A fragile pause, not a peace
Once again, Washington and Beijing are in a temporary truce. President Donald Trump’s summer announcement of another 90-day extension on tariff hikes has postponed another round of escalation in the long-running US–China trade war. Yet markets, corporates and governments know better by now: these pauses are tactical breathing spaces, not true peace. The structural disagreements – ranging from technology access and intellectual property to geopolitical dominance – remain firmly unresolved.
The battlefield has shifted. Steel and soybeans no longer define the front line. Instead, semiconductors, artificial intelligence (AI), and rare earths have become the “new oil” of the global economy. For treasurers and CFOs, this rivalry is no longer background noise but a direct risk factor shaping supply chains, financing costs and investment strategies. The uneasy balance looks less like détente and more like the “calm before the storm.”
Chips as the new oil
Why semiconductors? Because without them, modern industry grinds to a halt. Chips power everything from smartphones and electric vehicles to missile guidance systems and banking networks. Whoever controls semiconductor supply chains wields outsized economic and strategic power.
Washington understands this well. Over the past few years, the US has tightened export restrictions on cutting-edge chips and pressured allies such as Japan and the Netherlands to block sales of advanced lithography machines to Chinese fabs. In August 2025, Washington opted for a new licensing scheme requiring US chipmakers like Nvidia and AMD to pay around 15% of their China revenue to Washington in exchange for export permits. Critics call it a “pay-to-play” model; supporters see it as a clever way to slow China’s rise without killing the golden goose of corporate profits.
Beijing, in turn, has doubled down on its state-backed semiconductor programmes, accelerating efforts to build domestic 5-nanometer and even 3-nanometer chip capacity. Simultaneously, it has weaponised its dominance in critical resources by restricting exports of gallium and germanium – metals indispensable for chipmaking and defense applications. Although China eased restrictions this summer as a diplomatic gesture, few doubt it will re-tighten supply if tensions flare again.
AI and the race for digital dominance
If chips are the hardware, AI is the software of geopolitical power. Both Washington and Beijing now treat AI as a core national security asset. Recent research shows China leads in 57 of 64 critical technologies, including several AI applications such as facial recognition and fintech algorithms. The US still retains the edge in foundational AI models and talent concentration, but the gap is narrowing.
For treasurers, AI’s role is not only about geopolitics but also about market infrastructure. China’s tighter data localisation laws and the growing “splinternet” mean multinational corporations may soon need to operate within two incompatible AI ecosystems – one Western, one Chinese. This will complicate cross-border cash management, KYC/AML procedures, and even transaction monitoring, forcing firms to duplicate systems or choose sides.
The rare-earth card
Control over critical raw materials has become Beijing’s ace card. China currently produces around 60% of global rare earths, essential for EV batteries, wind turbines and precision weapons. The EU and US are scrambling to secure alternative supply chains, from Australian mines to Canadian refiners. Yet these projects take years to mature, leaving the West exposed in the near term.
For corporates, this translates into volatility in input prices and a premium on resilience. Treasurers increasingly find themselves stress-testing liquidity and financing models against potential supply shocks. The message is clear: geopolitics is the new currency risk.
A tale of two ecosystems
The gradual “decoupling” of US and Chinese tech spheres is no longer theoretical. Parallel standards are already emerging – China’s Beidou navigation system competing with GPS, Huawei developing its own operating system and divergent 5G/6G infrastructures taking shape.
Financial markets must prepare for what some analysts call the splinternet: two separate technological worlds with minimal interoperability. In such a scenario, transaction costs rise, innovation slows, and global cooperation on everything from cybercrime to climate change becomes harder. For corporates, the splinternet means dual systems for payments, reporting and compliance – a logistical headache with strategic implications.
Supply chains on the move
Businesses are adapting, often faster than policymakers. The “China+1” strategy – adding production hubs in Vietnam, Mexico or Eastern Europe – has become mainstream. US companies are reshoring key facilities, while Chinese manufacturers are routing exports through third countries to avoid tariffs.
This slow but steady untangling of supply chains represents a structural trend. For treasury teams, it means more fragmented cash pools, more local banking relationships and more complex hedging needs. A decade ago, efficiency was king; today, resilience and optionality take precedence.
Taiwan: the flashpoint no one can ignore
Beyond trade and technology, rivalry carries a sharp military edge. Taiwan – home to TSMC, the crown jewel of global chipmaking – remains the most dangerous flashpoint. Analysts warn that China’s quest for technological self-sufficiency could push it to accelerate reunification ambitions. For Washington, losing access to TSMC’s advanced nodes would be strategically unacceptable.
The US is hedging by urging TSMC to build new fabs in Arizona and Japan, but replicating Taiwan’s ecosystem is nearly impossible in the short term. For now, global markets live with the uncomfortable truth: a Taiwan crisis would trigger the mother of all supply chain shocks.
What this means for treasurers and CFOs
The geopolitical storm may feel abstract, but its financial consequences are immediate:
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Liquidity and supply shocks – firms must plan for sudden disruptions in raw materials or critical components. Treasury stress tests should include scenarios where rare earth exports are suspended or advanced chip supplies are cut off.
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FX volatility – trade tensions continue to inject uncertainty into Asian currency pairs. Treasury teams must actively manage hedging strategies, not only for dollar exposure but also for second-tier currencies tied to supply chains (Vietnamese dong, Mexican peso).
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Dual compliance systems – with the rise of the splinternet, corporates may soon need to maintain parallel compliance, payments and reporting systems – one for Western networks, another for China.
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Cost of capital – political risk premia are creeping into corporate borrowing costs. Firms with heavy China exposure may find investors demanding higher returns, while “friendshoring” investments may benefit from government subsidies.
An unwinnable war?
Ultimately, the US–China rivalry is unlikely to produce clear winners. The US has slowed China’s access to bleeding-edge technology, but Beijing is building self-reliance at the mid-tier. In AI, the world may split into two incompatible systems. Both sides suffer inefficiencies, but neither can fully disentangle without immense cost.
For corporates, the challenge is not to “pick the winner” but to navigate a world where economic logic is increasingly subordinate to geopolitical logic. Treasury teams must become geopolitical analysts, supply-chain strategists and risk managers rolled into one.
Calm before the storm
The current truce may calm markets for now, but the forces driving the US–China rivalry are structural, not cyclical. Chips, AI and rare earths are the oil fields of the 21st century, and both Washington and Beijing are digging in.
For global corporates, the task is clear: build resilience, diversify supply chains and prepare for parallel financial ecosystems. The calm is temporary. The storm – whether triggered by Taiwan, rare earth embargoes, or AI breakthroughs – is only a matter of time.
