Tense Sino-Western Relations
US-China relations deteriorated during the Trump era trade wars and the slew of tariffs imposed from both sides. It looked like the situation could normalize under the Biden administration, but that was not meant to be.
The US President has imposed critical trade restrictions, the Russian war in Ukraine has brought Beijing closer to Moscow creating frictions with the West and President Xi seems to be more focused on self-reliance and security during his historic third term. He also appears more aggressive around Taiwan, a constant thorn in the Beijing-Washington relations.
The rapport deteriorated after the spy balloon saga that erupted in February of this year. The United States had identified a Chinese "surveillance balloon" over their airspace and shot it down . They went on to take out three additional flying objects over North America, although their origin and intension was unclear. 
Around that period, Chinese Tik Tok social media app was thrusted back into the spotlight, as the European Commission banned its use by its employees, for protection against cyber threats . Similar moves followed by the United States and the United Kingdom shortly after. , 
Back in May, the G-7 nations (Canada, France, Germany, Italy, Japan, UK, US &EU) tried to adopt a less antagonistic approach, stating that they are "not decoupling" from China. However the rift is clear, since they vowed to "reduce excessive dependencies" in critical supply chains and stressed the importance of "peace and stability" across the Taiwan Strait, which is "indispensable" to international security and prosperity. 
The renewed Sino-Western strains are most evident on the tech sector, as Washington tries to reassert its semiconductor supremacy and stifle the Chinese advance, following the pandemic chip shortages.
The Biden administration imposed a sweeping set of export controls late last year, restricting China's ability to both purchase and manufacture certain high-end semiconductors, in order to protect national security and sensitive technologies. 
This year, the Netherlands announced additional export controls on advanced semiconductor manufacturing equipment . The country is home to ASML, which holds a monopoly on the cutting-edge EUV lithography method that is required for the production of the most advanced chips and represents a key choke point of the intricate global chip supply chain.
US President Biden went further last month, with an executive order that curbs investment in Chinese tech. The measures affect sectors such as semiconductors and microelectronics, quantum information technologies, and artificial intelligence. 
Beijing did not sit idle by and retaliated. It barred purchases from US memory chip maker Micron, for failing its security review . It also intends to restrict exports of metals widely used in the semiconductor industry, according to Reuters . Just days ahead of the new iPhone 15 launch, the Wall Street Journal reported that China is banning the use of Apple's iPhones for government officials . The Foreign Ministry later refused such action, although it spoke of security incidents. 
Making the situation even more complicated and sensitive, Taiwan is another crucial bottleneck in the global chip supply chain. It is home to TSMC, the biggest advanced chipmaker in the world, manufacturing semiconductors for tech giants like Apple, Nvidia and others.
It now looks like electric vehicles (EVs) have emerged as the next area of conflict, between China and the West. During her State of the Union address on Wednesday, the President of the European Commission announced an anti-subsidy investigation into electric vehicles coming from China. 
Ms von der Leyen said that global markets are "flooded" with cheaper Chinese electric cars, whose prices are kept "artificially" low by "huge state subsidies". Despite this action, she reiterated the "no decoupling" mantra.
Europe is the second largest market for electric vehicles behind China and has banned the sales of diesel and petrol passenger cars from 2035 , bringing it at the forefront of the EV revolution . 703,586 pure electric cars (BEVs) were sold in the first half, according to ACEA, marking a 53.8% y/y jump. 
Its massive auto industry includes legacy giants like Volkswagen that has a robust electric lineup and plans an entry-level electric car (priced at just €25,000 by 2026) , luxury makers Mercedes and BMW which recently unveiled their next-gen EV plans and more. , 
However, these auto giants are still far behind EV king Tesla Motors Inc and face intense competition from Chinese legacy makers and startups, not only abroad but also within the continent. China is pushing for European expansion and this was evident in this month's IAA Mobility show in Munich.
China's Nio has a strong presence in Europe where its sells some of its models, but also has an expanding network of showrooms, service stations and charging solutions . Xpeng is also at the forefront, recently announcing the expansion of its lineup into the important German market. 
It is unclear what the EU probe will produce, but the announcement alone could make it harder for Chinese EV makers to penetrate the EU market. Despite their appealing offering, they need to gain the trust of European consumers, to compete with established brands. It is also likely to help not only Europe's auto industry, but Tesla as well. Its Model Y was the best selling car in Europe in H1 2023, according to Jato Dynamics. 
Tensions to Persist
It does not look like the Sino-Western strained relations can improve in the near future. Although not de-coupling, the West is looking to protect its critical industries against China's practices and the announcement by the EU Commissioner is just the latest manifestation. These nations try to de-risk from China, which not an easy task in this highly interconnected world are looking towards India instead.
China for its part, makes its intentions around Taiwan more evident, it comes closer to Russia and tries to establish its own world order around the BRICs.
These tensions and trade skirmishes however, have negative economic impact for all sides and pose a risk source. China's post-pandemic recovery falters and trade activity has slumped. Europe faces economic hardships, with its economic engine (Germany) sputtering. The US has many corporate giants with large exposure in China and their interests are on the line.
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.