The escalating trade war between the United States and China has gone beyond tariffs as the countries increase pressure on each other to cede ground.
How should Washington deal with an authoritarian regime that is expanding its influence abroad and repressing its citizens at home? That is the question the United States faces today in dealing with Xi Jinping’s China. But it is not a new challenge. After World War II, the United States faced another authoritarian state intent on expanding its borders, intimidating its neighbors, undermining democratic institutions, exporting its authoritarian model, and stealing U.S. technology and know-how.
Regardless of what led to a failure to conclude a trade agreement between the US and China, the new reality is that hardliners on both sides have now gained the upper hand over those seeking to find an agreed way forward. It means both sides now have fewer inhibitions to provoke the other on trade, and even more sensitive and dangerous subjects.
“The technology war is not going to end,” Alastair Newton, director of Alavan Business Advisory and a former British diplomat, told CNBC’s “Squawk Box” on Wednesday. “Technology is where this battle is going to be fought out, even if we do get a trade deal on bilateral goods.”
If the ongoing tensions between Beijing and Washington force companies to develop two different sets of technologies -- one for China and its aligned countries, and the other for the rest of the world -- then it would be bad news for everyone, according to a senior executive at a multinational tech firm.
As ITIF has argued for more than a decade, there is no question China is the world’s leading practitioner of the dark arts of innovation mercantilism. As such, the United States, and the global trading community more broadly, is well within its rights to insist that China dramatically roll back these egregious and unfair practices, including intellectual property theft, forced technology transfer, and massive industrial subsidies.
It’s thrilling and nail-biting stuff watching the unfolding of what some predict will prove to be the defining event of our time - the onset of a technology cold war between the world’s two superpowers, the US and China. Whether Trump’s tough stance on Huawei turns out to be a hard-ball negotiating tactic or not, the events of the last few weeks will, in all likelihood, set China on a game-changing course towards becoming technologically self-reliant.
“We’re all going to suffer in this industry if we don’t get this thing resolved,’’ said Tom Caulfield, chief executive officer of Globalfoundries Inc., the largest U.S. contract manufacturer of chips. “Even though you try to do the right thing and force a better balance in trade, it could have negative consequences.’’
China occupies a commanding position, producing more than 95 percent of the world's rare earths, and the United States relies on China for upwards of 80 percent of its imports. Rare earths are 17 elements critical to manufacturing everything from smartphones and televisions to cameras and lightbulbs. That gives Beijing tremendous leverage in what is shaping up largely as a battle between the US and China over who will own the future of high-tech.
...the friction between these two superpowers, the U.S. and China, could result in a separation of tech spheres. This is already beginning as Chinese tech companies such as Huawei and Xiaomi look to alternative sources for semiconductor chips and other high-design supplies. It is also happening as U.S. companies are turning away from selling to Chinese companies and into China.