Date
25 June 2019
This trade and tech war is gradually turning into a race between the US R&D-driven industry chain and China’s manufacturing-led supply chain. Photo: AFP
This trade and tech war is gradually turning into a race between the US R&D-driven industry chain and China’s manufacturing-led supply chain. Photo: AFP

How US tech firms could suffer from trade war

It’s quite obvious that US President Donald Trump’s key objective in his trade war is to contain China – China’s tech sector, in particular.

By prohibiting American companies from selling patents, chips and software like the Android system to Chinese tech firms, Trump is trying to cripple Chinese manufacturers.

The ban will also apply to products or technologies provided by European or Japanese companies, if the ratio of US-derived content exceeds 25 percent by market value.

Trump’s move could paralyze China’s manufacturing chain for tech products and force manufacturers to move their factories to Southeast Asia and other regions.

Washington is concerned that China, already a global manufacturing hub, will one day become dominant in the making of tech products.

The manufacturing chain will naturally extend into research and development activities in the upstream, eating into US firms’ lunch.

China produces more than 3 million college science and engineering graduates every year. It’s understandable that Washington fears that it might lose the last chance to contain China if it does not take action now.

This trade and tech war is gradually turning into a race between the US R&D-driven industry chain and China’s manufacturing-led supply chain.

But the escalating trade war may encourage some companies in other nations to develop products that contain core American technology with the ratio of US-derived content just below 25 percent to get around the US ban and sell to the huge China market.

That way, the ban could backfire and trigger the R&D industry chain in the US to move to other nations. That’s the last thing Trump would want to see.

This article appeared in the Hong Kong Economic Journal on Jun 11

Translation by Julie Zhu

[Chinese version 中文版]

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RT/CG

Hong Kong Economic Journal columnist

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