Trump’s Trade War With China Highlights Tech Vulnerabilities on Both Sides

Summary

WSJ Tech News Briefing: Trump’s Trade War With China Highlights Tech Vulnerabilities on Both Sides

Release Date: May 7, 2025
Host: Victoria Craig, The Wall Street Journal

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Introduction

In the May 7th episode of WSJ Tech News Briefing, host Victoria Craig delves into the intricate web of technological dependencies between the United States and China, the world's two largest economies. The discussion centers around how recent trade tensions, particularly under the Trump administration, have unveiled significant vulnerabilities in both nations' tech industries. The episode features insights from WSJ tech columnist Christopher Mims and Yoko Kubota, the Wall Street Journal's Deputy Beijing Bureau Chief.

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1. Reducing U.S. Dependence on Chinese Rare Earth Metals

Timestamp: [00:00 – 05:41]

The episode opens with a focus on a Silicon Valley startup, Conifer, which is pioneering the development of electric motors that do not rely on rare earth metals—a critical component traditionally sourced from China. Rare earth metals are pivotal in manufacturing various high-tech products, including electric vehicles (EVs), smartphones, and military equipment.

Christopher Mims, WSJ tech columnist, explains:

“They have found a cheap way to make a rare earth free motor. Their first application is going to be like Vespa style scooters. Turns out that's a huge market. There's a billion of those in the world.”
[02:12]

Conifer's innovative approach utilizes iron-based magnets, specifically oxidized iron, which significantly reduces dependency on rare earth elements. Mims highlights the potential scalability of this technology beyond scooters, extending to household appliances, HVAC systems, and full-scale electric vehicles.

Victoria Craig probes the practicality and timeline for widespread adoption:

“Within four years you could have rare earths free motors of the kind made by Conifer and electric vehicles.”
[04:30]

Mims acknowledges the challenges, such as the slightly lower power output of these motors and the need for their integration directly into vehicle wheels. Despite these hurdles, he remains optimistic about the long-term vision of achieving a fully North American-made electric vehicle industry, contingent on substantial support and infrastructure development.

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2. U.S.-China Technological Interdependence

Timestamp: [05:41 – 07:23]

Victoria shifts the conversation to the broader context of the U.S.-China trade war, emphasizing President Trump's strategy to reduce manufacturing reliance on China by imposing tariffs and encouraging domestic production. The discussion underscores how U.S. tech giants are heavily dependent on Chinese manufacturing for critical components, including smartphones, laptops, and memory chips.

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3. China's Dependence on U.S. Semiconductors for Automotive Industries

Timestamp: [07:23 – 12:00]

Yoko Kubota provides an in-depth analysis of China's reliance on American semiconductors, particularly in the automotive sector. She notes that despite China's efforts to achieve self-sufficiency, the demand for American-made chips remains robust.

“China is still reliant on foreign chips, and that includes some American made chips. So last year China's imports of semiconductors hit $412 billion and that was still up 10% from 2023.”
[07:23]

Kubota differentiates between the types of chips used in consumer electronics versus those in automobiles. While advanced, smaller chips are critical for smartphones and AI applications, the automotive industry primarily utilizes microcontroller units (MCUs) and analog chips, which can be manufactured with older technology. However, the transition to domestically produced chips in China faces hurdles:

1. Safety and Validation: Automotive chips require rigorous safety standards and extensive validation, prolonging the development cycle.
2. Market Dominance of Established Players: Companies like Texas Instruments and other European and Japanese manufacturers have a robust product lineup, making it challenging for newer Chinese semiconductor firms to gain traction.

“The Chinese government has set a target... to make sure that the chips in your cars, quarter of them are made in China by this year 2025.”
[09:31]

Despite aggressive targets, Kubota indicates that achieving a 25% domestic chip production rate by 2025 is ambitious, with actual figures lagging behind. She anticipates a dual approach where Chinese automakers will increasingly seek locally produced chips while also negotiating with existing foreign suppliers to manufacture more chips within China.

“Chinese carmakers will ask American and other foreign chip makers to make more chips in China so that they can continue using the foreign companies chips.”
[11:18]

Kubota also observes that emerging Chinese chip manufacturers are keen to establish themselves amid the trade tensions, viewing the current scenario as a pivotal opportunity to prove their technological capabilities.

