Here is some data on the current state of trade between the U.S. and China, highlighting the industries most affected by the trade war:
- The U.S. trade deficit with China has increased from $295b in 2011 to $419b in 2018. In 2019, the deficit was reduced to $345b, but the U.S. trade deficit with the rest of the world increased from $453b in 2018 to $509b in 2019.
- In 2019, China accounted for 6.5% of U.S. exports and 18.1% of imports. In 2018, the U.S. accounted for 18% of China's exports.
- In the last few years, the major industries that rely on U.S. imports from China are cell phones, computers, sporting goods, textiles, telecommunication equipment, and computer accessories. In 2019, they collectively accounted for 44% of imports from China. Passenger cars (607%), alcoholic beverages (169%), and military aircraft and parts (106%) have increased import value over 100% since 2015.
- The U.S. industries that account for major exports to China are civilian aircraft and parts, semiconductors, soybeans, passenger cars, industrial machines, and pharma – they represent 46% of U.S. exports to China. The value of the natural gas, crude oil, and coal that China imports from America has increased 100-fold since 2015.
U.S. companies with high revenue exposure in China:
- Qualcomm - 66%
- Micron technology - 57.1%
- Texas Instruments - 44.3%
- AMD - 39%
- Intel - 36%
- Nvidia - 24%
- Apple, Nike ~ 20%
- Starbucks - ~10%
China’s stake in U.S. companies:
- Smithfield foods
- GE Appliances
- Riot Games
- The Waldorf Austria
- Ironman Triathlons
- Warner Music - 10%
- Airbnb - 10%
- Reddit - 5%
- Tesla - 5%
- IBM’s PC and x86 Server business
More than the trade volume of semiconductors, its influence in the technological landscape, particularly 5G, makes it a vital industry. Since 2015, the U.S. import of semiconductors from China has decreased by 40% and the U.S. export of semiconductors to China has increased by 51%. In China, Taiwan Semiconductor Manufacturing Company (TSMC) generated revenue of $7b in 2019 compared to China’s leader Semiconductor Manufacturing International Corp. (SMIC), which generated $3b. To become more self-reliant, China will invest $9.1b in SMIC in 2020.
U.S. companies hold 47% market share in the semiconductor industry compared to China’s 5%, as of 2019. However, 80% of manufacturing facilities operate in Asia. The number of U.S. firms that manufacture advanced semiconductors has fallen from 30 in 2001 to five in 2018. With Intel announcing that it is outsourcing the manufacturing of its chips, the U.S. needs to invest more in this strategic sector. (More on semiconductors and their role in the trade war in the section below.)
China's investments in AI should allow the country to become the world’s top AI innovation hub by 2030. But as Kai-Fu Lee, an AI pioneer pointed out, though the U.S. leads in high-quality research, China leads in implementation and both countries are currently closing the gap. China is currently spending more than the U.S. in AI, but the U.S. still remains the world leader in attracting AI talent. Becoming a leader in AI requires talent, investment, data, and implementation. Whichever country can successfully pioneer and implement AI technology on a global scale will become the next technological superpower.