The US-China Trade Cold War could soon affect the global tech supply chain

The tech industries in the US and China are heavily linked, but the growing trade war between the two countries is impacting how the two conduct business.

Both are looking to decrease dependence on the other with the rise of tariffs.

However, nearly all iPhones are made in China, and Huawei is “scrambling” to find new tech with greatly reduced access to the US.

Even as businesses continue to protest the growing US-China trade war, the tariffs are already causing companies in both countries to rethink how and where they do business.

Why it matters: For all their differences, the US and Chinese tech industries remain very interdependent — each country contributes a great deal of business to the other's economy.

Where it stands: What tech companies want most is an end to hostilities, as evidenced by a letter issued Wednesday by more than 150 business groups calling for an end to the tariffs. However, the ongoing trade war has both sides eyeing how to lessen their dependence on the other.

Historically nearly all smartphones and most other consumer electronics have been made in China, but that is starting to shift. Google, for example, is joining the electronics makers looking at Vietnam as an alternative.

China is also likely to explore ways to reduce its dependence on US technology for everything from software to chips and the tools to make them.

Yes, but: In the short term, there is a lot of pain for companies in both countries.

Apple remains highly dependent on China for manufacturing and it is also a key market for iPhone sales. Nearly all iPhones are made there, with the exception of phones sold in Brazil and India, where laws impose huge tariffs on imported electronics.

Huawei, subject to a near-total ban on business with the US, finds itself not only shut out of a key market, but scrambling to find new options for chips and operating systems, among other components. The company faces the prospect of launching its first high-end smartphone without Google's apps and services.

Meanwhile, more than 130 companies have asked the Commerce Department for permission to continue selling components to Huawei, Reuters reported this week.

Between the lines: Trump has repeatedly argued that Apple and other tech companies should return manufacturing to the US. But that's considered wildly unrealistic, a point that Tim Cook has no doubt tried to make during his meetings with President Trump.

US unemployment rates are already at record lows, the Trump administration's immigration policies actively discourage expanding the domestic labor force, and efforts (like Foxconn's deal with Wisconsin) to get overseas manufacturers to build new US factories have been overhyped.

More importantly, the US just doesn't have the type of workforce concentration that would allow for devices to be made at the kind of scale Apple and others need for smartphones. At most, tariffs will cause manufacturers to move production from China to other countries.

The bottom line: The tech industry's global supply chain took years to assemble, and it will not dissolve overnight. But even if the Trump administration's most bellicose trade-war scenarios don't materialize, the tariff fight has added a deep layer of uncertainty to how companies operate globally.

Wide-open world trade was the rock-solid foundation for decades of tech expansion. With that condition no longer a given, more defensive behavior and slower growth are likely.