Abacus | US-China trade war: not about trade, not about Trump. Here’s what it is about

The US objective is not to win trade concessions, but to force a change in China’s whole economic and industrial policy approach

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A ZTE booth at an expo in Beijing. Photo: Reuters

Published: 9:00am, 23 Apr 2018Updated: 1:21pm, 23 Apr 2018

Perhaps we should stop talking about US President Donald Trump’s US-China trade war. As last week’s developments demonstrated, the dispute between Washington and Beijing isn’t really about trade at all, nor even about Trump. It’s much, much bigger than that.

On Monday last week, the US Department of Commerce banned American companies from selling components to state-owned Chinese phone maker ZTE for a period of seven years. The move was intended to punish ZTE for failing to comply with the terms of an earlier US penalty. Last year, the Chinese company admitted to having sold products containing US-made chips to Iran in contravention of the US trade embargo in place at the time. As punishment, ZTE paid a hefty fine and agreed to comply with US regulatory restrictions.

Now, the US says that ZTE has reneged on that agreement, even rewarding the executives responsible for evading US export controls – hence the latest penalty.

Inevitably China will retaliate, most likely with tit-for-tat action against a US company. Beijing has any number of ways to make life difficult for US companies operating in China. But its retaliation appears to be taking a different form.

Washington has banned US companies from selling smartphone components to ZTE for seven years. Photo: Reuters

Last Thursday, China’s Ministry of Commerce confirmed that it had extended by up to six months its scrutiny of US chip maker Qualcomm’s proposed acquisition of Dutch semiconductor company NXP, complaining about “market competition problems”. If its action doesn’t block the deal entirely, it at least threatens to tie it up in knots for a long time to come.

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