Trump Threatens High-Tech Export Curbs in Latest Swipe at China

Date: Tuesday, November 20, 2018
Source: AJOT

The Trump administration is considering tighter curbs on technology exports, a step that Deutsche Bank AG says would have a “profound and long lasting adverse impact” on relations between the U.S. and China.

A request for public comment, published Monday on the U.S. government’s Federal Register, asks if a list of new technologies that have national security applications—from artificial intelligence to microprocessors and robotics—should be subject to more stringent export-control rules. That would affect U.S. manufacturers as well as purchasers in China.

The news added to bearish sentiment in China’s stock market on Tuesday, with two manufacturers of surveillance equipment—Hangzhou Hikvision Digital Technology Co. and Zhejiang Dahua Technology Co.—leading large-cap losses.

“Many technologies and products are used for both military and civil purposes,” Deutsche Bank analysts Zhiwei Zhang and Yi Xiong wrote in a note. “In an economic cold war, even if the controls are not imposed on certain products at the current stage, companies will likely feel the potential risk if the tension escalates between China and the U.S. down the road.”

High-end technology has taken center stage in a burgeoning U.S.-China trade war, as President Donald Trump pushes Beijing to drop plans to dominate leading-edge industries like electric vehicles, robotics and artificial intelligence. Trump plans to hold a high-stakes meeting with Chinese President Xi Jinping at the Group of 20 summit in Argentina at the end of the month.

The analysts said they put the chances of a trade deal between the world’s biggest economies at 40 percent—down from 50 percent previously—after neither side showed any sign of backing down at last weekend’s Asia-Pacific Economic Cooperation summit, which ended without a joint statement for the first time in its 25-year history. Twists and turns in the trade conflict have been whipsawing markets for much of the year.

Under the proposed curbs, Apple Inc., Alphabet Inc.’s Google, IBM, Amazon.com Inc. and similar companies could see limits placed on the way they export the technology behind voice-activated smartphones, self-driving cars and fast supercomputers to China, the Washington Post reported. The newspaper said spokespeople for the companies, as well as the Commerce Department, either declined to comment or didn’t respond to requests for comment.

The proposal also raises the prospect of retaliation from China, where the anti-monopoly regulator is already investigating Samsung Electronics Co., SK Hynix Inc. and Micron Technology Inc. Progress has been made in that probe, a Chinese official said late last week.

Other comments from Deutsche Bank:

  • “U.S. technology companies will likely be constrained to do business in China, while companies in other advanced economies will likely have better opportunities to fill the vacuum in China. China may face difficulty competing with global players on new technologies.”
  • “These controls will also likely affect supply chains in China negatively. Products in the above fields may be manufactured by a global supply chain with assembly plants in China. The controls will impose legal risk on such production.”

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