The U.S.-China trade war counting from 3-1-2018, the date the U.S. declared tariff on steel and aluminum imports (including metal imports from China), has been over one year. The first 10% tariff on $16B Chinese imports and China’s reciprocal retaliation had begun since 8/23/2018. The anted-up tariff of 25% on $200B Chinese goods (effective 1-1-2019) pressuring China to accept a trade deal had been delayed to 3/1/2019 after Trump and Xi met in G20 meeting in Argentina and later Trump made the extension indefinite signaling good progress on trade talks. The negotiation of a trade agreement to remove US tariffs for getting Chinese government committing to making changes on her business practices, investment policies and trade issues had appeared to make progress until May 5th. The negotiation broke down, the U.S. accusing China for reneging commitments (although nothing was ever agreed on) and China accusing the U.S. pressuring her to accept an unequal treaty damaging China’s dignity and sovereignty rights.
As of today, the Trump Administration threatens to increase tariff from 10% to 25% on $200B Chinese goods giving China a few weeks to come to a trade agreement. China responded by announcing tariffs on $60B American goods effective on June 1, 2019. What has followed in events has not only raised the trade war to high tension but has also openly extended the US-China conflict to a ‘technology war’. In addition of making threats to add tariff to $325B and later to cover virtually all Chinese imports, Trump has issued an executive order prohibiting American companies to buy telecommunication products from Chinese companies citing national security concern. Specifically, the U.S. places the Chinese telecommunication giant, Huawei, and dozens other Chinese tech companies on the U.S. ‘entity list’ which means American corporations are prohibited to sell American products and technologies to the listed companies. This sanction even applies to foreign corporations if their products contain more than 25% content of American technology components.
Recalling that Huawei CFO, Ms Meng Wan Zhou, had been arrested and detained by the Canadian government by an extradition order issued by an U.S. court on the ground that a Huawei’s subsidiary company in the U.S. may have violated the US sanction law against Iran. The case is still in the judicial courts in Canada weighing on its legitimacy. The order placing Huawei et al on the entity list is clearly an open declaration of technology war against China. Numerous reports by political and economic commentators analyzed the situation, but despite of the Administration’s hawkish stand towards China, the organic media have lots of voices cautioning the government: The escalation of trade war is not clearly a win situation for the U.S. The trade imbalance is a small matter compared to the potential economic impact to the U.S. in terms of job loss and GDP reduction. The trade war will hurt China, but China’s survival rate is high and the end result creates a defensive, hostile rather a friendly, collaborative competitor. Furthermore, elevating technology competition to an open technology war not only will complicate the trade negotiation but also will hurt the U.S. credibility in the international community concerning technology development and free trade. Foreign companies will be hesitating in using American technologies and reluctant in participating in technology collaboration with the U.S. Forcing Google to suspend support to Huawei customers and forbidding Google to share Android platform with Chinese corporations violate the spirit of open platform where many foreign corporations including Huawei et al contributed to the advancement of software such as Android.
In this article, we will not discuss moral issues of ‘cheat’ and ‘steal’ versus ‘lie’ and ‘bully’, simply because history will render the truth. No one can manipulate the media to fool all the people all the time. What we will focus on is how the trade war and technology war may play out in the near future. The current Trump Administration seems to be following a playbook taken from the Cold War and how the U.S. dealt with the ‘Japan Threat’ three decades ago. China is different from the Soviet Russia and Japan. China survived throughout the five thousand years of history exhibiting her salient respect to history and she would not blindly copy the West. China believes in Justice and public opinion far more than Western powers that overly rely on military strength. When China is on a moral high ground, she will defend justice to her last ounce of energy. Western aggression and Japanese invasion had demonstrated that in the past. When Japan copied everything from the West and from the U.S. post WW II, the U.S. tolerated even helped Japan until felt threatened. China’s Rise is no different from any developing country except she has been rising too fast and she has smartly treated her huge market as an asset not as a pizza pie for the industrial powers to slice. Today is no longer a colonial era, we talk about human rights, non-discrimination and global collaboration and prosperity. China’s ascending role on the world stage is positively obeying the above principles, making her self-reliant by hard work. The U.S. must reflect on this; her greatness cannot be maintained by suppressing others to rise up.
Following the current world events, we can predict what may happen in the future; hopefully the U.S. and China can adjust their competition to be mutually beneficial. Despite of the heavy-handed actions that the U.S. applied to Huawei ($108.5B revenue, 188,000 employees and 76000 scientists and engineers and $13.8B in R&D), its founder, Mr. Ren Zheng Fei, reacted with calm and philosophical comments: Huawei did nothing wrong, no backdoor nor spying on anyone. Huawei would not come to the U.S. market if not welcomed, but Huawei appreciates and wants to work with her American corporation partners. He even advised people not to take a nationalistic or patriotic (emotional) view to support Huawei. Huawei will find ways to keep the company successful. If being sanctioned, Huawei would use her own technologies already developed and maintain her technology lead to serve her customers and clients. As we can see, many countries despite the pressure from the U.S. have signed up contracts with Huawei and many American corporations are pleading the U.S. Administration to lift the sanction on Huawei and for their own interests. Huawei is standing on the moral high ground. It became the world telecommunication leader in a few decades with a unique and super private corporation model and it is likely to be able to defend her technology leadership in the future.
