Tariffs and Tech Sanctions Don't Work...China Overtakes US in Cars, Batteries, AI, and Infrastructure

▲ Yuan (CNY), Dollar (USD)

China has surpassed the United States in automobiles, batteries, AI, and infrastructure construction, and the gap is widening despite tariffs and technological sanctions.

Cryptocurrency-focused YouTube channel Coin Bureau, in a video uploaded on October 31 (local time), highlighted where China is ahead, how it has overtaken the U.S. in manufacturing, and why tariffs and tech bans have failed to slow it down. Automobile figures come first. BYD's registrations in the European Union (EU) more than doubled in the first half of 2026. A record number of Chinese brands set up booths at the Paris Motor Show. China's passenger car exports exceeded 7.1 million units in the first nine months of this year, an increase of over 70% compared to the same period in 2025. The same applies to infrastructure. China is successively opening high-speed rail lines, container terminals, bridges, and subways, while similar projects in other countries are reportedly bogged down in endless reviews.

The video stated that the clearest sign of China's dominance is the machines that build machines for other countries. Tunnel boring machines for railway and subway tunnels are entirely relied upon by construction companies in many countries. Beijing announced export controls on these machines this month, to be implemented in mid-November. India is already experiencing further delays in its high-speed rail and subway projects due to Chinese-made machinery being held up at customs. The fastest widening gaps are in batteries and AI. Both major EV battery companies, CATL and BYD, are Chinese firms, and their batteries are also used in vehicles assembled outside China. In AI, Chinese research institutes like the development teams behind DeepSeek, Qwen, and Kimi have released models that developers worldwide download and use. The trade surplus for the first nine months of this year is $938 billion. The world bought nearly $1 trillion more from China than it sold, and the items have shifted from cheap clothing and plastic toys to semiconductors, batteries, automobiles, and machinery.

The video cited the concentration of everything needed for a product in the same region as the secret to speed. An engineer designing an electric vehicle in Shenzhen has mold manufacturers, circuit board factories, battery cell factories, and software teams within driving distance. If they need to change the shape of a battery housing, they can go to the mold factory that afternoon and finalize it within a few days. Automakers with suppliers scattered across multiple countries send drawings via email and samples via cargo, with each revision taking months. The accumulated know-how from assembling mobile phones, laptops, toys, and home appliances for a long time also contributes. Tool engineers who know which molds crack and which last longer, site managers who resolve bottlenecks before lunch, and inspectors who find defects with their fingertips create a higher starting point for each product cycle. 'Involution,' meaning fierce competition, also plays a role. Price wars have reduced hundreds of EV manufacturers to a few survivors like BYD, Geely, NIO, and Xpeng, while weaker companies quickly disappeared as they ran out of funds.

There are three strategies that have fostered this dominance. First is choosing an industry early and pushing it through to the end. Under plans like Made in China 2025, Beijing designated batteries, solar power, and electric vehicles as leading industries and provided funding even during periods of thin demand and no profit. U.S. battery manufacturer A123 Systems went bankrupt in 2012 and was acquired by a Chinese company, and many early solar manufacturers in the U.S. and Europe collapsed or withdrew. Second is a bet on chemistry. Most Western automakers chose nickel-manganese-cobalt (NMC) batteries, but China pushed lithium iron phosphate (LFP) batteries, which exclude expensive nickel and cobalt. CATL and BYD produced these on a massive scale, and BYD created blade batteries. Third is AI. As cutting-edge chips were blocked by U.S. export controls, Chinese research institutes squeezed more performance out of existing hardware. The DeepSeek, Qwen, and Kimi teams significantly saved computing resources by using a mixture-of-experts approach, activating only the expert domains needed for a given query. The models were released with open weights, allowing anyone to download and run them on their own computers. Chinese AI spread not through the largest data centers, but through efficiency and accessibility.

China also controls the refining of key raw materials. Rare earth magnets are used in EV motors, graphite, lithium, and cobalt in batteries, and gallium and germanium in chips. While raw materials are mined on various continents, the stages of separation and refining to make them usable are overwhelmingly carried out in China. China accounts for 90% of global rare earth refining and most of the refining of graphite, cobalt, and gallium. Last April, China introduced licensing requirements for seven types of rare earths, including those used in high-performance magnets, and then in October announced controls covering more metals, which were later suspended as part of a truce with the U.S. This means that to produce without China, one must first buy from China. U.S. tariffs on China merely shifted final assembly to Southeast Asian countries like Vietnam and Mexico, but components still come from China, only the origin labeling changed, and China's trade surplus actually grew larger. The blocking of advanced AI chips and manufacturing equipment pushed Chinese companies to produce them domestically. Huawei developed Ascend AI chips, SMIC pursued more advanced processes, memory manufacturers CXMT and YMTC continued expansions, and China guided its domestic companies towards domestically produced chips, providing suppliers with a guaranteed domestic market.

The next race has also begun. According to the International Federation of Robotics, China installed 354,000 industrial robots in 2025, accounting for 59% of new global installations, with over half of them being products from Chinese suppliers. At IFA in Berlin in September, Chinese companies hosted the largest exhibition of humanoid robots in the event's history. In drones, DJI is already widely known, and CATL is developing next-generation batteries, including sodium-ion battery 'NaSstra' and solid-state designs. The factories, engineers, and supply chains that won the EV competition are now turning their same speed to robots, drones, and the batteries that power them.

[Article Key Summary]

-China exported over 7.1 million passenger cars in the first nine months of this year, BYD's EU registrations more than doubled in the first half, and the trade surplus is $938 billion.

-China accounts for 90% of global rare earth refining and leads in batteries and AI, while U.S. tariffs and chip sanctions have only led to production relocation and domestic chip development.

-China installed 354,000 industrial robots in 2025, accounting for 59% of new global installations.

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