Trump’s return could fuel US-China tech rivalry: Catherine Thorbecke

A renewed trade war between the US and China, spurred by President-elect Donald Trump's return, could escalate tensions, particularly in the tech sector. While Trump's policy shifts have kept allies and companies uncertain, his transactional approach may inadvertently support Beijing's self-sufficiency goals. China's focus on strategic tech industries and self-reliance, coupled with Trump's unpredictability, suggests a challenging environment ahead for US firms with exposure to China's market..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..The seventh BizNews Conference, BNC#7, is to be held in Hermanus from March 11 to 13, 2025. The 2025 BizNews Conference is designed to provide an excellent opportunity for members of the BizNews community to interact directly with the keynote speakers, old (and new) friends from previous BNC events – and to interact with members of the BizNews team. Register for BNC#7 here. .By Catherine Thorbecke .___STEADY_PAYWALL___.The US presidential election may be over, but the battle with China for high-tech supremacy is just heating up. And if past is prologue, President-elect Donald Trump will only strengthen Beijing's push for self-sufficiency..Trump's looming second trade war could also have major consequences for US technology companies with exposure to China, though these likely won't be even. Firms on both sides should brace for a bumpy next four years, but over the longer term it's likely that Trump's antagonism of allies, cozy relationship with Xi Jinping, and transactional approach could provide opportunities for Beijing's broader ambitions. .Trying to predict what Trump will actually do when he's back in the White House has proven an exercise in futility for global policymakers. He has a history of flip-flopping, especially on issues regarding China's tech sector..The last time, he abruptly tried to reverse penalties inflicted on Chinese telecom equipment maker ZTE Corp. for flouting sanctions. He said he was negotiating a larger trade deal to protect Chinese livelihoods because, in part, of his "personal relationship" with Xi. .Perhaps his most high-profile recent U-turn is on TikTok. During his first term, Trump signed an executive order to ban the app due to perceived risks over its Chinese parent company, ByteDance Ltd. While his original order didn't hold up in court, President Joe Biden earlier this year approved fresh legislation with bipartisan backing to force TikTok to divest from ByteDance or face a US ban..Read more: Trump administration could ignite commercial property growth and clear regulatory hurdles – Orbvest's Justin Clarke.But on the campaign trail, Trump promised Americans, half of whom use the app, that he would save TikTok. Without providing details as to how, he added that he had become "a big star" on the platform. When asked by Bloomberg News editor-in-chief, John Micklethwait, last month if he still viewed TikTok as a risk, he confirmed that he did. "Frankly, I think everything's a threat," he added. "But sometimes, you have to fight through these threats.".Trump's sudden and self-serving policy pivots sow uncertainty, which is bad for businesses that will be increasingly caught in the crosshairs. But the stakes are particularly high for the current tech rivalry, especially as America's head start is quickly fading, and it's not even clear that this is a priority for the incoming president..The trade war between Washington and Beijing that Trump had kicked off in his first term has morphed into a tech race more focused on choking China's progress. Biden kept many of his predecessor's restrictions and worked with allies on new ones, arguing from a national security perspective that doing so was critical to hinder innovations that could be used for the Communist Party's military applications. .But fresh research published last month by my colleagues reveals that despite years of tariffs, export controls and sanctions that Trump started, Xi has made steady headway in positioning China to dominate industries of the future. It's still behind the US in some areas, but has a clear lead in others, and is closing the gap fast. .Expansive tariffs of up to 60% that Trump has threatened would no doubt do damage to China's already-struggling economy. Many analysts are skeptical if they will actually come into fruition given their inevitable shock to businesses. But Beijing has spent the last six years preparing for further uncertainty by focusing on self-sufficiency, especially in strategic areas such as EVs and chipmaking. It has used industrial policy levers to support domestic giants like Huawei Technologies Co. that were clobbered by the US. .Read more: Frans Cronjé: The GNU, US Election, how SA can flourish with Trump's America.Beijing has also widened its arsenal to respond to future trade restrictions, including expanding its own export controls, which it could potentially wield in industries like batteries and minerals. And China is betting on Trump's disrespect toward allies being a benefit for key sectors such as semiconductors..Trump campaigned on the economy, and might not be so hawkish on Chinese innovation from a security standpoint, but he has surrounded himself with people who are. This means there will be less wiggle room for his dealmaking or political feasibility of loosening export controls. It will all force Beijing to focus inward, and could mean more consumer-facing firms find themselves as bargaining chips if China tries to exploit Trump's transactional negotiating. .Major US firms from Apple Inc. to Tesla Inc. have simultaneously found themselves relying on China for supply chains or revenue. This gives Beijing extra ammunition. During Trump's first term, Apple was spared from the most punishing tariffs because of CEO Tim Cook's direct appeals to Trump. In the years since, it has become increasingly dependent on suppliers there, and Beijing knows this. Tesla CEO Elon Musk, who threw his wealth and influence behind Trump's reelection campaign, may also urge him to show restraint on at least his own Chinese business interests. An editorial published by a Chinese state-backed news outlet urging cooperation mentioned Tesla's Shanghai factory, perhaps a not-so-veiled threat of what companies could be brought into future trade negotiations. .Ultimately, Trump's return to the White House and another trade war causes major headaches for companies on both sides. But it's worth remembering that the president-elect's past policies didn't stymie Beijing's high-tech ambitions. And while Trump is caught up with short-term and transactional wins, Xi has been laser-focused on coming out on top in the long run. .Read also:.Trump taps Musk, Ramaswamy to lead government efficiency overhaul🔒 'Trump bump' market honeymoon won't last much longer: Robert BurgessAre there any upsides to a second Trump presidency?: Ivo Vegter.© 2024 Bloomberg L.P.

Trump’s return could fuel US-China tech rivalry: Catherine Thorbecke

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