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4. Implications of the Trade War on Global Tech Supply Chains

Timestamp: [12:00 – End]

Victoria Craig wraps up the discussion by reflecting on the mutual dependencies exposed by the U.S.-China trade war. The episode illustrates that while the U.S. seeks to curb its reliance on Chinese manufacturing through innovations like Conifer's rare-earth-free motors and enhanced domestic chip production, China similarly grapples with reducing its dependence on American semiconductors.

The episode concludes with a brief return to the earlier CRM meltdown skit, underscoring the persistent challenges in technological operations and supply chain management amidst escalating trade tensions.

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Key Takeaways

• Innovative Solutions: Companies like Conifer are developing technologies that could significantly reduce U.S. dependence on Chinese rare earth metals, promoting more localized and sustainable manufacturing.
• Mutual Dependencies: Both the U.S. and China reveal deep interdependencies in their tech industries, particularly in semiconductor supply chains crucial for consumer electronics and automotive sectors.
• Challenges in Localization: Efforts to localize chip production in China face significant obstacles, including stringent safety standards and market dominance by established foreign manufacturers.
• Future Outlook: The path towards technological self-sufficiency for both nations is complex and requires sustained investment and strategic policy support to overcome existing dependencies.

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Notable Quotes

• Christopher Mims:
  “Within four years you could have rare earths free motors of the kind made by Conifer and electric vehicles.”
  [04:30]

• Yoko Kubota:
  “China is still reliant on foreign chips, and that includes some American made chips... last year China's imports of semiconductors hit $412 billion and that was still up 10% from 2023.”
  [07:23]

• Yoko Kubota:
  “Chinese carmakers will ask American and other foreign chip makers to make more chips in China so that they can continue using the foreign companies chips.”
  [11:18]

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This episode of WSJ Tech News Briefing provides a comprehensive overview of the technological tug-of-war between the U.S. and China, highlighting both the innovative strides being made to reduce dependencies and the significant challenges that lie ahead in achieving true technological independence.

Transcript

[Victoria Craig]

This is a CRM meltdown.

[Bob]

Hey boss. Our chatbots glitched, 300 orders vanished and everything got escalated to our live agents. Wait times are over two days long.

[Victoria Craig]

Call me bad CRM was then. This is ServiceNow CRM for the AI era. Hey TNB listeners, before we get started, a heads up we're gonna be asking you a question at the top of each show for the next few weeks. Our goal here at Tech News Briefing is to keep you updated with the latest headlines and trends on all things tech. Now we want to know more about you, what you like about the show, and what more you'd like to be hearing from us. We already asked you about some corners of tech you might be interested in. Now we got a few others in mind. Biotech, data science, robotics. Let us know what sparks your interest. If you're listening on Spotify, look for our poll under the episode description or you can send us an email to tnbsj.com now onto the show. Welcome to Tech News briefing. It's Wednesday, May 7th. I'm Victoria Craig for the Wall Street Journal. Today, a show about cars, China, and the way tech industries in the world's two biggest economies are actually reliant on each other to succeed. First we'll look at a startup that's trying to end America's dependence on China for rare earth's metals by excluding them in the design of new electric motors. Then we talk a lot about the dependence of America's tech titans on China for critical componen. But the inverse is also true. Our deputy Beijing bureau chief walks us through how the trade war has exposed China's dependence on the US for chips that drive its own auto industry. But first, building an electric powered motor without rare earths metals say it ain't so. Rare earth's metals are used to create critical tech components and they've been a focus for the Trump administration recently, specifically how to source more of them from the US but what if we don't need them for one big use case? Cars. WSJ tech columnist Christopher Mims says it's a real possibility and it could lead to more American made vehicles. Chris, how does this electric motor minus rare earths work?

