Democrats and Republicans are freaked out by Chinese 5G technology — but are they just being paranoid?

Democrats and Republicans are freaked out by Chinese 5G technology — but are they just being paranoid?

Democrats and Republicans rarely agree on anything, but this week, the parties united to condemn one common enemy: China.

The views of President Trump and lawmakers on both sides of the aisle aligned when they determined that allowing the Chinese company Huawei to build a global 5G network constitutes a security threat to the U.S. 

That might not be the whole story, though: Dashing Huawei’s 5G ambitions would give the U.S. an economic advantage, and allies don’t agree with the  threat level of a potential Huawei-run 5G network. However, experts say that fear about the control the Chinese government might exercise over a Huawei 5G network is genuine, and warranted.

On Wednesday, President Trump issued an Executive Order in which he declared a national emergency to safeguard U.S. information and technology networks from “foreign adversaries.”  

Trump did not specifically name China in his order. But his actual nonstop tweets about China show that his order is basically a subtweet of the country and Huawei; where the order gives his agencies the broad authority to cancel transactions with and write policies against “persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary,” everyone knew who it was really talking about. 

The U.S. Department of Commerce compounded that not-so-oblique reference when it placed Huawei on its “Entity List” shortly after the announcement, meaning that any U.S. company needs government approval to do business with Huawei.

I want 5G, and even 6G, technology in the United States as soon as possible. It is far more powerful, faster, and smarter than the current standard. American companies must step up their efforts, or get left behind. There is no reason that we should be lagging behind on………

— Donald J. Trump (@realDonaldTrump) February 21, 2019

….something that is so obviously the future. I want the United States to win through competition, not by blocking out currently more advanced technologies. We must always be the leader in everything we do, especially when it comes to the very exciting world of technology!

— Donald J. Trump (@realDonaldTrump) February 21, 2019

Just one day earlier, the Senate Judiciary Committee held a hearing to gain understanding about the risks that allowing Huawei to build 5G infrastructure posed to U.S. security. The general idea is that, because Huawei is a Chinese company, it is compelled to follow the orders of the authoritarian Chinese government, which could include espionage or even cyber warfare. 

As Democratic senators like Dianne Feinstein solemnly endorsed this alleged threat alongside her Republican colleagues, Chairman Lindsey Graham blurted out, “I haven’t seen bipartisanship like this in a long time.”

Apparently, if there’s one thing that can unite the U.S. government, it’s alarm about China.

Great hearing in @senjudiciary today about the threats we face from Chinese dominance of the worldwide 5G network which presents economic and national security concerns.

Amazing bipartisanship on the issue. https://t.co/i2Tu79qATb

— Lindsey Graham (@LindseyGrahamSC) May 14, 2019

Huawei & ZTE pose a clear & alarming threat to our national security & the development of 5G, & should be banned. We now have to draw a line: foreign adversaries must be blocked from any involvement with our critical infrastructure & communications networks.

— Richard Blumenthal (@SenBlumenthal) May 16, 2019

The experts brought before Congress strongly argued that if Huawei was allowed to build 5G infrastructure, it would afford the Chinese government a backdoor into U.S. communications, and everything else that will be run on the 5G network, such as Internet of Things objects like autonomous vehicles. 

“With all the critical services relying on 5G networks, the stakes for safeguarding them could not be higher,” Christopher Krebs, director of cybersecurity and infrastructure security agency at the Department of Homeland Security (DHS), said while giving testimony. “This moves from a data confidentiality issue to a life safety issue.”

With all the head-nodding going on in the halls of Congress, and a full blown national emergency order coming from the White House, it would seem that the danger posed by a Chinese company building 5G infrastructure is clear cut. But that’s actually not the case around the world.

“There is significant bipartisan alarm,” Sen. Richard Blumenthal (D-CT) said. “Why do our partners around the world seem less alarmed than we are?”

The UK has already contracted with Huawei to build some communications infrastructure, and the E.U. has not ruled it out. Other countries in Africa and the Middle East also have talks in the works for Huawei to build out 5G. 

Hey DC Twitter friends, I agree that Huawei is a major concern, but let’s talk less about them and more about what the U.S. can and should be doing to increase our own competitiveness in 5G, especially increasing support for research and development pic.twitter.com/26rgRrncqN

— Elsa B. Kania (@EBKania) May 16, 2019

These countries see Huawei as a leader in 5G tech, and think the economic and technological advantages that contracting with Huawei provides outweighs potential risks. 

“We are having a significant disagreement with some of our allies,” Sen. Chris Coons (D-DE) pointed out.

So, what gives? How do Senate Democrats and President Trump manage to see eye to eye on this issue, while some of our closest allies deliver a proverbial shrug to concerns that the Chinese government could use 5G infrastructure to watch, control, manipulate, and wage war against us all?

