Navigating the U.S.-China Trade War: Short-Term Defensive Plays and the Long Game in Tech Diversification

The U.S.-China trade war has entered a new phase in 2025, with escalating tensions over critical minerals, semiconductors, and supply chain resilience. Recent U.S. policy actions—including Section 232 investigations, tariffs on Chinese goods, and supply chain overhauls—create both immediate risks and opportunities for investors. This is not a time to wait on the sidelines; it's a moment to pivot toward defensive equities for short-term gains and tech diversification plays for long-term dominance.

The Short-Term Play: Defensive Equities in Critical Minerals and Semiconductors

The U.S. government's focus on critical minerals—such as lithium, cobalt, and rare earths—has created a clear divide: companies exposed to China's supply chains face escalating tariffs, while those with diversified or domestic production stand to benefit.

1. Critical Minerals Producers:
Investors should prioritize companies with U.S.-based or non-Chinese mineral sources. For example, Freeport-McMoRan (FCX), a major copper producer with mines in the U.S. and Indonesia, is positioned to capitalize on rising demand for EV batteries and industrial metals. With the U.S. revoking duty exemptions for Chinese-origin goods, domestic suppliers like FCX gain pricing power.

2. Semiconductor Equipment Firms:
The semiconductor sector is at the heart of the trade conflict. The U.S. is pushing to reduce reliance on Chinese-manufactured chips and equipment. Companies like Applied Materials (AMAT), a leader in semiconductor manufacturing tools, are critical to this effort. Their products are vital for U.S. foundries aiming to meet domestic production targets.

3. Defensive Plays in Logistics:
The revocation of the de minimis exemption has hit Chinese exporters hard, but U.S. logistics firms like C.H. Robinson (CHRO) could benefit as companies reroute supply chains. Additionally, tariffs on Chinese maritime cargo equipment may favor U.S. logistics firms with diversified operations.

The Long-Term Bet: Tech Supply Chain Diversification

The U.S. is not just reacting to China—it's redefining global tech supply chains. Investors must focus on companies enabling this shift:

1. Semiconductor Foundries:
Taiwan Semiconductor Manufacturing Company (TSM) is a cornerstone of this strategy. Its new U.S. factories, backed by federal subsidies, aim to secure chip production for the Pentagon and domestic industries. TSM's dominance in advanced nodes (3nm, 5nm) makes it indispensable as the U.S. seeks self-sufficiency.

2. Rare Earth and Battery Metals:
MP Materials (MP), the largest rare earth producer in the U.S., is a critical player in reducing reliance on China's dominance in this sector. With the Biden administration's Inflation Reduction Act incentivizing domestic mining, MP's stock could surge as demand for EVs and defense tech grows.

3. Automation and Robotics:
Companies like Teradyne (TER), which provides automated testing equipment for semiconductors, are key to reducing labor costs and dependency on Chinese manufacturing. As U.S. firms invest in “reshoring,” automation leaders will see sustained demand.

The Risks—and Why They're Worth Taking

The U.S. is still determining tariffs on semiconductors and critical minerals, with final Section 232 reports due by November 2025. Uncertainty remains, but the trend is clear: tariffs will rise, and supply chains must diversify. Even legal challenges, like the temporary injunction on “fentanyl” tariffs, are unlikely to derail the broader strategy.

Act Now: The Clock is Ticking

With the August 12 deadline for China tariffs looming and the November Section 232 report approaching, investors have a narrow window to position their portfolios. Short-term plays in defensive equities offer shelter from volatility, while long-term bets on tech diversification will define the next decade of global economic power.

The U.S.-China trade war isn't just about tariffs—it's about control of the industries that will shape the future. The question isn't whether to act, but how quickly you can seize these opportunities before others do.

Investors should conduct their own due diligence. Past performance does not guarantee future results.