The tariff increases that the United States has placed on Chinese goods affect not only the interests of Chinese companies and consumers, but also their U.S. counterparts and threaten the security of global industrial and supply chains. “We once again urge the U.S. to stop unreasonably suppressing Chinese companies. Chinese companies deserve to invest and operate in a fair and just environment in the U.S. and the world,” Vice Minister of Industry and Information Technology Wang Zhijun said. Concerning the U.S. decision to further increase tariffs on Chinese imports, Wang said that the total impact is “controllable”. The nearly USD200 billion of Chinese goods hit by additional U.S. tariffs on May 10 accounted for 41.8% of China’s U.S. exports in 2018, or 8% of its total exports, and 50% of the enterprises affected by those additional tariffs are foreign funded. Many of them are U.S. companies whose primary market is in the U.S., Wang said.

The Vice Minister said the tariff increases undermined the stable development of the global integrated circuit industry. China’s chip industry has grown on average 20% annually since 2012, with sales revenue reaching CNY653.2 billion in 2018. Wang conceded that there is a significant gap between China and global leaders in the overall design, manufacturing, equipment testing and raw material processing for integrated circuits. The tariff hikes will cause trouble to China’s overseas manufacturing market, but they will not lead to a decline in China’s manufacturing sector, Mei Xinyu, Researcher at the Chinese Academy of International Trade and Economic Cooperation said. “The U.S. no longer accounts for such a significant market share as it did in the old days,” Mei said. He added that the U.S. ban on Huawei and rumored imposition of restrictions on Hikvision will not hamper the growth of China’s tech sector. The U.S. accounts for only a small part of Hikvision’s overseas markets, and Hikvision is not heavily reliant on U.S. components for production, Mei said.

“Huawei’s chip arm HiSilicon has produced 70% of global surveillance chips. In past years, Japanese companies were Hikvision’s main chip suppliers, and now the major supplier is HiSilicon.” Mei added. A recent report by Dongxing Securities said that as the U.S. has imposed restrictions on Huawei’s purchases of U.S. technology, some major domestic chipmakers will step in to offer the supply. Dongxing Securities analysts noted in the report that the ban will set off alarm bells in China, and the Chinese government and domestic companies will accelerate the push for developing core industries, including chips manufacturing, the China Daily reports.