US-China Tech Tensions Ease Amid Escalating Geopolitical Conflict

US Foreign Policy Shifts Under Trump's Second Term

The US has been at the center of a series of high-stakes geopolitical events in 2026, with President Trump's foreign policy priorities undergoing a significant shift. The US-Israel-Iran projectile war, which began in late February 2026, has disrupted the flow of people and resources, both within West Asia and globally. This development marks a break from the nearly eight-year trend of prioritizing technology competition with China, which defined the foreign policy agenda from Trump's first presidency to Biden's four years in office.

The US-China tech competition, which began in earnest during Trump's first term with the targeting of Chinese telecom giant Huawei, has seen a significant easing of restrictions in recent months. In January 2025, Biden effectively banned Chinese electric vehicles (EVs) in the US market and placed Beijing in the most restrictive tier three of the AI diffusion rules. However, when Trump began his second term in January 2025, the focus shifted from tech competition to other areas. One of the first decisions Trump took was to prevent TikTok from going dark, with a deal involving multiple US investors and ByteDance finally reached in early 2026 to change TikTok's ownership structure.

Despite the TikTok saga, there were initial signs that the White House considered the AI race with Beijing crucial enough to necessitate restricting the flow of even downgraded H20 Nvidia chips to China. However, restrictions on chip flows were soon eased, and Biden's AI diffusion rules, which placed China in tier three, were also rescinded. The tech competition between the US and China did not quite take off for the rest of 2025, ostensibly because of China flipping the supply chain warfare script.

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Throughout 2025, Trump's foreign policy priorities were heavily skewed towards trade and tariffs. After announcing self-styled "Liberation Day" tariffs in April 2025, Trump spent the whole year threatening and imposing tariffs at will over issues sometimes unrelated to trade, citing the International Emergency Economic Powers Act (IEEPA), 1977. Trump did not spare longstanding allies and partners, including India, which at one point was subject to some of the highest US import tariffs in the world. It took a US Supreme Court ruling in February 2026 to outlaw the use of IEEPA for imposing tariffs by the executive.

However, even before the Supreme Court ruling, Trump started getting entangled in a military operation. In early January 2026, the US military captured Venezuela's Maduro from Caracas. Trump launched another war in tandem with Israel against Iran in end-February 2026, a war that has lasted more than a month and has affected not just West Asia but the entire world due to the centrality of the Gulf region for energy supplies.

Trump's preoccupation with Iran has further led to the deprioritization of the tech competition with China in the US foreign policy agenda. Trump postponing his first trip to China in his second term from end-March to mid-May owing to the Iran war is emblematic of this trend. It remains to be seen how long the West Asian crisis, including the Strait of Hormuz issue, will drag on and whether Trump will resurrect tech competition with China during his visit in May or at any point later this year.

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