“When China chose isolationism, the Celestial Empire slept for hundreds of years, indifferent to the changes outside… yet the world has already surpassed it.” This is the evaluation of the Qing Dynasty’s policy of closing its doors by American historian Randles. Today, we can return this phrase word-for-word to the United States itself.
As the competition between China and the US intensifies, a strange and puzzling phenomenon has emerged before the world’s eyes.
As the world’s hegemon, with a top-notch chip manufacturing industry, the US has chosen to isolate itself, actively severing its connections with the outside world.
The cause of this situation stems from their trade war with China.
The Trade War Behind the US’s Decision to Isolate China
In 2017, then US President Trump launched the “301 investigation” into China.
This investigation was aimed at what the US considered “uncivilized and even illegal trade practices.”
After this order was issued, anyone with eyes could see that something was wrong. The trade volume between the US and China was already enormous, with certain industrial raw materials being heavily reliant on each other.
By initiating an investigation into trade with China, the US was effectively kicking off an unprecedented trade storm.
And so it began – the trade war between China and the US.
Over the following year, the US government, led by Trump, began imposing tariffs on low-end manufacturing products imported from China.
The tariffs were substantial, often exceeding 30%, with reasons for the sanctions ranging widely.
In retaliation, China imposed tariffs on US agricultural products, causing great distress to American farmers. Both sides were holding each other’s throat, waiting for the other to cave first.
This trade conflict between China and the US could be recorded in history, with both sides using a variety of methods that stunned many countries.
However, in the face of the US’s export restrictions on high-end manufacturing, China suffered significant losses.
As the tariffs on trade escalated, Trump’s government also banned the export of high-tech chips to China.
Even if chips were to be exported, they had to be of lower quality, with only low-end chips being allowed to reach Chinese tech companies.
This harsh tactic dealt a heavy blow to Chinese companies, particularly those in the smartphone industry that relied on American chips. The research and assembly of phones came to a halt.
The purpose of the US’s actions was clear: to use its high-tech manufacturing power to choke China, forcing them to make concessions in trade negotiations.
This method of banning the export of high-tech products is the origin of the US’s “high wall” policy.
The Blockade of High-End Manufacturing and the Resulting Advantages and Disadvantages for the US
Many people who grew up in the 1990s still have unrealistic fantasies about the US’s current state. It’s not surprising that people believe the US’s technology is advanced.
To this day, the US remains a leader in the development of high-tech industries. Silicon Valley is home to countless tech manufacturing companies, and the US’s pharmaceutical and high-end chip technologies are unmatched globally.
But despite all these shiny façades, the US is facing a situation that’s hard to comprehend.
The US, with its coveted high-tech, is unable to produce some low-end manufacturing tools, relying entirely on imports.
A country known for producing high-tech talents is unable to solve its high unemployment rate, resulting in serious class divisions and increasing poverty. Homeless people die on the streets.
This series of contradictions can be summarized as the result of the US choosing industrial hollowing and an upgraded manufacturing sector, leading to societal division.
After the Cold War, the US lost its ideological opponent and ceased fearing the spread of socialism.
This allowed American capitalists to maximize profits by relocating low-end manufacturing to third-world countries, taking advantage of cheap labor and various subsidies. At the same time, the US economy became financialized, closely linked to high-tech manufacturing companies.
With breakthroughs in technology, the US gained a monopoly on high-end manufacturing technology. Many financial capitalists made massive profits in the stock market and enjoyed substantial dividends during the industrial shift.
But this advantage comes with its disadvantages.
The advantage is that the US eliminated labor-intensive low-end manufacturing, reducing environmental pollution, while also monopolizing high-end manufacturing. This allowed it to use various financial policies to remotely control modern trade countries.
This is also the origin of the US’s sanctions policies.
The “sanction” stick became a tool that the US used to easily bring down a country’s government with just one statement, much more effective than military intervention.
The disadvantage, however, is that high-end manufacturing requires highly educated workers, and the US’s middle and lower classes cannot fill these positions, leaving companies to rely on foreign immigrants. This leads to high unemployment, exacerbated by the outflow of domestic low-end manufacturing industries.
Meanwhile, key manufacturing companies in the US are also hollowing out due to industrial upgrades.
This has left the US dependent on foreign imports of raw materials for military production and other essential sectors. Without these imports, they cannot independently complete production.
A prime example is the stagnation of the US Navy. The service life of many old warships has been extended, and their malfunctions are patched up as they go.
The Collapse of the US’s Vision of Using High-End Manufacturing as a Chokehold
Returning to the beginning of the article, why has isolationism become the US’s economic policy? We must give credit to China’s scientific resilience.
Though the US’s blockade on high-tech exports to China dealt a blow to some companies, it also sparked China’s determination for independent research and development.
Take Huawei, for example. Its breakthrough in chip manufacturing was a sharp slap to the face of the US.
No one can continue to rely on imports forever. Self-reliance and self-improvement are at the core of China’s scientific enterprises.
During the years when the US blocked high-tech chips to China, China made significant breakthroughs in scientific and technological research that shattered the US’s pride in its technological monopoly.
In 2021, SMIC achieved a 7nm process trial production without the EUV lithography machine. In 2022, SMIC’s 14nm process yield nearly matched TSMC’s level, used in Huawei’s Kirin 710A chip, entering the self-sustaining phase. In 2023, the first 28nm lithography machine was successfully developed… These examples have seriously impacted the US’s chip industry monopoly.
In response, under Biden’s administration, the US, angry and ashamed, cut off all supplies and banned the inflow of talent to Chinese high-tech companies. They also launched a media smear campaign to discredit China’s achievements in chip development.
They prohibited China’s self-developed chips from entering the US market, marking the US’s current closed-off economic situation.
The US’s Frustration and the Shrinking Market Share
On July 2, 2025, the US officially lifted the sanctions on chip exports to China and began regular supply again.
Since 2018, the chip trade between the two countries has almost returned to normal.
However, this time, the market share of American chips in China has significantly reduced, and the US has gained nothing, even being squeezed by China’s self-developed chips.
In reality, the US’s restoration of chip exports to China is a sign of their frustration after their strategy failed.
This is similar to foreign car companies like Toyota and Volkswagen, which still cling to the Chinese market despite the pressure from the new energy vehicle sector, which has squeezed their profits.
Even with this squeeze, the market remains enormous for these foreign companies, and they continue to earn profits, albeit reduced.
The same applies to American chips. Even though they’re being squeezed by China’s self-developed chips, they still maintain some profit share in the market.
Rather than continue with harsh sanctions, the US is reluctantly choosing to restore exports for a chance to profit.
This is the first somewhat reasonable action taken by the Trump administration, as he, too, is a businessman who wouldn’t want to forgo profit.
Even with the restored exports, the initiative to buy still lies with China. Why buy expensive US chips when we can directly buy our own?
The prices of chips are no longer determined by monopoly capital but by the market.
References:
- Wang Jiayan. “The China-US Trade War and China’s Exports to the US.” Nanjing University, 2021. DOI: 10.27235/d.cnki.gnjiu.2021.002110.
- Ren Jing, Zhou Shuai. “Study on the Hollowing Out of US Industry.” Dalian Maritime University Journal (Social Science Edition), 2015, 14(05): 6-13.
- Liu Haoyan, Ke Dongli. “The Three Pillars of US ‘Chip Hegemony’ and Responses.” Science Research, 2025, 43(07): 1375-1385. DOI: 10.16192/j.cnki.1003-2053.20240820.001.