Some people are worried that the U.S. is splitting the world into two halves in terms of telecommunication and in all domains that telecom is a vital element. (Two Internets, two phone systems, two standards, two trading systems and two economies) I am worried that the splitting is going to be uneven. The Eastern world led by China and Chinese companies like Huawei, Zhong Xing, Semiconductor International Corporation (SMIC), etc. will work with other Asian Countries like India, Japan, Russia to keep their lead in telecommunication and its supported fields. The EU and African countries already favor Huawei will likely to be in the China camp. The U.S. will struggle to keep a separate system together. Is this what the U.S. want? I don’t think so. The U.S. must take a rational path to be an integral part of the global telecommunication and economy, not swayed by the military thesis that the U.S. must have control of telecomm industry to maintain an overpowering military.
Trump and Xi may meet again in the G20 conference in Japan. This is an excellent opportunity for the two leaders to reach a genuine understanding. Because of the trade war extending to technology war, the world telecommunication industry is in turmoil, immediately affecting the semiconductor industry. The Chinese corporation SMIC (17,600 employees) is delisting from the New York Stock Exchange, presumably to be free from the U.S. technology sanction laws. The stock markets are jittering with Apple, Google and all tech stocks crashing down. China, instead of buying more US tech products, is setting up funds to support start-up companies to make China self-sufficient in technology supply chain. Some argue that the U.S. tech industries are threatened thus we must stop China’s growth. This is so un-American. Just look at Huawei company alone, many American companies make money through Huawei and many American jobs are maintained because of Huawei. It is time to get our White House staff to wake up from the 19-20th century ‘empire dreams’ and focus on building a ‘prosperous democratic America’ in 21st century!
Ifay Chang. Ph.D., Inventor, Author, TV Game Show Host and Columnist (www.us-chinaforum.org) as well as serving as Trustee, Somers Central School District.
The U.S.-China trade war counting from 3-1-2018, the date the U.S. declared tariff on steel and aluminum imports (including metal imports from China), has been over one year. The first 10% tariff on $16B Chinese imports and China’s reciprocal retaliation had begun since 8/23/2018. The anted-up tariff of 25% on $200B Chinese goods (effective 1-1-2019) pressuring China to accept a trade deal had been delayed to 3/1/2019 after Trump and Xi met in G20 meeting in Argentina and later Trump made the extension indefinite signaling good progress on trade talks. The negotiation of a trade agreement to remove US tariffs for getting Chinese government committing to making changes on her business practices, investment policies and trade issues had appeared to make progress until May 5th. The negotiation broke down, the U.S. accusing China for reneging commitments (although nothing was ever agreed on) and China accusing the U.S. pressuring her to accept an unequal treaty damaging China’s dignity and sovereignty rights.
As of today, the Trump Administration threatens to increase tariff from 10% to 25% on $200B Chinese goods giving China a few weeks to come to a trade agreement. China responded by announcing tariffs on $60B American goods effective on June 1, 2019. What has followed in events has not only raised the trade war to high tension but has also openly extended the US-China conflict to a ‘technology war’. In addition of making threats to add tariff to $325B and later to cover virtually all Chinese imports, Trump has issued an executive order prohibiting American companies to buy telecommunication products from Chinese companies citing national security concern. Specifically, the U.S. places the Chinese telecommunication giant, Huawei, and dozens other Chinese tech companies on the U.S. ‘entity list’ which means American corporations are prohibited to sell American products and technologies to the listed companies. This sanction even applies to foreign corporations if their products contain more than 25% content of American technology components.
Recalling that Huawei CFO, Ms Meng Wan Zhou, had been arrested and detained by the Canadian government by an extradition order issued by an U.S. court on the ground that a Huawei’s subsidiary company in the U.S. may have violated the US sanction law against Iran. The case is still in the judicial courts in Canada weighing on its legitimacy. The order placing Huawei et al on the entity list is clearly an open declaration of technology war against China. Numerous reports by political and economic commentators analyzed the situation, but despite of the Administration’s hawkish stand towards China, the organic media have lots of voices cautioning the government: The escalation of trade war is not clearly a win situation for the U.S. The trade imbalance is a small matter compared to the potential economic impact to the U.S. in terms of job loss and GDP reduction. The trade war will hurt China, but China’s survival rate is high and the end result creates a defensive, hostile rather a friendly, collaborative competitor. Furthermore, elevating technology competition to an open technology war not only will complicate the trade negotiation but also will hurt the U.S. credibility in the international community concerning technology development and free trade. Foreign companies will be hesitating in using American technologies and reluctant in participating in technology collaboration with the U.S. Forcing Google to suspend support to Huawei customers and forbidding Google to share Android platform with Chinese corporations violate the spirit of open platform where many foreign corporations including Huawei et al contributed to the advancement of software such as Android.
