Abstract
Tariffs, sanctions, and industrial policies are political actions critical in shaping the trajectory of technological innovation in ways that are not immediately predictable. While some accelerate innovation by reducing barriers to entry or protecting infant industries, others impede innovation by reducing competition, discouraging investment, or limiting international collaboration. This paper examines these dynamics through three case studies. The first examines the Chinese air conditioning industry after tariffs were imposed on Korean imports, showing how protectionist measures can stimulate short-term growth but stifle incentives for sustained innovation over time by eliminating foreign competition. The second considers the electric vehicle sector, where BYD benefited from a protected domestic market while Tesla’s entry under selective tariff exemptions fostered healthy competition. Finally, the effect of U.S. export controls—most notably the placement of companies like Huawei on the Denied Party List—forced affected firms to accelerate independent innovation, like in the development of HarmonyOS, advanced domestic semiconductors, and DeepSeek. Tariffs and related policies are neither inherently beneficial nor harmful. Their effect depends on scope, duration, and the broader geopolitical and industrial context in which they are applied.
Keywords: Technological Innovation, Protectionism, Competition
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