China's Strategy in Trade War: Threaten U.S. Tech Companies

In the ongoing trade war between the United States and China, Beijing has adopted a strategy of threatening U.S. tech companies to maintain its technological supremacy and economic growth. By imposing tariffs and other restrictions on U.S. tech companies, China aims to force them to share their technology with Chinese firms, reduce its dependence on foreign technology, and build indigenous innovation capabilities. This strategy has had significant consequences for U.S. tech companies and the global tech landscape.

One of the primary consequences of China's strategy is the decline in patenting and innovation among sanctioned Chinese firms. Research by Cao et al. (2024) found that sanctioned Chinese firms experienced a decline in both the quantity and quality of patents filed, compared to similar non-sanctioned firms. This decline was particularly pronounced for high-technology patents. Additionally, the sanctions led to a breakdown of critical partnerships between Chinese firms and U.S. inventors, further hindering Chinese innovation.



Another consequence of China's actions is the disruption of global supply chains. The growing division between the U.S. and China has the potential to spark a tech cold war that could disrupt global supply chains, stifle technological innovation, and strain international relations. This dynamic has already led to increased competition from other countries, such as Europe or South Korea, which may be more open to Chinese investment and collaboration.

To mitigate these risks, U.S. tech companies could consider diversifying their partnerships and collaborations, investing in domestic R&D, engaging with policymakers, and adapting to changing market dynamics. By taking these steps, U.S. tech companies can better position themselves to navigate the challenges posed by China's actions and maintain their competitive edge in the global tech landscape.

In conclusion, China's strategy of threatening U.S. tech companies in the trade war has had significant consequences for the global tech landscape and the competitive dynamics between the two countries. While these actions aim to maintain China's technological supremacy and economic growth, they have also led to a decline in Chinese innovation, disruption of global supply chains, and increased competition from other countries. To mitigate these risks, U.S. tech companies must adapt their strategies and engage with policymakers to maintain their competitive edge in the global tech market.