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In the past few months, China-U.S. trade tensions have boiled over, disrupting world markets and reshaping supply chains. In response to Beijing's accusations that the United States violated a trade deal by imposing export restrictions on AI chips and strategic technologies, China is sending robust countermeasures signals. The most sensational step is perhaps China's consideration of commissioning a giant airliner purchase from Airbus, up to 500 planes — an open challenge to U.S. aircraft behemoth Boeing.
Why Is China Turning to Airbus?
The backdrop to this shift is increasing U.S. curbs on China's technology sector. The Biden administration, continuing policies initiated under the previous administration, has put on hold sales of advanced semiconductor technology and revoked visas for Chinese students in certain fields, ratcheting up diplomatic tensions. This has prompted China to expand its pool of suppliers and reduce reliance on American companies, particularly Boeing, which has long had a monopolistic hold on China's commercial aircraft market.
It has emerged that The Times announced that the deal would be a severe blow to Boeing and reshuffle the Asian commercial aviation landscape.
Impact on Global Trade and Aviation
This move is characteristic of how the trade disagreement transcends tariffs and intellectual property concerns into the broader economic and geopolitical fields. To Airbus, securing such a huge order would further its reach in Asia and provide it with a market leverage over Boeing. To the U.S., it is a potential loss of dominance in a significant sector within already strained relations.
The ongoing American export ban on AI chips and tech, defined by Investopedia, makes the trade relationship even more complicated, as technology is still a significant area of competition.
What's Next?
To date in mid-2025, diplomatic channels remain open, with expected discussions between U.S. President Joe Biden and Chinese President Xi Jinping hoping to ease tensions. Both, however, remain firm in asserting their interests, so immediate resolution is doubtful.
Firms involved in global supply chains must keep a close eye since shifts in trade policy and buying choices like the Airbus order have far-reaching implications.
Key Takeaways:
- America has been accused by China of violating trade agreements with export controls of AI chips and technology.
- China's potential order of as many as 500 Airbus planes represents a strategic departure from Boeing.
- Trade war is reflective of additional geopolitics beyond economic tariffs.
- U.S.-China diplomatic talks in the future will be significant but exceedingly difficult.
For regular updates on U.S.-China trade relations and their impact on global markets, keep following our blog.
References:
- China Considers Ordering 500 Airbus Jets in Snub to US Rival Boeing - The Times
- China Says US Measures Seriously Undermine Trade Truce - Investopedia
*US-China Trade Talks and Export Controls - Bloomberg