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Even as businesses continue to protest the growing US-China trade war, the tariffs are still leading companies in both countries to rethink how and where they do business.
Why it matters: For all their differences, the US and Chinese tech industries remain very interdependent – each country contributes to a great deal of business to the other's economy.
Where it stands: What tech companies want to do business, as evidenced by a letter issued Wednesday by more than 150 business groups calling for an end to the tariffs. However, they do not care about their dependence on the other.
- Historically nearly all smartphones and most other consumer electronics have been made in China, but that is starting to shift. Google, for example, is joining the electronics makers looking at Vietnam as an alternative.
- China is also likely to explore ways to reduce its dependence on US technology for everything from software to chips and the tools to make them.
Yes, but: In the short term, there is a lot of pain in both countries.
- Apple remains highly dependent on China for manufacturing and is also a key market for iPhone sales. Nearly all iPhones are made there, with the exception of phones in Brazil and India, where laws impose huge tariffs on imported electronics.
- Huawei, subject to a near-totality on the business of the US, finds itself not only a key market, but also to find new options for chips and operating systems, among other components. The company faces the prospect of launching its first high-end smartphone without Google's apps and services.
- Meanwhile, more than 130 companies have asked the Commerce Department for permission to continue selling components to Huawei, Reuters reported this week.
Between the lines: Trump has repeatedly argued that Apple and other tech companies should return manufacturing to the US. But that is considered unrealistic, a point that Tim Cook has no doubt tried to make during his meetings with President Trump.
- Unemployment rates are already at record levels, the Trump administration's immigration policies are intensifying the domestic labor force, and efforts (like Foxconn's deal with Wisconsin) to get new US factories have been overhyped.
- More importantly, the US just does not have the type of manpower that would allow for devices to be made at the kind of scale Apple and others need for smartphones. At most, tariffs will cause manufacturers to move production from China to other countries.
The bottom line: The tech industry's global supply chain took years to assemble, and it will not dissolve overnight. But even if the Trump administration is most likely to work in a global economy.
- Wide-open world trade was the rock-solid foundation for decades of tech expansion. With that condition no longer a given, more defensive behavior and slower growth are likely.
Go deeper: China tariffs will hit fall shoppers despite Trump's postponement
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