Beyond Tariffs: The US-China Race for AI Supremacy

 

Column by Atiq Chaudhry

A critical meeting between US President Donald Trump and Chinese President Xi Jinping on the sidelines of the Asia-Pacific Economic Cooperation (APEC) Summit in Busan, South Korea, has injected a temporary dose of optimism into the volatile global landscape. This face-to-face encounter the first in six years was marked by a warmth and conciliatory tone designed to soften the edges of a deepening "superpower rivalry." Yet, beneath the veneer of diplomatic cordiality lies an escalating commercial and technological war, the new epicenter of which is Artificial Intelligence (AI) the 21st century's most potent strategic weapon.

In Busan, President Trump’s characterization of Xi Jinping as an “old friend,” a “distinguished leader,” and a “great leader of a great country,” coupled with the Chinese President's praise for the US role in the Gaza ceasefire, offered a fleeting sense of relief. As President Xi Jinping noted, "Beijing and Washington are two major economies, and it is normal to have differences from time to time," emphasizing the need for both to be "partners and friends."

Global media reports indicate the two nations agreed to a one-year trade truce. This involved China postponing restrictions on the export of Rare Earths—critical minerals essential for high-tech and defense industries—while the US agreed to lift some additional tariffs on Chinese goods. This development, which aims to immediately ease global economic tensions, was met with enthusiasm across world stock markets. The US tariff rate on Chinese imports, for instance, has seen fluctuations throughout the trade war, with reductions following this summit from previous highs though the average tariff rate remains significantly higher than before the trade war's escalation.

The strategic friction between the US and China is directly impacting global economy, politics, and institutions, quietly carving the world into two distinct economic and geopolitical blocs. On economic Front: Companies are adopting 'China plus One' or 'De-risking' strategies, accelerating shifts in global supply chains and redirecting capital investments toward Southeast Asia and other emerging regions. On political Front: International bodies such as the United Nations (UN) and the World Trade Organization (WTO) are under severe duress, making consensus difficult on shared global challenges like climate change and the arms race, severely undermining global cooperation.

This backdrop presents a major foreign policy challenge for Pakistan: maintaining a delicate balance. On one hand, China is indispensable for Pakistan's economic prosperity and security through the China-Pakistan Economic Corridor (CPEC) and deep defense cooperation. On the other, the US remains crucial for military assistance, access to the International Monetary Fund (IMF), and vital technology.

Pakistan’s foreign policy is rooted in "balance and non-alignment," aiming to cultivate mutually beneficial relations with both superpowers without joining either bloc. However, as the world pivots toward an AI-centric division, a prudent strategy for Pakistan must prioritize national interest, focusing on strengthening strategic partnerships and bolstering Regional Connectivity to avoid excessive dependency on any single power. The recent positive statements by President Trump toward Pakistan's leadership, alongside enduring Chinese support, signal an opportunity to cement these balanced ties.

The US-China trade war, which saw the US impose tariffs of up to 25% on Chinese goods and China responding in kind, severely disrupted global supply chains. However, this conflict was never just about the trade deficit; it was fundamentally a battle for technological supremacy.This dynamic aligns with the framework of the "Thucydides's Trap," a theory popularized by Harvard Professor Graham Allison in his book, Destined for War: Can America and China Escape Thucydides's Trap? Allison argues that when a rising power (China) threatens to displace a ruling power (the US), large-scale conflict is frequently the result. He contends that the current friction is far more than a conventional trade spat—it is a classic manifestation of a geopolitical trap where the fear of losing dominance pushes both powers toward collision.

The true battlefield of this rivalry has now transitioned to Artificial Intelligence. AI is not merely a technology; it is the definitive weapon of the new century, determining global supremacy and military might. Following US sanctions, President Xi Jinping himself has stressed the critical need for self-reliance and innovation in Chinese technology, particularly AI, where the nation is rapidly advancing its applications and technological development.

This strategic ambition is further detailed in Michael Pillsbury's book, The Hundred-Year Marathon: China’s Secret Strategy to Replace America as the Global Superpower. Pillsbury, a long-time US government advisor on China, asserts that Beijing has pursued a covert, long-term strategy to mislead the US into viewing it as a benign developing nation while quietly accruing technological and economic power. He views the AI race as a key component of this decades-long plan, aiming for global dominance by 2049.

AI's centrality to military capabilities—including autonomous surveillance, advanced military drones, and hypersonic missile technology—is undeniable. Restrictions on the export of semiconductors—the foundational hardware for AI—are a direct manifestation of the fear that control over AI infrastructure equates to indirect control over global technology and defense.

While the Busan meeting represents a significant diplomatic step, the core reality is that the US-China contest has moved beyond trade tariffs into a high-stakes competition for technological and strategic superiority. The coming years will determine whether this trade truce can evolve into peaceful technological collaboration, or whether this "New Cold War," as analyzed by scholars like Allison and Pillsbury, will plunge the world into deeper instability.