The Impact of Government Subsidies on Sino-U.S. Semiconductor Trade Frictions

Abstract

As a cornerstone of the high-tech sector, semiconductors play an indispensable role in critical processes such as chip manufacturing and wafer production. They are essential for China to achieve its strategic goal of becoming a high-tech power. This article examines the trade policy of the United States, which imposes tariffs on China's semiconductors, by constructing a profit matrix model that incorporates the primary stakeholders from both China and the United States, utilizing game theory analysis methods. It systematically analyzes the variations in China's export revenue and U.S. income under two scenarios: with and without tariffs. Furthermore, the article introduces government subsidy variables to explore their impact on China's export income and U.S. consumer surplus. The research results show that in bilateral semiconductor trade, adopting a free trade strategy can achieve the balance of dominant strategies between the two sides, thereby maximizing trade interests; in the case of the United States implementing tariff barriers, the Chinese government can effectively alleviate the decline in the income of export companies and maintain industrial competitiveness through subsidy policies. Based on the above conclusions, this article suggests that the Chinese government should strengthen its financial support for the semiconductor industry, respond to the negative impact of trade frictions through targeted subsidy policies, and at the same time actively promote bilateral trade consultations to promote the healthy development of international cooperation in the semiconductor industry.