Is it ever a quiet week at the White House? After Donald Trump fired H.R. McMaster as national security advisor, replacing him with Bush Jr-era hawk John Boston, the President launched his first salvo in a trade war with China, that has been long coming.
A memorandum signed by Trump will target $60 billion in Chinese goods in tariffs, which are a response to intellectual property violations he first complained of long before winning the 2016 presidential election. The move, which comes into effect in 30 days, mostly targets technology, and runs to around 1,300 items.
Trump himself has attempted to downplay the list, which many view as an attempt to appease nationalist voters and elements within his own administration. He sees China as a “friend,” he said when announcing the tariffs. Vice president Mike Pence added, however, that the “era of surrender is over.”
China has hit back. “We will retaliate,” Chinese ambassador to the US Cui Tiankai said via Facebook. “If people want to play tough, we will play tough with them and see who will last longer.”
The tariffs could have a massive effect on the tech sector. China is undoubtedly catching up with Silicon Valley’s innovation. President Xi Jinping, who was recently approved to become leader for life, has targeted a world-beating technology sector by 2049. Almost 40% of unicorn companies are now from China. Though China’s tech industry represents just 32% of the Valley’s output, its rapid rise suggests that parity is not far away.
American companies are hugely dependent on their Chinese counterparts to build parts like circuit boards and chips: little wonder the Internet Association, an influential tech lobby, has told Wired its members, which comprise almost all of the country’s biggest tech firms, will be furiously lobbying to ensure they are not caught in the crosswinds of a political storm.
Chinese industrial espionage is a huge problem. IP theft at large costs the American economy between $300m and $600 each year. Loudly heading into a trade war could be disastrous – especially at a time when most experts agree the US and China should cooperate, not clash, on tech.
Don’t expect those platitudes to reach the President, however. If they do, he’ll likely fire the messenger.