“The U.S. government has not, at least publicly, pointed to a smoking gun,” Peter Harrell, an adjunct senior fellow in the energy economics and security program at the Center for a New American Security (CNAS), told Mashable. “The technology has vulnerabilities, and Huawei is obliged to cooperate with the Chinese government. So there is strong circumstantial evidence of this, but no smoking gun.”

Harrell also explained that foreign countries have a strong financial interest in building out 5G, and building it fast — and, right now, that means working with Huawei. Huawei is offering governments existing technology at what many authorities consider good prices. So theoretical security concerns aren’t weighing as strongly in their minds.

“It’s not just a cost issue, it’s a pace of deployment issue,” Harrell said.

In the U.S., the big four telecoms companies have agreed to not buy 5G infrastructure from Huawei; they will be working with companies like Samsung and Nokia instead. The experts argued that these arrangements will make the U.S. a leader in 5G deployment by 2025, but allies are being lured by Huawei’s financial incentives. 

The U.S. has taken other action in the past against Huawei, and China by proxy, when it forbade the government to get Huawei-supplied technology, and when it pursued Intellectual Property theft charges against Huawei’s CFO.

It’s hard not to see these actions against Huawei as an extension of the Trump Administration’s larger battle with China over trade, and, ultimately, technological power. Trump and China continue to argue about tariffs. Some have reported that the U.S.’s aggressive trade stance toward China is an effort to weaken their ambitions to become a manufacturing — not just assembly — hub, which could compromise the U.S.’s economic standing. 

Given these U.S. ambitions, and European allies’ difference in opinion on Huawei’s security risks, is there something more to the U.S.’s alarm about Huawei building the 5G internet?

The jury is not entirely out, but many experts do think that China’s authoritarian government constitutes a real threat with regard to awarding Huawei with 5G contracts.

“I think there are genuine security concerns that are out there, and have been out there,” Harrell said. “They’re coming to a head now because of the 5G issue. And I think that these concerns have been simmering for a while.”

According to Harrell, the U.S. has been raising questions and taking action about the security risks of contracting with Huawei for the last decade — well before Trump got in office, and pursued his ambition to stymie China’s technological manufacturing hopes. Harrell acknowledged that there is, of course, an economic upside for the U.S. to preventing a Chinese company’s dominance in 5G, but that he did not think this was the driving force behind the security concerns.

“Clearly, if we are able to lead in the 5G race, we have the potential to gain economically from this as well,” Harrell said. “I think that’s indisputably true. But I don’t think the fact that the U.S. also wants the economic advantages means the security risks are not real.”

Huawei is fighting the perspective that it will be nothing more than a tool of the Chinese government. It issued a statement after the DOC placed it on the entities list, arguing against the categorization.

“This decision is in no one’s interest. It will do significant economic harm to the American companies with which Huawei does business, affect tens of thousands of American jobs, and disrupt the current collaboration and mutual trust that exist on the global supply chain.

Huawei will seek remedies immediately and find a resolution to this matter. We will also proactively endeavor to mitigate the impacts of this incident.”

Sorry, Huawei. For an issue that strengthens national security while delivering an economic upside, the strange bedfellows of elected officials uniting on this issue aren’t likely to back down.

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Macy’s CEO warns that the trade war could force the department store to raise prices (M)

Macy’s CEO warns that the trade war could force the department store to raise prices (M)

shopping bags macy's shoppers

Macy’s is bracing itself for a wave of new tariffs.

AP/Bebeto Matthews

  • Macy’s CEO Jeff Gennette said in an earnings call on Wednesday that proposed new tariffs would have a significant impact on the company.
  • “It is hard to do the math to find the path that gets you to a place that doesn’t have a customer impact,” he said, without commenting on exactly what this would mean in terms of price increases.
  • The US-China trade war reached new levels this week. Retailers are now bracing themselves for the prospect of yet more tariffs on $300 billion worth of Chinese goods.
  • Visit Business Insider’s homepage for more stories.

Macy’s is bracing itself for a fresh wave of tariffs.

In a call with analysts on Wednesday, Macy’s CEO Jeff Gennette addressed the ongoing US-China trade war, which reached new levels this week, and whether it would have a meaningful impact on the department store’s business.

Gennette said that tariffs imposed on Chinese imports during 2018 did not have a meaningful impact on the company. However, new tariffs announced this month on $200 billion worth of Chinese imports likely would have an impact, specifically on Macy’s furniture business.

Read more: Experts say these retailers could be worst hit by the trade war with China

Gennette said Macy’s is now bracing itself for another wave of proposed tariffs that would impact $300 billion worth of goods imported from China. Should these be put into action, Macy’s is unlikely to find a way to absorb costs without raising prices.

