The National Security Risks of Chinese Auto Tech and U.S. Supply Chain Vulnerabilities

The global transition to electric vehicles (EVs) has become a strategic battleground, with China's dominance in automotive technology and supply chains raising profound national security and economic concerns for the United States. As the world races to decarbonize transportation, the U.S. faces a dual challenge: mitigating the risks of overreliance on Chinese EV technology while navigating the geopolitical and financial implications of a fragmented global supply chain. For investors, the stakes are clear-understanding these dynamics is critical to assessing long-term risks in the U.S. automotive and tech sectors.

National Security Risks: From Data to Espionage

The Biden administration's February 2024 review of "connected vehicles from countries of concern" underscores the growing alarm over Chinese EVs' potential for espionage and data exploitation. Modern EVs are increasingly "computers on wheels," equipped with sensors, cameras, and cloud connectivity that could enable surveillance of drivers, infrastructure, and even critical national assets according to FDD analysis. As research shows, Chinese EVs are perceived as tools for "data extraction and remote control," with vulnerabilities that could be exploited for intelligence gathering or cyberattacks.

This risk is compounded by China's control over key components of the EV value chain. For instance, Chinese firms dominate the production of high-tech semiconductors and software used in autonomous driving systems, creating opportunities for embedded backdoors or malicious code according to legal analysis. The U.S. has responded with import restrictions on internet-connected Chinese EVs, but these measures highlight a broader dilemma: how to balance innovation with security in an era where technology and geopolitics are inextricably linked as the White House announced.

Supply Chain Vulnerabilities: A Geopolitical and Economic Quagmire

China's grip on the EV supply chain extends far beyond vehicles themselves. It controls over 75% of global lithium-ion battery production and more than half of the processing capacity for lithium, cobalt, and graphite-critical minerals essential for EV batteries according to energy research. This dominance is not merely economic; it is geopolitical. Chinese investments in Latin America and the Caribbean (LAC), for example, are reshaping regional dynamics, with firms expanding from mining into refining and manufacturing to secure raw materials and bypass U.S. and European tariffs as research indicates.

The Inflation Reduction Act (IRA) represents a U.S. attempt to counter this trend by incentivizing domestic production and supply chain resilience. However, as noted in a 2025 analysis by the American Security Project, the IRA's success hinges on rapid execution and sustained investment. Meanwhile, Chinese automakers are diversifying into third countries like Brazil and Vietnam, fragmenting global supply chains and intensifying trade tensions according to policy analysis. For investors, this fragmentation raises questions about the long-term viability of U.S. supply chain strategies and the potential for retaliatory measures from China.

Economic Impacts: Market Competition and Policy Uncertainty

The economic implications of China's EV expansion are equally daunting. By 2024, China accounted for 70% of global EV production and nearly 80% of lithium-ion battery manufacturing, driven by state-subsidized policies like Made in China 2025 according to U.S. analysis. This has enabled Chinese automakers such as BYD to outpace Tesla in sales volume, while European automakers face shrinking margins due to battery dependence on non-European suppliers as reported.

For the U.S. tech sector, the risks are twofold. First, China's control over critical minerals and battery production creates a dependency that could be weaponized in times of geopolitical conflict. Second, U.S. automakers are at a disadvantage due to inconsistent policy support for clean technology. As highlighted in a 2025 report by the U.S.-China Economic and Security Review Commission, the U.S. has lagged in industrial policies that could offset China's cost advantages, which include a 20% lower production cost for EVs compared to Western markets according to World Economic Forum analysis.

Mitigation Strategies: Diversification and Strategic Resilience

Addressing these challenges requires a multifaceted approach. Diversifying supply chains is a priority, but this is easier said than done. The U.S. must accelerate domestic processing of critical minerals and invest in alternative technologies, such as solid-state batteries, to reduce reliance on China. Public-private partnerships will be essential, as will international collaboration with allies to create alternative supply chains in regions like Southeast Asia and Africa according to industry insights.

Policy coherence is equally critical. The Trump administration's 2025 tariffs on Chinese EVs, while politically expedient, have created uncertainty for investors and disrupted trade flows as automotive logistics reports. A more sustainable strategy would combine targeted tariffs with incentives for domestic innovation and workforce development. Additionally, the U.S. must address the overcapacity crisis in China's EV market, where state-driven production surpluses distort global markets and undermine fair competition according to regulatory analysis.

Conclusion: A Delicate Balance

The U.S. automotive and tech sectors stand at a crossroads. While Chinese EV technology poses significant national security and economic risks, a purely adversarial approach risks stifling innovation and inflating costs. Investors must navigate this landscape with a nuanced understanding of both the threats and opportunities. The path forward lies in building resilient, diversified supply chains, fostering strategic alliances, and implementing policies that align with long-term economic and security goals. In an era of geopolitical rivalry, the ability to adapt will determine not just the competitiveness of U.S. firms, but the stability of the global EV ecosystem.