America @249: From chips to jets, how US-China rivalry is reshaping the world

First Post

04-07-2025

President Donald Trump's second presidency has brought the rivalry with China to the surface, so much so that their tensions are practically reshaping the world. Since January, Washington and Beijing have been engaged in backdoor politics, trying to get ahead in key sectors like technology and defence read more
The US has entered its 249th year as an independent nation today. With over two centuries gone by, China remains America's greatest threat despite its economic and geopolitical prowess.
President Donald Trump's second presidency has brought the rivalry with China to the surface, so much so that their tensions are practically reshaping the world. Since January, Washington and Beijing have been engaged in backdoor politics, trying to get ahead in key sectors like technology and defence.
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As the world's two largest economies compete for strategic dominance, their tensions are spilling into key regions, from the South China Sea and Taiwan Strait to Africa, Latin America, and cyberspace. The two countries are trying to get ahead in several races at once. Let's take a look at some of them:
The tech race
In January this year, China unveiled its flagship artificial intelligence model, DeepSeek, unnerving observers and stakeholders across the world. Dubbed as the 'biggest dark horse', DeepSeek sent shockwaves through Wall Street and Silicon Valley by creating AI models at a fraction of the cost incurred by OpenAI and Meta Platforms.
Its grand reveal made some experts jump to the conclusion that Beijing is going to 'win' the AI war against the US. Part of the reason why DeepSeek sent jitters down US-based AI-makers' spines was its free-of-cost business model, which made its R1 version free for users, a key differentiator from OpenAI's o1 models, which cost $200 monthly for unlimited access.
Three key events in May 2025 signalled that the US–China rivalry over artificial intelligence has escalated into a more intense phase. The first was a Senate hearing titled 'Winning the AI Race,' where American lawmakers voiced growing alarm that the United States' technological edge over China was rapidly diminishing.
Then followed a ban on sales of critical software tools used to design semiconductors to Beijing, a move that was seen as nipping the bud of the problem of China getting ahead in the race.
The chip software restriction marked a sharp, though brief, escalation in the ongoing US campaign to tighten controls on China's access to semiconductor technologies. These measures were intended to block Beijing from using American innovations to advance its military and artificial intelligence capabilities.
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However, the ban was lifted yesterday (July 3).
The defence race
China's defence spending on fighter jets has increased manifold in recent years. Admiral Samuel Paparo, the head of US Indo-Pacific Command, during a Senate Armed Services Committee hearing, warned that China is 'outproducing' America in furthering its defence systems.
'China's unprecedented aggression and military modernisation poses a serious threat to the homeland, our allies, and our partners (in the Indo-Pacific). China is outproducing the United States in air, missile, maritime, and space capability and accelerating these,' he said in April.
China is making significant investments in advanced combat aircraft. It already operates more than 200 J-20 fifth-generation stealth fighters and, last year, unveiled its second stealth jet of the same class—the J-35. In addition, Beijing is developing two sixth-generation fighters, the J-36 and J-50, both of which are currently in the flight testing phase.
The economic race
China overtook the United States in GDP measured by purchasing power parity (PPP), which adjusts for local cost of living, in the mid-2010s, with most estimates pinpointing the crossover around 2014–2016.
By 2016, China's PPP‑adjusted GDP reached approximately $21 trillion, surpassing the US, while its share of global economic output increased from under 5 per cent in 1980 to nearly 18 per cent in 2016. This dramatic rise reflects decades of rapid industrialisation, export-led growth, and urbanisation following China's reform era beginning in 1978.
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Today, China's economic and geopolitical influence continues to expand on several fronts. With an estimated PPP‑GDP of nearly $39.4 trillion in 2023, about 20 per cent of the world's total compared to the US's 14.8 per cent, China's economic weight allows it to exert significant influence over global trade, investment, and development patterns.
The trade race
Like the rest of the world, China, too, faced the wrath of Trump tariffs. In fact, it met with the most harsh trade measures by Washington.
Although signs of reset have started to show now, the ripples of the US-China trade war were felt across the globe.
The US trade deficit widened more than expected in May, with both imports and exports declining. Trade data published Thursday showed the world's biggest economy logged an overall trade gap of $71.5 billion in the month after Trump imposed a 10 per cent duty on most trading partners before pausing steeper rates for dozens of these economies.
US imports were down 0.1 per cent to $350.5 billion, as incoming shipments of goods ticked down.
Imports of consumer goods dropped by $4.0 billion, with those of certain apparel and toys both sliding, although imports of autos and parts climbed.
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US exports, meanwhile, dropped by 4.0 per cent to $279.0 billion, with declines largely seen in industrial supplies and materials, the report showed.
With inputs from agencies