“It is hard to do the math to find the path that gets you to a place that doesn’t have a customer impact,” he said.

Gennette said he is still hopeful that talks between the US and China will be productive.

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Google’s problems in China are bigger than Huawei – CNET

Google’s problems in China are bigger than Huawei – CNET

google-hq-sede-mountain-view.jpg

Google has long had a complicated relationship with China.


Getty

Google’s troubles in China now include Huawei.

For years, the tech giant has been dogged by its relationship with the world’s biggest country. In 2010, Google pulled out of the search market in China after co-founder Sergey Brin cited the government’s “totalitarian” policies, including censorship of the web.

Since then, Google has tried to tiptoe back into the huge and appealing market, only to draw the ire of lawmakers and human rights advocates. Dragonfly, a censored search product for China, and an AI lab in Beijing have been particularly controversial.

Now Google has to deal with another issue in the country. On May 15, the Trump administration upended the tech world by effectively banning Huawei from doing business with US companies. A host of tech giants — Qualcomm, Broadcom and Intel — reacted quickly, reportedly cutting off business with the world’s second-largest smartphone maker. Microsoft removed Huawei’s MateBook X Pro laptop from its online store, an apparent reaction to the ban.

Google, too, reacted swiftly, saying that it would stop providing Huawei with technical support and that upcoming versions of Huawei’s phones outside China would no longer get access to Google’s Play Store app marketplace and its marquee slate of services, including YouTube and Gmail. The move was temporarily reversed on Tuesday after the US said it would issue a 90-day license for US mobile companies to figure out long-term solutions.






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The ban highlights Google’s unusual position. Unlike other tech companies, such as iPhone maker Apple, Google’s biggest product isn’t available in China. Losing its relationship with Huawei will only make it more difficult for the search giant to eventually enter the lucrative market.

“They are walking more of a political tightrope than the other players are,” said Bob O’Donnell, president of Technalysis Research. “Google’s biggest money maker — search — isn’t there.”

Google declined to comment.

ReadSamsung has the most to gain from Google putting Huawei on ice

The search giant, of course, isn’t the only tech company blocked in China. Facebook’s service is blocked in China though it has advertisers in the country. Twitter can’t be accessed in China. (You can check whether a website is available in China with the Blocked in China tool.)

Still, few tech companies are as obviously eager to be part of the market as Google, said O’Donnell. Dragonfly, the censored search product, would reportedly blacklist search terms disapproved of by the Chinese government, such as “student protest” and “Nobel Prize.” It also may have tied searches to people’s phone numbers.

Human rights advocates protested when news of Dragonfly broke last year. Google called work on the project “exploratory” and said it had “no plans” to launch a search service in China. When Google CEO Sundar Pichai was dragged in front of Congress last December, Dragonfly was a key topic in the grilling.

Google has also been criticized for its artificial intelligence lab in Beijing, which opened in 2017. In March, Gen. Joseph Dunford, chairman of the Joint Chiefs of Staff, said the search giant’s work in the country is “indirectly benefiting the Chinese military.” Pichai ended up meeting with both Dunford and President Donald Trump that month to discuss Google’s relationship with China.

Now the search giant’s relationship with Huawei is another source of friction in its overall relations with China. None of those sources of tension is likely to ease anytime soon.

“Google,” says Technalysis’ O’Donnell, “is in a particularly tough spot.”


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China starts working on its own blacklist in response to the Huawei ban

China starts working on its own blacklist in response to the Huawei ban

What you need to know

  • China is planning on blacklisting foreign companies that have been deemed “unreliable.”
  • It could include companies from the U.S. as well as Japan or Britain.
  • China could also restrict rare earth exports to the U.S. in the future.

Tensions are rising in the trade war as China threatens to create its own blacklist. The list would contain foreign companies or organizations which China has deemed unreliable.

China will set up a mechanism listing foreign enterprises, organizations and individuals that don’t obey market rules, violate contracts and block, cut off supply for non-commercial reasons or severely damage the legitimate interests of Chinese companies.

It is clear this is a direct response to the recent U.S. ban on Huawei which has caused many U.S. and foreign companies to cut ties with the Chinese mobile giant. The ban has resulted in Huawei losing direct access to Android, as well as access to patents from ARM that are used to make its Kirin processor.

While Huawei has its own operating system in the works set to launch in China in late 2019, getting around the hardware regulations will be a tougher cookie to crack.

As the trade war continues to heat up between the two countries, it was only a matter of time before China found a way to retaliate.

It’s expected that China will not only target U.S. companies but also other foreign companies who have been dragged into this dispute. For example, Japanese companies Toshiba and Panasonic or Britain’s ARM who have both been forced to shun Huawei after the U.S. ban was handed down.

