Photo: Al Drago/Bloomberg via Getty Images
President Trump’s ambitious attempt to rapidly reorder U.S. economic relations in the early months of his administration centers on the expansive, if chaotic, use of tariffs on adversaries and allies alike. With a new round of reciprocal tariffs set to go into effect on April 2, what some senior officials have called “Liberation Day,” much of the current discussion is overlooking the biggest risk of these measures: A multifront trade war will weaken the United States’ ability to compete on the critical and emerging technologies that will be essential to the administration’s economic growth and national security goals.
Indeed, the enduring test of the America First Trade Policy is not its short-term effect on the merchandise trade deficit or fentanyl interdiction by neighbors, but its impact on the United States’ ability to innovate and scale critical and emerging technologies. And China is ready to pounce on strategic missteps by the United States to lock in decisive technological advantages. The risk has never been higher.
Countries that establish and sustain advantages across these technologies will shape the coming economic order. They will be positioned to set technology standards in global markets. They will control technology supply chains and choke points. They will be able to shape the future of work and jobs. And they are more likely to have the first-mover advantage in gaining market share for tech-enabled goods and services. Those countries that cannot do these things will fall behind.
By most assessments, the United States currently maintains an edge in a number of critical and emerging technologies such as artificial intelligence, leading-edge semiconductor design, biotechnologies, pharmaceuticals, supercomputing, and quantum computing, but China is catching up. In other technologies, however, China already leads—for instance, in cryptocurrency, small drones, e-commerce, electric vehicles, facial recognition, mobile device manufacturing, high speed rail, hypersonics, solar and wind energy, and telecommunications.
It is true that China has long engaged in unfair trade practices, intellectual property theft, and outright sabotage of assets (and these must be addressed, including with tariffs). But it would be wrong to conclude that mercantilist and malign actions alone have led to China’s technological rise. Let’s acknowledge China’s strengths: quality scientific research, prodigious STEM talent, an ability to move rapidly from “lab to market,” dominance in processed critical minerals, a capacity to scale commercial production, and access to markets worldwide, especially in the Global South. Notably, China is well-integrated into most major technology value chains.
That is the essential point: Technology value chains are global in nature. They comprise complex research, trade, commercial, and investment ties that crisscross the world, from advanced economies in Asia and Europe to middle-income countries in Latin America and developing countries in Africa and South Asia. To compete, U.S. companies, big and small, need reliable access to critical and cost-competitive inputs, stable ties with suppliers of those inputs (Figure 1), and strong protections from intellectual property (IP) theft and industrial espionage. They also need foreign direct investment and access to export markets. The volatility of tariffs and retaliations, at a minimum, cuts against a stable technology environment. More likely than not, a multifront trade war would pose major obstacles to U.S. industry, universities, and workers seeking to compete on advanced technologies.
Take the case of the semiconductor industry, which includes chip designers, foundries, equipment providers, and material suppliers across the world. U.S. companies such as NVIDIA, Qualcomm, and Intel lead in the design of advanced chips, but they depend on chip makers in Taiwan and South Korea. They in turn depend on equipment providers in Japan and the Netherlands, and processed materials from China. Tariffs on imports from China, Mexico, and Canada; tariffs on steel and aluminum; and reciprocal tariffs on other countries add uncertainty and costs to U.S. chipmaking prospects. They may alter investor expectations and provoke retaliatory measures akin to China’s tit-for-tat tariffs and export controls on critical minerals.
Efforts to attract investment in U.S. chipmaking to Arizona, New York, Ohio, and other states (under the CHIPS and Science Act and via Trump announcements of massive investments from Taiwan and the United Arab Emirates) are laudable. Tariff threats may have induced these moves, but whether real investments materialize primarily depends not on tariffs but on other factors such as tax incentives, talent, and regulations. On the contrary, tariffs on chip inputs render U.S. chipmaking more expensive in the short run, while shielding U.S. domiciled companies from market pressures essential to their competitiveness and innovation over time. That’s bad for the AI revolution, which will depend on access to leading-edge chips.
Similar issues will play out in the U.S. biotechnology and life sciences sector in the U.S. Northeast and on the West Coast, as well as increasingly in the heartland and the South. This sector thrives on international collaboration, sourcing raw materials, specialized equipment, and active pharmaceutical ingredients from global partners, including China and Canada. Imposing tariffs on these imports inflates research and production costs, stifling innovation in drug development and medical technologies.
The nascent quantum industry in states such as Illinois and Colorado is no different. Quantum networks rely on more than 15 hardware components such as random number generators, detectors, quantum chips, and polarization equipment, variously supplied by companies in China, France, Germany, India, Japan, New Zealand, and the United Kingdom. If tariffs raise the cost of these inputs or if retaliatory measures limit U.S. companies’ access to key components, the United States risks losing the first-mover advantage in this pivotal technology.
The administration would do well to orient its trade strategy to the technology leadership vision that Vice President Vance laid out at the Paris AI Action Summit in February. While he affirmed the United States’ intention to ensure that “American AI technology continues to be the gold standard worldwide,” he added, “just because we’re the leader doesn’t mean we want to or need to go it alone.”
To that end, the administration should issue an updated America First Trade and Technology Policy focused on U.S. technology leadership at all costs. With allies, the United States should seek reliable access to low-cost inputs to U.S. technology products and services (even if it means a bilateral goods deficit with some countries), deep and secure R&D partnerships, greater coordination on focused export and investment controls, and the removal of tariff and nontariff barriers to U.S. exporters. With China, any technology-friendly deal should include uninterrupted U.S. access to processed critical minerals, a ratcheting down of heavy subsidies on Chinese products, and verifiable measures to stop IP theft and cyberattacks.
Navin Girishankar is president of the Economic Security and Technology Department at the Center for Strategic and International Studies (CSIS) in Washington, D.C.
