Author: Andrea Little Limbago, PhD, SVP, Applied AI
Over a decade ago, mutual assured economic destruction (MAED) defined the unprecedented interdependence between US and China economies. Based on the growth pace of China’s economy, there was concern that within a decade or two, the power dynamics would shift, and China would no longer be as dependent on the rest of the world as the world is on China.
That scenario may be coming to fruition. The US-China trade war is escalating with a series of tit-for-tat export controls, tariffs, and commercial agreement realignments threatening an accelerated bifurcation of global supply chains.
DeepSeek’s announcement last month, and the subsequent plummeting of US semiconductor stocks, is largely viewed as an inflection point in geopolitical technology competition.
Geopolitical market risks are taking center stage, redefining supply chains, and entering the board room.
Organizations that fail to integrate and monitor these market signals risk extreme shocks as economic warfare reshapes the global economy, corporate technology stacks, and the regulatory landscape.
Global Buyer-Supplier Dependencies
Since joining the World Trade Organization in 2001, China’s exports have increased five-fold and its economy is now eleven times larger. China surpassed Germany in 2009 as the world’s largest exporter and now contributes almost 15% of global exports, followed by the United States with 8.3%. China’s top export destinations are the United States at almost 15% share, followed by Hong Kong, Japan, Germany, and South Korea.
In contrast, the US leads all global importers, with a 13.5% share of global imports, followed by China at 8.8%. Top US import destinations are China, Mexico, Canada, Japan, and Germany.
US goods imports continue to rise, totaling $3.2 trillion in 2022, almost a 15% increase from 202, with China accounting for 16.5% of total goods imports.
In short, China has the upper hand in supply side trade, while the US’ strength lies in its purchasing power.
Those statistics demonstrate extreme interdependency among the economies but mask the underlying retaliatory dynamics.
Since in 2016, over four thousand Chinese companies have been added to various US commercial and financial restrictions. China’s Unreliable Entity List continues to expand, with two new US entities added on February 4th, and unparalleled detentions of corporate executives in recent years, and anti-trust lawsuits against US tech companies.
Moreover, last week’s US tariffs on China were quickly followed by their own tariffs as well as an expansion of control exports on critical minerals used for weapons development, including tungsten and molybdenum.

Referred to as China’s ‘assassin’s mace’ of economic warfare, it is a continuation of China’s demonstration of power and control over the raw materials the power global technology and weapons systems. The interdependent system decades in the making is undergoing tectonic shifts and wreaking havoc on supply chains ranging from steel and aluminum to AI.
The Growing Convergence of Economic Warfare and AI
At this week’s Paris AI Summit, geopolitics – and not AI technologies – seemed to take center stage.
Governments are doubling down on sovereignty-first AI strategy and national champions following DeepSeek’s announcement. French President Emmanuel Macron contended, “The future of AI is a political stake, of sovereignty and strategic dependence.” US Vice President JD Vance agrees, noting, “We will safeguard American AI and chip technologies from theft and misuse, work with our allies and partners to strengthen and extend these protections and close pathways to adversaries attaining AI capabilities that threaten all of our people.”
Anthropic CEO Dario Amodei called the Paris AI Summit a “missed opportunity”. While stressing AI’s benefit to humanity, it missed the urgent need for democratic societies to lead in the innovation, fully address the security risks, and account for the disruptions.
For instance, DeepSeek quickly jumped to the number one app download, but within days revelations emerged of its publicly accessible database that exposed private data. Additional concerns over its training data as well as censorship over politically sensitive topics in China further demonstrate the AI divide between authoritarian and democratic governments.
The US and China are asserting their supplier side and purchasing power, respectively, across all aspects of the AI supply chain. For instance, the US continues to tighten AI restrictions based on geopolitical affinity with the US.
Despite questions surrounding the efficacy of US export controls targeting AI, they continue to cause disruption to supply chains. In response, the Taiwan Semiconductor Manufacturing Company (TSMC) has decided to halt shipping orders to China unless directly approved by the US, regardless of whether they are on a banned list or not.
In contrast, China continues to ban or limit key high-tech materials to the US that are essential for semiconductors and weapons development. A move that caused shares of those producers to rally following the announcement.
The Shift is On
The potential risk of supply chain bifurcation and realignment is not decades away, but already underway.
In 2023, Mexico surpassed China as the US’ largest importer for the first time in two decades. New supply chain agreements across allies in the Pacific, the Quad’s Supply Chain Resilience Initiative, and Minerals Security Partnership are just a few examples of global cooperative supply chain agreements focused on ally shoring and near-shoring.
In contrast, for over a decade, China’s Belt and Road Initiative (BRI) has been a force for extending economic and political influence, and more recently has shifted to technology transfers and integration. However, the United State’s purchasing power is behind Panama’s recent decision to decline the renewal of an infrastructure agreement with China, striking a blow to China’s hallmark initiative.
As this economic warfare continues to escalate – with each side exerting their market powers – companies of all sizes that ignore these market pressures may become collateral damage.
For instance, small and medium businesses may face the largest adverse consequences of the retaliatory tariffs, while tech giants are now thrust into geopolitics over both competition and security concerns.
If the first month of the year is any indication, geopolitical market risks are going to be the redefining feature of global supply chains in 2025 and must be elevated in corporate risk strategies and in the board room.
For more on the geopolitical risk landscape in 2025, download our 2025 Predictions Report: