Trump Dangerously Escalates Trade/Tech War on Huawei as U.S. Recession Deepens
May 21 — Last Friday Trump launched his strongest attack yet against China’s tech industry, as his Commerce Department declared that non-U.S. companies using U.S. technology to supply Huawei must get a license for that technology to do so.
The U.S. attack is aimed at controlling the supply from Taiwan’s TSMC of advanced semiconductor custom chips that Huawei designs for its network equipment and smartphones, which Huawei is the number one and two producer, respectively, in the world.
Huawei is TSMC’s second largest customer, after Apple. TSMC is the leading-edge semiconductor foundry in the world. It uses equipment and software from several U.S. companies, which is the basis of the Commerce Department order. According to NAR, TSMC has stopped taking new orders from Huawei.
Trump is still trying to weigh his trade deal with Xi against the continued push by the hawks in his administration and in the media, both right and left, to completely de-couple from China under the guise of the Covid-19 Crisis, so perhaps cooler heads might still prevail on the Commerce Department order, there may be loopholes and workarounds. [Update: here and here.]
In justifying their order against Huawei, Trump officials trotted out their same but still unsubstantiated claim from a year ago that its lead in 5G poses a threat to U.S. national security, which some U.S. allies did not buy into back then, when the U.S. first attacked Huawei with bans on technology such as Android software.
Huawei has been stocking up on key semiconductors since then, but China, unlike Japan, S Korea and Taiwan when they moved up the industrial value chains decades ago, has yet to successfully address its glaring strategic vulnerability on most advanced wafer fabs after many years of trying. Global Foundries recently shut down its China wafer fab according to SCMP.
Presumably Trump now believes that his relentless China-bashing on Covid-19, which he has dragged the WHO into, and the Dems’ acquiescence in it, has made the U.S. political environment more conducive to such unsubstantiated fear-mongering about Huawei. Pompeo has also made unproven allegations about the coronavirus coming from a Wuhan lab, see my May 6 article.
Also last Friday, TSMC announced, under U.S. pressure, that it would build a $12 billion wafer fab in Arizona, ostensibly to better ensure the supply chain of chips critical to national security. The fab will be smaller than TSMC’s main ones in Taiwan, and a step behind in process technology when completed.
The new fab will employ 1,600. Since mid-March about 38,600,000 Americans have filed for unemployment. Of course Trump’s attacks on China have never mainly been about bringing jobs back to the U.S., manufacturing employment declined in key key midwest swing states last year during his trade/tech war against China.
Rather it is about trying to hold back China’s technology development on the grounds that it is a threat to U.S. national security and hegemony. Control of advanced semiconductors is as critical to modern economies as the control of oil, which China imports from the Middle East through the S China Sea, where the U.S. Navy and China are also at odds.
One of the major effects of Trump’s attacks on Huawei and U.S. China bashing has been to increase China’s resolve to develop its own indigenous technology. Another has been to strengthen China popular support for Xi and also the hand of hard-liners in China.
Trump is risking losing the goodwill toward the U.S. of the majority of 1.4 billion Chinese, many of whom have studied in America, “the beautiful country,” built up over the past forty years of China’s “reform and opening up.” That would be a HUGE long-term negative for the American people for Trump’s dubious short-term political gain.
China hasn’t forgotten that Huawei’s CFO, its founder’s daughter, has been under house arrest the past eighteen months in Canada awaiting extradition to America for allegedly violating a U.S. ban on dealing with Iran.
U.S. Has Now Dragged TSMC and Taiwan Into Its Trade/Tech War Against China
It is also very unfortunate that the U.S. has now chosen to involve Taiwan and TSMC in its trade/tech war against China. It has done so knowing that Taiwan is THE hot button issue for China’s ruling CCP (China Communist Party).
The U.S. chose to make an issue of Taiwan being included in the World Health Assembly of the WHO on Monday, which China’s Xi addressed, once again filling the void left by Trump. Pompeo also congratulated Taiwan’s just re-elected President, the first U.S. Secretary of State to do so, which the CCP considered a deliberate provocation just ahead of its National People’s Congress tomorrow.
