump proposed before China and the US reached an agreement in Geneva – then Chinese products would probably lose their price advantage and be effectively shut out of the US market.
Second, there are indirect effects. As Chinese companies face more trade barriers from the US, they’ll need to work even harder on cutting costs and scaling up. A good example is what we saw in response to the chip embargo – many Chinese tech firms started open-sourcing their AI models. That’s a more cost-effective and collaborative way to keep developing advanced technologies when resources are tight. I expect we’ll see similar strategies in other areas like electric vehicles, batteries and renewable energy. These firms are going to keep pushing hard to make their products even more competitive.
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At the same time, they’re not going to sit still. I think we’ll see Chinese companies look more aggressively to other markets – Asia, Latin America, Africa. And we’ll likely see more efforts to deepen trade with Europe, including offering technology transfers in exchange for market access.
Of course, there’s a lot of uncertainty ahead. But one thing is clear: Chinese firms are going to face serious challenges in the coming years under the Trump administration.