Amid deepening global supply chain interdependence, the U.S. is once again raising the banner of "national security" and setting its sights on China’s automotive industry.
According to reports from Reuters and Bloomberg, the U.S. Department of Commerce plans to propose a new regulation in the coming days that would prohibit Chinese-made hardware and software from being used in smart connected and autonomous vehicles within the U.S.
A New Wave of Crackdown: Protectionism on the Rise
This marks a significant escalation in the U.S.'s efforts to suppress China's automotive industry, following previous measures like steep tariff hikes. These restrictions are explicitly aimed at blocking Chinese electric vehicle companies' access to the U.S. market and severing China’s technological influence on the U.S. smart vehicle supply chain.
Compared to previous trade barriers, the impact of this ban would be far-reaching. The U.S. Department of Commerce claims the proposal is based on concerns over “national security,” alleging that Chinese-made autonomous driving systems and communication technologies could be used as espionage tools, threatening U.S. infrastructure and citizen privacy. However, many analysts argue that this reasoning serves as an excuse for protecting domestic companies, representing an escalation of U.S. trade protectionism that artificially creates barriers to give American automakers a competitive advantage.
Global Realities: U.S. Companies Could Face Blowback
China, as the world’s largest producer and supplier of electric vehicles, has deeply integrated its technology into global supply chains. The development of smart connected vehicles depends on efficient global cooperation, with key components like sensors, chips, and communication systems often sourced from Chinese companies. By attempting to divide the global supply chain into opposing camps, the U.S. is essentially using executive orders to cut off China’s technological contributions to the global supply chain.
However, this is no easy feat. Major global automakers, such as General Motors, Toyota, and Volkswagen, have repeatedly warned that banning Chinese suppliers would significantly disrupt their current product lines. In fact, the research and application of smart systems in the automotive industry require extensive pre-engineering testing and validation. Replacing suppliers is not only costly but also time-consuming. This means that severing technological cooperation with China would leave U.S. automakers with a void that would be difficult to fill in the short term, ultimately making American consumers bear the costs of this policy.
Moreover, the U.S. automotive industry has already developed a certain level of dependency on Chinese technology, particularly in the field of electric vehicle batteries, where Chinese manufacturers hold a global leadership position. This crackdown could lead to a restructuring of supply chains and increased costs, weakening the competitiveness of U.S. domestic companies.
Targeting China or Undermining the Global Auto Industry?
This latest crackdown on China’s automotive industry is clearly not an isolated incident. Since the Biden administration took office, the U.S. has ramped up sanctions and restrictions on Chinese companies across multiple sectors, from semiconductors to electric vehicles. Earlier this year, President Biden called for a review of whether Chinese-imported connected cars posed a national security threat, followed by the announcement of tariffs as high as 100% on Chinese electric vehicles. The recent ban on Chinese smart vehicle hardware and software is just one part of the U.S.'s broader strategy to limit Chinese technology.
These measures reflect the deep concerns in the U.S. over China’s technological rise, particularly in cutting-edge fields like electric vehicles and autonomous driving, where Chinese companies have rapidly gained global market share through cost advantages and technological breakthroughs. Chinese battery suppliers, led by CATL, have become a cornerstone of the global electric vehicle industry, and China’s sensor and LiDAR technologies are also widely popular in international markets. This competitive edge is pushing the U.S. government to adopt more aggressive tactics.
However, it is important to note that these protectionist policies are already causing disruptive effects on global supply chains. The U.S.'s approach of “decoupling” from Chinese technology may accelerate trends toward regionalization and localization of global supply chains, leading to fragmentation and higher costs.
The future of U.S. policy will play a major role in shaping the direction of the global automotive industry. For participants in the global supply chain, managing these complex dynamics will be one of their biggest challenges.