Editorial | The damaging consequences of US trade and tech war

Self-reliance in technology is becoming inevitable for Beijing in the face of US President Donald Trump’s protectionist policies. The trade tariffs, investment restrictions and export controls that have been imposed on Chinese products and companies are forcing development of hardware and software that was previously obtained from foreign firms. Washington’s aims are to quash competition and stifle China’s rise, but the ill-thought out strategy has wider and more damaging consequences. If it stands, the United States will suffer, as will globalisation, the world economy and global tech development.

President Xi Jinping has made repeated calls for the nation to develop core technologies as the trade, and now technology, war escalates. But Trump’s targeting of Huawei, the country’s leading tech company, has added urgency to the push. Through preventing US firms and their subsidiaries from dealing with it and an executive order prohibiting tech agreements with a “foreign adversary” on national security grounds, its global ambitions are being threatened. The move was reason for Xi to make a symbolic trip last month to Ganzhou in Jiangxi province, where the Communist Party’s Long March began 85 years ago, to promote the need for self-reliance and endurance for the anticipated “long march” against foreign challengers.

It is sound advice for Huawei, which, like most of the world’s tech companies, relies on global supply chains of components, software and services to make its products. The private firm, a global leader in 5G next-generation telecommunications equipment and the world’s second-biggest manufacturer of smartphones, last year released a list of core suppliers, with 33 of the 92 being American and the rest largely based in Taiwan, Japan and South Korea, all firm US allies. Huawei contends it has breathing space through having stockpiled a year’s worth of components and owning its own chipmaking facility. But those can only be short-term fixes; while the domestic market is likely to be little affected, there is bound to be disruption or even damage to global ambitions due to the challenge of obtaining or producing parts that do not infringe on US patents.

Trump’s moves will take business from American firms. Thousands of other Chinese tech firms could also now be in the US firing line. But countries and companies around the world that are involved in Chinese technology, whether as a supplier or customer, now also have to choose sides through weighing up profitability and political risk. That will lead to the fragmenting and slowing of the development of technology. Unless US policy changes, the deepening protectionism will also impact the reform of China’s economy and make for a gloomy global economic outlook.