The U.S.-China trade war, which only seems to be intensifying, has put businesses in both countries under pressure to adjust to changing market conditions — and that pressure will have significant impact on hiring decisions in both countries.
Under President Donald Trump, a style of protectionism that almost seemed outdated has once again taken hold on a global scale — including $200 billion in tariffs on Chinese imports and China responding with $60 billion in tariffs on US imports — and not everyone is jumping for joy.
One of the most recent additions to the trade blacklist is leading Chinese electronics and telecommunications company Huawei, a main insurgent competitor to the leading U.S. tech companies including Microsoft, Google and Apple.
The move sparked concerns that the trade war could escalate and expand to the technology sector overall. Shares in Apple, Tesla and Google parent company Alphabet dippedOpens a new window on fears that cutting off Huawei could limit growth.
Already, the trade war has had a dampening effect on hiring, even within the tech sector. In January, Bloomberg reportedOpens a new window that hiring by Chinese tech companies plummeted by a fifth in the final quarter of 2018. The gaming industry has been particularly hard-hit, but the addition of Huawei to the trade blacklist could exacerbate concerns.
“Recently, the cases of ZTE and Huawei have intensified,†said Pony Ma, the head of Chinese tech company Tencent.Opens a new window  “We are also constantly watching whether the trade war will turn into a tech war after the addition of Huawei to the trade blacklist was made public. As a result, if we don’t continue to work hard on basic research and key technologies, our digital economy will just be a high-rise built on sand, difficult to sustain, not to mention the transformation to new from old drivers of growth or the promotion of high-quality development.
The tariffs come at a critical time for China’s tech industry. After years of lagging behind Silicon Valley — or allegedly stealingOpens a new window tech innovations from the U.S. outright — the sector has been coming into maturity, with significant investmentsOpens a new window from Beijing to bolster semiconductor development and artificial intelligence.
But the trade war puts those ambitions in peril. Already, Chinese technology exporters have reported sales drops of 40%Opens a new window , which has secondary effects on research and development. China has positioned itself as a central hub for manufacturing, and many of the computers, tablets, laptops and phones that are destined for foreign markets – including the U.S. market – are assembled there.
But a recent survey showedOpens a new window that many Chinese manufacturing firms have either put a stop to hiring, announced layoffs, or curtailed wages.
In the U.S., tech companies are facing their own set of problems. The loss of confidence from investors reflects concerns that growth potential in the sector is largely driven by shares in major consumer markets in Asia. Apple has been particularly hard hit, with a significant share of both its consumer base and manufacturing capacity based in China.
According to observersOpens a new window , there’s little that U.S. tech companies can do.
“China represents the hearts and lungs of the tech food chain for U.S. semiconductor companies, as well as tech bellwethers like Apple,†Wedbush analyst Dan Ive told Fortune recentlyOpens a new window . “U.S. tech players (and investors) are caught in the crossfire with minimal leverage.â€
In January, Apple chief executive Tim Cook issued a warningOpens a new window to investors over the negative impact of the trade war, saying that the tariffs prompted the company to revise downward its projected earnings for the quarter. He said an economic slowdown in China directly impacted Apple’s business, which in turn prompted the company’s shares to slide.
That hasn’t yet translated to significant layoffs or wage curtailment in the U.S. tech sector, but the longer the trade war persists, the more likely that it could start to stifle hiring and innovation in Silicon Valley as well. Cook’s warning came weeks before the U.S. handed down the latest tariffs to Huawei; the latest addition only makes the outlook bleaker.
China has never been an unfettered market for many of Silicon Valley’s biggest players, but the they have nevertheless made significant inroads, which are now imperiled. Tech, much like its products, thrives at every level from interconnectedness and global ties. With trade barriers going up, the sector is facing the ‘most present danger’ yet encountered to its growth.