[Christopher Mims]

There's a company called Conifer. They're based in Silicon Valley and they have found a cheap way to make a rare earth free motor. Their first application is going to be like Vespa style scooters. Turns out that's a huge market. There's a billion of those in the world. But you know, this could go into Those vacuum cleaners, it could go into your H VAC system, it could be scaled up, it could go into electric vehicles. So that's a big deal. It just means local supply chains for motors eventually all over the world. Because the only thing you need to make these motors are some power electronics, some steel and some rust. They actually used just iron based magnets. It's oxidized iron.

[Victoria Craig]

Make it from rust now without getting too much into the weeds, because you'll lose even me. Just tell us how this new kind of motor could actually work. In practice, they just drop it in where you would use a normal motor. How does that work?

[Christopher Mims]

Yeah, that's right. Typically it might be like an in wheel motor. So in most vehicles, the motor is sitting somewhere under the chassis of the car. This motor would actually be in the wheel itself, which gives you some other advantages like traction control and without getting too in the weeds. A lot of what's going on here is that they are making clever use of a different kind of motor technology than what we've used for the past 200 years. So for the nerds, the regular motors are radial flux, these new ones are axial flux. But that's as far as we have to go into that.

[Victoria Craig]

Okay, good. You haven't lost me yet. So good sign. Now, the dream of this new startup company that you have been talking to, Conifer, Their dream is an affordable, easy to make electric motor made from materials right here in America. But how realistic, how feasible is that and how quickly could that happen?

[Christopher Mims]

This is happening now. So they have conversations with EV makers happening. Their first customer that they were able to connect me with is called Lyra Energy. They're based in Los Angeles. They want to make the Tesla Vespa style scooters for the developing world.

[Victoria Craig]

So this is on a relatively smaller scale because we're talking about startups using it in limited applications at this point. But if we wanted to think about a world in which this could be used in every electric vehicle on the road in America, what's the timeline like on that and what are the hurdles that need to be overcome in order to achieve that?

[Christopher Mims]

So within four years you could have rare earths, free motors of the kind made by Conifer and electric vehicles. One challenge though is that because these motors are typically a bit less powerful than the current ones, they really have to be in the wheels. Turns out that just makes it more efficient. You don't have to transmit the power through a bunch of gears. It's an early days market within the early days market of electric vehicles, especially.

[Victoria Craig]

In the context of the trade disputes that we're seeing with tariffs all over the world, moving manufacturing back to the US Is a big priority for President Trump. How would this fit into that broad overall goal of bringing vehicle manufacturing to.

[Christopher Mims]

The US between domestic manufacture of microchips, new kinds of batteries, which can be based on things like sodium, which is very easy to obtain, we really do have a sight line toward an entirely made in North America vehicle. I mean, from the moment that the materials are dug out of the ground, it'll take a while and it'll take a lot of support. And just taxing imports isn't going to do it on its own. But 20 years from now, it could be a very different conversation.

[Victoria Craig]

That was WSJ tech columnist Christopher Mims. Coming up, Beijing's move to exempt certain imports from tariffs shows its carmakers vulnerabilities to the trade war with the US we'll have more on that after the break. This is a CRM meltdown, so it gets worse.

[Bob]

Inventory swears the units arrived last week. They bounce made a warehouse who claim inventory's full of it. So either inventory's got a vivid imagination or warehouse lost everything. Our manufacturer says they'll look into it, but the only guy who'd know anything about this is Bob. But Bob's in Bora Bora. Sure hope Bob's enjoying his Mango Tangos because we're about to lose so many customers.

[Victoria Craig]

Bad CRM was then this is ServiceNow CRM for the AI era. Tariff exemptions in the trade spat between Washington and Beijing illustrate how vulnerable the tech industry is to the ongoing conflict. President Trump has so far allowed smartphones, laptops, memory chips and other electronics not to be subject to US Tariffs on imports from China, while Beijing has said certain semiconductors and chip making equipment are exempt from its own retaliatory tariffs on American imports. WSJ Deputy Beijing Bureau Chief Yoko Kubota writes that one consequence from this trade war has been the exposure of the depth of each side's reliance on the other, especially when it comes to tech. Yoko, your story focuses specifically on imports of American chips for cars to China. Just walk us through that. How dependent are Chinese automakers on US Chips?