The U.S. dragging TSMC and Taiwan into its trade/tech war against China is somewhat similar to what happened last year with the Hong Kong protests. In both cases, cynical American politicians, in both parties, egged on by U.S. China hawks, exploited, for their own political agenda, democratic desires in HK and now Taiwan.
Despite knowing that the CCP would never budge an inch on internal issues of its national sovereignty, thus damaging the lives and families of many idealistic HK protesting youth, which I wrote about last year, and strengthening China hard-liners. (China has just proposed a new HK security law, according to the NYT, I will write follow-up article.)
This isn’t to say that China isn’t an authoritarian state with some serious issues, or that Carrie Lam didn’t egregiously mismanage HK last year. It is to say that the U.S. should focus on its own extremely deep flaws, as I have been saying throughout Trump’s trade/tech war, rather than trying to meddle with China.
China Will Get No Respite from Biden/Dems on Trade/Tech War
If anything, Biden and the Dems are trying to outflank Trump to the right on China. This was made crystal clear in a May 19 NYT op-ed by Susan Rice titled “Trump Is Playing the China Card. Who Believes Him? He attacks Joe Biden to deflect blame for his terrible handling of Covid-19 and record of appeasing Beijing.” “Appeasing.”
Rice served for the full eight years in both the Clinton and Obama administrations, in the latter the first four as U.N. Ambassador, the last four as National Security Advisor.
Her op-ed shows what China can expect from Biden, with Obama/Clinton support, who has also released ads attacking Trump on China from the right. As did the Dems’ over three years of Russia- and Ukraine-gate with respect to peace with Russia, incessantly egged on by the liberal media.
Because of their hypocritical “free market” ideology, U.S. elites must try to tie technology development to so-called “national security” issues, i.e. policing the world militarily, including East Asia, where governments can openly promote indigenous technology for their peaceful economic development, as was the case in Japan, S Korea and Taiwan, long before China followed.
“It’s Time to Build” “Sputnik Moment” in the U.S.?
But building up the U.S. economic and other systems, like healthcare, is a secondary concern of Trump’s trade/tech war, as was also clear throughout Trump’s dysfunctional response to the Covid-19 Crisis. This includes all the Trump and media talk about re-shoring of supply chains, see this May 16 Bloomberg op-ed for a more balanced view.
Key midwest swing states, because of Trump’s pathetic Covid-19 response, are now suffering perhaps 20% unemployment due to lockdowns. Trump’s Commerce Secretary, Wilbur Ross, attacking Huawei is an 82 year-old former private equity asset/pension stripper in the “rust belt.”
As usual, the super-wealthy have mainly benefited as the U.S. stock market has exploded upward after the “free market” Fed once again began buying up an enormous amount of financial assets.
Recently Marc Andreessen, a venture capitalist famous for writing nine years ago that “software is eating the world,” has now written that “it’s time to build,” as Intel’s Andy Grove said years ago. But to build all the stuff he mentions, including nuclear power plants, will take a HUGE political/economic change, not Biden, nor Bitcoin fantasies.
As I wrote on April 27, Trump’s trade/tech war and Covid-19 China bashing has provided it with a “Sputnik moment.” Maybe Andreessen’s blog post will mark the beginning of a much-needed one in the U.S., including a shift away from the “asset light” business models pushed by private equity, hedge and venture capital funds since the 1980s, which helped de-industrialize America that he now laments, I hope so, but doubt it.
The U.S. now has 95,112 Covid-19 deaths in a population of 328.2 million. Taiwan has 7, total, with 23.7 million living a mere 112 miles from mainland China. Maybe Trump, and the Dems, should leave China and Taiwan alone, and focus on fixing America. Or even better yet, cooperate with China and Europe on fighting Covid-19, including developing a vaccine, which Xi pledged to make a “global public good” on Monday, see my April 30 article.
I hope so, but doubt it.
Make America and World Awesome, MAWA
Best,
John Furlan
Photo credit: Nikkei Asian Review
