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Why robotics and AI will be winners of US-China trade war

Robotics, automation, and AI may be the only winners from the US and China trade war, says Richard Lightbound, CEO EMEA & Asia and Jeremie Capron, Director of Research, ROBO Global

As the trade war between the US and China continues, the tariffs and barriers on imported products threaten to slow business activity, create supply chain friction, and dampen international trade. This is not only between the two countries themselves but also impacts countries around the globe. But robotics, automation, and AI (RAAI) is notorious for breaking the rules and may be the one notable exception and winner in this trade war.

The move comes in retaliation to what the US perceives as decades of unfair trade practices by the Chinese government. It’s all about innovation, including technology, and China’s government-driven commitment to dominate global innovation. The Chinese government’s initiative called ‘Made in China 2025’ is the clear target. In Trump’s words, “These tariffs are essential to preventing further unfair transfers of American technology and intellectual property to China, which will protect American jobs.” In other words, China’s push to innovate is perceived as a threat to US technology companies. To combat that threat, the Trump administration announced tariffs that aim directly at many of the RAAI-specific industries that are key to China’s plan: aerospace, automobiles, information technology, and robotics.

While tariffs may be seen to be a fairly weak economic tool and may generate collateral damage, they are the first step in trying to level the playing field and to win the long-term battle for economic dominance. While Made in China 2025 is the key target, in this case tariffs are likely to miss the mark. Bad news for some but for companies in the US and abroad that are delivering today’s most innovative products and technologies in RAAI, the trade war is bound to be nothing more than a blip the size of a robot’s microchip, at least in the short-term. Here’s why:

China isn’t a big enough player in the robotics supply chain yet.

Although Made in China 2025 is a huge initiative and is driving massive innovation in technology for manufacturers across China, from a US perspective it is still far from a threat. In fact, for suppliers of the goods and services these companies need to meet their goals, that push has resulted in a steady upturn in demand for everything from microchips to precision components to industrial robots to RAAI-related software.

China is lagging behind in the global export market for advanced technologies.

While China has seen a rapid development of local businesses serving the local market for advanced technologies, most of these products remain out of the global export market. This is due primarily to inferior quality and weak distribution channels. There is a reason why China is pushing for innovation but in the broad scope, their products are lagging and that may take many years to change.

The tariffs don’t have a significant impact on the robotics industry.

China is currently the largest market in the world for robotics but that’s not the area the tariffs are poised to inflict damage. More than one-third of goods imported from China are mobile phones, computers, integrated circuits and consumer-focused technologies such as telecom equipment, televisions, and displays. Further down the list are toys and sports equipment, furniture and bedding, footwear, and clothing. Therefore the tariffs that have been imposed to date are not likely to make a difference to the global supply chain for robotics.

If that’s not enough, today’s tariffs are more likely to help, not hurt, companies that are innovators in RAAI. Firstly, they are likely to accelerate the recent shift towards re-shoring. Secondly, because the tariffs currently target materials and components that are critical to many global manufacturers, these companies now face increases in production costs. The easiest and most cost-effective way to offset these higher production costs is to accelerate automation—a trend that would drive an increase in demand across the RAAI supply chain.

So the question is, who is poised to fulfil this increase in demand? US-based automation providers. China is certainly investing aggressively in AI and may even surpass the US in 2018 in terms of actual dollars spent on AI technologies. Even so, at the moment, China’s AI technology is simply not mature enough to be exported globally or to have any major impact on global trade balances.

Will that change in the future? Possibly. China is deeply committed to becoming a global leader in robotics, electric cars, computer chips, and a myriad of other RAAI-related products. Innovation and evolution of advanced technology is bound to happen eventually and it will happen with or without international tariffs.

Trump said that a trade war is “good” and “easy to win.” While I disagree on most counts, when it comes to RAAI that statement may be true. After all, the tariffs could potentially be good news for the industry as a whole. Every industry in every corner of the globe will benefit from the development and application of smarter technology. RAAI has been changing how the world works for decades.

It seems that when it comes to defining the real winners in this trade war, robotics, automation, and AI continues to be an exception to the rules.

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