In this article, we will not discuss moral issues of ‘cheat’ and ‘steal’ versus ‘lie’ and ‘bully’, simply because history will render the truth. No one can manipulate the media to fool all the people all the time. What we will focus on is how the trade war and technology war may play out in the near future. The current Trump Administration seems to be following a playbook taken from the Cold War and how the U.S. dealt with the ‘Japan Threat’ three decades ago. China is different from the Soviet Russia and Japan. China survived throughout the five thousand years of history exhibiting her salient respect to history and she would not blindly copy the West. China believes in Justice and public opinion far more than Western powers that overly rely on military strength. When China is on a moral high ground, she will defend justice to her last ounce of energy. Western aggression and Japanese invasion had demonstrated that in the past. When Japan copied everything from the West and from the U.S. post WW II, the U.S. tolerated even helped Japan until felt threatened. China’s Rise is no different from any developing country except she has been rising too fast and she has smartly treated her huge market as an asset not as a pizza pie for the industrial powers to slice. Today is no longer a colonial era, we talk about human rights, non-discrimination and global collaboration and prosperity. China’s ascending role on the world stage is positively obeying the above principles, making her self-reliant by hard work. The U.S. must reflect on this; her greatness cannot be maintained by suppressing others to rise up.
Following the current world events, we can predict what may happen in the future; hopefully the U.S. and China can adjust their competition to be mutually beneficial. Despite of the heavy-handed actions that the U.S. applied to Huawei ($108.5B revenue, 188,000 employees and 76000 scientists and engineers and $13.8B in R&D), its founder, Mr. Ren Zheng Fei, reacted with calm and philosophical comments: Huawei did nothing wrong, no backdoor nor spying on anyone. Huawei would not come to the U.S. market if not welcomed, but Huawei appreciates and wants to work with her American corporation partners. He even advised people not to take a nationalistic or patriotic (emotional) view to support Huawei. Huawei will find ways to keep the company successful. If being sanctioned, Huawei would use her own technologies already developed and maintain her technology lead to serve her customers and clients. As we can see, many countries despite the pressure from the U.S. have signed up contracts with Huawei and many American corporations are pleading the U.S. Administration to lift the sanction on Huawei and for their own interests. Huawei is standing on the moral high ground. It became the world telecommunication leader in a few decades with a unique and super private corporation model and it is likely to be able to defend her technology leadership in the future.
Some people are worried that the U.S. is splitting the world into two halves in terms of telecommunication and in all domains that telecom is a vital element. (Two Internets, two phone systems, two standards, two trading systems and two economies) I am worried that the splitting is going to be uneven. The Eastern world led by China and Chinese companies like Huawei, Zhong Xing, Semiconductor International Corporation (SMIC), etc. will work with other Asian Countries like India, Japan, Russia to keep their lead in telecommunication and its supported fields. The EU and African countries already favor Huawei will likely to be in the China camp. The U.S. will struggle to keep a separate system together. Is this what the U.S. want? I don’t think so. The U.S. must take a rational path to be an integral part of the global telecommunication and economy, not swayed by the military thesis that the U.S. must have control of telecomm industry to maintain an overpowering military.
Trump and Xi may meet again in the G20 conference in Japan. This is an excellent opportunity for the two leaders to reach a genuine understanding. Because of the trade war extending to technology war, the world telecommunication industry is in turmoil, immediately affecting the semiconductor industry. The Chinese corporation SMIC (17,600 employees) is delisting from the New York Stock Exchange, presumably to be free from the U.S. technology sanction laws. The stock markets are jittering with Apple, Google and all tech stocks crashing down. China, instead of buying more US tech products, is setting up funds to support start-up companies to make China self-sufficient in technology supply chain. Some argue that the U.S. tech industries are threatened thus we must stop China’s growth. This is so un-American. Just look at Huawei company alone, many American companies make money through Huawei and many American jobs are maintained because of Huawei. It is time to get our White House staff to wake up from the 19-20th century ‘empire dreams’ and focus on building a ‘prosperous democratic America’ in 21st century!
Ifay Chang. Ph.D., Inventor, Author, TV Game Show Host and Columnist (www.us-chinaforum.org) as well as serving as Trustee, Somers Central School District.
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