China bets on generative AI boom to cushion Trump’s tariff blows

Chinese companies don’t plan on sitting still while Trump’s tariffs make a comeback. This time around, they’ve got a weapon they didn’t have last time — generative artificial intelligence.

And they’re not just talking about it. These guys are launching AI products every week, stacking up tools, updates, and revenue like it’s a clearance sale on innovation.

The AI flood isn’t hype. In just the past two weeks, a long list of China-based companies have pushed out new tools or announced exactly how they’re making money from them. They’re not experimenting. They’re shipping.

Chinese companies launch new AI tools and show profits

Short-video platform Kuaishou said on Tuesday that its AI video-generation tool Kling pulled in over 100 million yuan (about $13.78 million) since launching last summer. That’s not testing — that’s market traction.

Meanwhile, Tencent rolled out an updated version of its AI model for creating 3D visuals. Those visuals can be used in games or for 3D printing. It also pushed out the full release of its Hunyuan T1 reasoning model. Weeks earlier, Tencent had plugged T1 into its chatbot app Yuanbao, which also connects to DeepSeek’s R1.

Tencent said daily active users on Yuanbao jumped 20x in one month. Some farmers are even using the app to check soil quality before planting. It’s a chatbot, but it’s farming now. Welcome to 2025.

Baidu launched tools on Monday that let people build websites and simple games using plain prompts — no coding skills needed. One day later, Kunlun Tech, the company that owns the Opera browser, upgraded its Mureka app that uses AI to make music.

China’s advantage isn’t just software. It’s machines. It has factories full of hardware that can collect useful data, making it easier to train models that fit real-world industries. Maxwell Zhou, CEO of DeepRoute.ai, said that gives China a physical edge.

DeepRoute.ai, which launched in 2019, said last week it’s building a voice-controlled delivery system for autonomous vehicles. Zhou said the idea is to say stuff like “pick up coffee from this store and send it to the apartment,” and the car just does it. He hopes it goes live across China early next year.

Beijing faces pressure as U.S. hits AI firms with blacklist

While China pushes AI, the U.S. is doing the opposite — locking Chinese tech out. The U.S. Department of Commerce’s Bureau of Industry and Security dropped the hammer this week, adding 80 organizations to its export blacklist. Over 50 of them are from China.

American companies are now banned from selling to those on the list unless they get government permission. The agency said these firms acted against U.S. national security and foreign policy. That includes tech tied to exascale computing and quantum technology — stuff that processes massive amounts of data and pushes the military edge.

Dozens of Chinese entities were targeted for helping develop advanced AI, high-performance chips, and supercomputers for military use. Two companies were flagged for supplying restricted tech to Huawei and its chip unit HiSilicon.

In total, 27 Chinese firms were blacklisted for trying to use U.S. tech for military modernization. Another seven companies were linked to quantum computing advances. Even six subsidiaries of Inspur Group — a Chinese cloud company already banned by Biden in 2023 — made the list again.

China’s foreign ministry wasn’t happy. It said Wednesday that it “strongly condemns” the move and urged the U.S. to “stop generalizing national security,” according to Reuters.

The blacklist also took aim at anyone helping China access tech through backdoors. Alex Capri, from the National University of Singapore, said it’s about targeting third countries, transit points, and intermediaries. He said some Chinese firms got U.S. dual-use tech using loopholes.

“U.S. officials will continue to step up tracking and tracing operations aimed at the smuggling of advanced semiconductors made by Nvidia and Advanced Micro Devices,” Capri said.

AI helps offset earnings hit as tariffs rise again

Chinese businesses aren’t just building AI for show. They’re trying to stay profitable while tariffs tighten the noose again. Ding Wenjie, investment strategist at China Asset Management, said the AI boom is lifting earnings expectations. That’s critical because profit numbers will show whether China’s economy is actually bouncing back or still dragging under Trump’s new tariffs.

Analysts think AI tools will help cut costs and soften the blow from slowed growth. With AI running workflows and generating content, firms can do more with less — fast.

But the hit is real. Back in February, Goldman Sachs said if the U.S. slaps a 20% tariff hike on Chinese goods, corporate profits in Hong Kong dollar terms could drop by 5%.

And it’s not just about earnings or products anymore. The U.S. and China are headed for something bigger. After a trip to China, New York Times columnist Thomas Friedman said the urgent topic isn’t Taiwan or tariffs — it’s AI. He compared it to nuclear arms talks during the Cold War.

Friedman thinks U.S.-China AI cooperation might need a global agreement, just like the one Washington had with Moscow back in the day. That’s how seriously some folks are taking this tech war.

Meanwhile, DeepSeek, a rising AI startup in China, is driving adoption of low-cost, open-source AI models. These are the opposite of the expensive, proprietary models pushed by American giants. DeepSeek’s rise is turning up the heat on those U.S. firms and giving China more local firepower.

The Trump administration isn’t backing off either. It already rolled out sweeping export bans on chips, servers, and anything tied to high-performance computing under its “small yard, high fence” policy. That means the U.S. is trying to block a tight set of sensitive tech, while letting everything else flow normally.

Jeffrey I. Kessler, Under Secretary for Industry and Security, said they’re sending a “clear, resounding message” that Trump will block U.S. tech from being used in military drones, hypersonic weapons, and aircraft training.

“The entity list is one of many powerful tools at our disposal,” Kessler said, “to identify and cut off foreign adversaries seeking to exploit American technology for malign purposes.”

China might be locked out, but it’s not slowing down. Companies are still building, launching, and finding ways to work around the wall. Whether that holds — or cracks — is what comes next.

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