[Yoko Kubota]

China has over the years they've been trying to become more self reliant on many goods, including semiconductors because of all the, you know, American export controls, etc. They realize that they could face pain if they're cut off from foreign flows of semiconductors. But despite all those efforts, actually China is still reliant on foreign chips, and that includes some American made chips. So last year China's imports of semiconductors hit $412 billion and that was still up 10% from 2023. So you can see that actually if you look at the import trends over the years, it's still been on a growing trend.

[Victoria Craig]

So what is the difference between the chips that American companies need to import from China to make things like iPhones and computers to put in all of these data that power AI and the ones that China needs for cars? Because that's really what your story focuses on.

[Yoko Kubota]

That's right. So the chips used in smartphones and also AI platforms, et cetera, those tend to be advanced chips. They tend to be really, really small and they require manufacturing tools and technology that are very advanced. Meanwhile, car chips tend not to be, quote, unquote, so advanced in that sense. They tend to be a little bit bigger. It is possible to make them, generally speaking, using older manufacturing technology. So there's a difference there. For cars, we're talking about chips like so called mcu, microcontroller units, analog chips, those control signals, those tend to be quite often used in cars. And more recently, because there are smart cars, because there are advanced driver assistant technology, etc. Chips involved in that technology made by some American companies like Qualcomm, Nvidia, those tend to be popular too.

[Victoria Craig]

The Chinese government has been trying to encourage automakers to get Chinese manufactured chips rather than relying on American producers of them. So in the same way that I constantly ask people on the show, how likely is it that we can make things in America, I'll ask you, how likely is it that Chinese companies can make these chips that Chinese automakers need?

[Yoko Kubota]

So China has set up a target, a guidance that it has communicated to Chinese carmakers and that was, let's make sure that the chips in your cars, quarter of them are made in China by this year 2025. But so far it looks like it's just not easy to attain that quickly. Last year that figure was apparently at about 15%. So it's kind of an aggressive target to go to 25% by this year. There are a couple reasons why that's looking a little bit difficult when it comes to these car chips. One is that cars, they tend to have very strict safety requirements. So it might be a little bit different from replacing chips in other products like electronics versus cars. They take years often to validate. It's a little bit longer development cycle than other products. So there might be a little bit of that time cycle and safety issues involved there. The other thing is a lot of the dominant players, the foreign players, which include Texas Instruments and other European and Japanese players, they've been around in the market for a long time and they offer a variety of products. So there's a solid product lineup. And it's just easier for carmakers to choose from a company that offers a solid product lineup instead of a Chinese semiconductor maker that offers one new product. So there's that difficulty when it comes to, to switching chips as well.

[Victoria Craig]

And what has the Chinese government said about any of this?

[Yoko Kubota]

The Chinese government didn't respond to a request for comment for this story.

[Victoria Craig]

So Yoko, you talk about how US Companies are already making chips in China. Is it that now they'll just try to push some of these companies that they already work with to make more of these chips in China so they don't have to start from scratch with their own homegrown companies?

[Yoko Kubota]

Two things are going to happen here. One is that the Chinese carmakers will ask American and other foreign chip makers to make more chips in China so that they can continue using the foreign companies chips. But it's just seen as made in China chips. But the other thing that we're already seeing is that the Chinese chip makers, the relatively new players, they're very aggressive in trying to win business from their foreign rivals. They see it as a once in a lifetime chance that they could be taken seriously and that this is the chance to prove their technology. So we will also see Chinese carmakers shifting to locally produced chips again. It's just that the shift is taking a little bit of time and probably both things are going to happen at the same time.

[Victoria Craig]

That was Yoko Kubota, the Wall Street Journal's deputy bureau chief in Beijing. And that's it for Tech News Briefing. Today's show was produced by Julie Chang with supervising producer Melanie Roy. I'm Victoria Craig for the Wall Street Journal. We'll be back this afternoon with TNB Tech Minute. Thanks for listening.

[Christopher Mims]

Foreign.

[Victoria Craig]

This is a CRM meltdown.

[Bob]

Hey, Good news, only 200 customers are on hold now. Bad news, it's because 100 canceled their orders. We need a new CRM.

[Victoria Craig]

Bad CRM was then. This is ServiceNow CRM for the AI era.