During July and August, Washington implemented stricter regulations on foreign-developed advanced robotic technologies and imposed high tariffs on imported drones and their parts, with both actions citing concerns over national security. The drone tariffs will be enforced starting in September, with additional tariffs on components set to begin in 2027.

These actions are part of a wider U.S. initiative to limit foreign technology presence in critical sectors. The FCC’s Covered List, launched in 2021, initially focused on telecommunications and surveillance devices from companies such as Huawei, ZTE, and Hikvision, before being extended to foreign-made drones and, most recently, advanced robotic systems.

The latest developments come as Chinese manufacturers dominate the markets for both drones and humanoid robots, frequently competing at price points that U.S. and European competitors find challenging to meet.

Cumulatively, the restrictions raise a significant question for the global robotics sector: If Chinese drones and humanoids face increasing exclusion from the U.S. market, where will the competition pivot next?

While the restrictions may offer some protection to segments of the American market, they do not directly tackle China’s extensive manufacturing capacity and cost advantages.

Industry analysts and executives who engaged with TechCrunch indicated that the outcomes may lead to less of a clear U.S.-China divide and more of a fragmented global marketplace, where Chinese firms expand into other regions while U.S. and allied manufacturers contend in markets where security regulations are a primary concern.

The Scale Gap

The robotics sectors in the U.S. and China remain closely linked; however, both countries approach the competition armed with markedly distinct advantages. Unlike semiconductors, robotics relies on multiple technologies that no single nation can entirely dominate, noted Ankur Saxena, an investment director at TDK Ventures.

China leads the global market for humanoid robot production, with shipments reaching 22,000 units in the first half of this year, predominantly sourced from Chinese manufacturers, according to a report by Counterpoint. In contrast, U.S. firms are operating on a considerably smaller scale, as highlighted by Soumen Mandal, a principal analyst at Counterpoint Research.

The five largest humanoid robot manufacturers by shipment volume — AgiBot, Unitree, Galbot, UBTECH, and Leju Robotics — are all based in China and collectively represented 86% of global shipments in the first half of 2026, according to Counterpoint.

This advantage may deepen over time. Lower pricing enables Chinese manufacturers to deploy more robots, generating practical data that can enhance their technology. Higher production volumes can further reduce costs, Saxena explained.

Mandal pointed out that Chinese humanoid manufacturers are also lowering costs by internalizing more of the technology and utilizing China’s established manufacturing infrastructure. For instance, Unitree is enhancing more components in-house, while automotive companies like XPeng leverage their expertise in chips and vehicle production as they venture into robotics.

“The United States excels in advanced AI, software, and semiconductor innovations,” Saxena shared with TechCrunch. “China excels in manufacturing scale, supply-chain complexity, and cost efficiency.”

This manufacturing superiority has enabled Chinese firms to decrease humanoid pricing more swiftly than most U.S. competitors can respond.

“You cannot sanction your way out of a cost curve. The only way to overcome it is through building more, and America has not yet embarked on the long-term investments that will necessitate,” Saxena stated.

Where Does China Go Next?

The answer may increasingly lie outside the U.S. Even if Chinese robotics firms lose entry to the American market, they retain access to a sizable domestic market and opportunities for expansion elsewhere, particularly in regions where demand for cost-effective automation is on the rise, Saxena noted.

Chinese robotics firms are actively pursuing price-sensitive markets facing acute labor shortages across Europe, Southeast Asia, Latin America, and the Middle East, according to Mandal.

Mandal anticipates that humanoid manufacturers will follow a trajectory resembling that of Chinese electric vehicle makers: scaling up domestically, entering foreign markets, and ultimately establishing local production. Regions experiencing labor shortages and demographic decline could emerge as early adopters of humanoids, especially in manufacturing, where robots can perform routine tasks.

The drone sector provides an initial look at what this more fragmented robotics landscape might resemble. The industry is progressively bifurcating into two ecosystems: a U.S.-led market centered around American-made, NDAA-compliant technologies, and a China-led market prioritizing low-cost, high-volume production, shared Bentzion Levinson, founder and CEO of Virginia-based drone manufacturer Heven AeroTech.

Levinson remarked that Western manufacturers are unlikely to outpace Chinese companies in the low-cost consumer drone segment, where pricing remains a significant edge. Instead, U.S. and allied firms could find stronger competition in long-range autonomous systems for defense and critical infrastructure, where security specifications carry greater significance.

Levinson perceives the coming competitive landscape shifting from the drones themselves to the technology that powers them and the payloads they transport. “The next arena of conflict centers on who controls next-gen energy and payload frameworks,” he noted, especially highlighting battery limitations. As drones evolve in capability, battery constraints could become an increasingly crucial competitive factor.

Agility Robotics expressed support for the FCC’s July decision, claiming it could mitigate security risks associated with foreign-made advanced robots becoming entrenched within the U.S. market, a situation that has arisen in the drone field. The company highlighted its Digit humanoid, which is designed and produced in the U.S., while also advocating for ongoing access to necessary tools and technologies to advance robotics research.

A More Regional Robotics Market

“The alternative to China isn’t solely a domestically-focused U.S. supply chain; it’s a diversified allied supply chain,” Saxena remarked.

This could open doors in other parts of Asia. Japan boasts decades of expertise in industrial robotics and precision manufacturing, South Korea excels in electronics, batteries, and automobiles, and Taiwan plays a significant role in semiconductors. However, none can simply replace China, as Saxena pointed out, due to the deep integration of Chinese components in the global robotics landscape.

Asian manufacturers might emerge as a middle path between lower-cost Chinese robots and pricier U.S. alternatives, Mandal suggested. South Korea’s Hyundai, owner of Boston Dynamics, and Japan’s Toyota are among the automotive firms investing in robotics, drawing on their backgrounds in vehicles, manufacturing, and autonomous systems as they pivot toward humanoid robots.

Yang Fang of Beagle Technology, a California-based agtech startup applying AI and robotics software to transform standard farming tools into autonomous machinery, shared with TechCrunch that the robotics sector is likely to become more regionalized as firms engineer devices tailored to the labor needs, working conditions, and clientele within their home territories. Chinese robotics enterprises, for instance, might hone in on products suited for China and nearby markets, whereas U.S. firms are more inclined to develop for industries across North America, he noted.

The outcome may not yield neatly separated U.S. and China-led robotics sectors. Rather, the restrictions could hasten the rise of regional markets: Chinese companies competing on price and scale across a significant portion of the globe, U.S. and allied manufacturers gaining traction where security considerations dominate, and manufacturers in Japan, Taiwan, and South Korea striving to stake out ground amid the two.