A Ministry of Commerce spokesman for China, Gao Feng said that China is setting up the list:

to protect international economic and trade rules and the multilateral trading system, to oppose unilateralism and trade protectionism, and to safeguard China’s national security, social and public interests

Another measure China has considered is restricting exports of rare earth minerals to the U.S. That’s a big deal because these minerals are used in high-tech electronics, automobiles, and even for defense. The minerals aren’t called rare for nothing, and China is the largest supplier with around 35% of the world’s reserves and responsible for 70% of the mining done in 2018.

Trump has said in the past that Huawei could be part of a trade deal between the two countries. However, until the U.S. and China can come to a trade agreement, the two will continue to battle it out with tariffs and blacklisting companies. The U.S. still has the potential to add new companies to the entities list such as Zhejiang Dahua Technology Co. and Hangzhou Hikvision Digital Technology Co.

Chinese President Xi Jinping and Trump will next meet at the G-20 Summit at the end of June. Whether or not this next meeting leads to a trade deal is still up in the air, with Trump saying he’s in no hurry to make a deal.

Losing Google support would irreparably damage Huawei’s global smartphone business

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Factbox: Winners and losers in Trump’s trade war with China

Factbox: Winners and losers in Trump’s trade war with China

(Reuters) – U.S. companies in everything from computer chips to tractors have said President Donald Trump’s trade wars, including disputes with Beijing and global steel tariffs, have had an impact on them.

FILE PHOTO: A general view of Hongkong International Terminals (HIT), owned by Hutchison Port Holdings, as part of the Kwai Tsing Container Terminals for transporting shipping containers in Hong Kong, China July 25, 2018. REUTERS/Bobby Yip/File Photo

Even for some of the expected winners, such as steel companies, the benefits of the president’s tariffs are not entirely clear.

Trump said on Sunday he will raise tariffs on $200 billion worth of Chinese goods from 10 percent to 25 percent, ratcheting up pressure on Beijing to agree to a deal.

TECHNOLOGY

Apple Inc

Apple Inc cut its fiscal first quarter sales forecast, blaming slowing iPhone sales in China where uncertainty around U.S.-China trade relations has hurt the economy.

Late last month after Apple slashed prices, sales picked up and Apple cited the improved tone of the trade war for a stronger outlook.

Intel Corp

The chipmaker last month cut its revenue forecast for 2019, citing a slowdown in demand from China.

VEHICLES

Fiat Chrysler Automobiles NV forecast higher commodities costs, driven by tariffs, would cost 750 million euros for the year.

General Motors Co projected $1 billion extra costs this year for tariffs and raw materials. Steel and aluminum prices have eased, but prices for other commodities such as palladium have risen, it said.

Ford Motor Co Ford said that in 2018 it incurred “headwinds” of about $750 million in tariff-related effects. Lower sales volume and increased commodity costs including tariff-related effects added $500 million to first-quarter costs over the prior year.

Harley-Davidson

The motorcycle manufacturer said European Union and China tariff-related costs were $23.7 million in 2018 and are expected to range between $100 million and $120 million in 2019.

HEAVY EQUIPMENT

Caterpillar Inc

Caterpillar said tariffs would cost the company $250 million to $350 million in 2019 if there was no relief.

Deere & Co

The manufacturer said in February it expects U.S. tariffs on Chinese imports will cost $100 million in 2019.

AGRICULTURE

Archer Daniels Midland Co

The commodities trader’s adjusted operating profit slumped 30 percent in the fourth quarter to $183 million as the China trade war hit its sorghum and soybean origination business.

Bunge Ltd The company reported a $125 million mark-to-market loss in August on a position in soybeans that bet a China trade war would be averted. Bunge’s profits then plunged in the fourth quarter as a temporary truce with China caused soybean prices to fall and slashed the value of its Brazilian soybean inventory by $125 million.

Cargill Inc

Commodities trader Cargill said in March that U.S.-China trade tensions and other supply chain disruptions continued to drag on earnings in origination and processing, the company’s primary grain-trading unit.

STEEL

Nucor Corp

No.1 U.S. steel producer Nucor Corp posted record earnings and shipped a record amount of steel in 2018, benefiting from the tariffs.

But the company last month forecast first-quarter profit below Wall Street estimates, citing lower average selling prices of steel sheets and delay in shipments to customers in the construction sector.

The tariffs imposed by the Trump administration on steel imports, mainly from China, have increased domestic production, leading to a drop in steel prices.

JBS SA

Brazil’s JBS, the world’s largest meatpacker, has been able to boost meat exports to China as the tensions between the Washington and Beijing escalated. The company’s share of exports to China rose to more than 24 percent last year vs under 21 percent in 2016 and 2017.

Louis Dreyfus Company

The global agricultural commodity merchant said that trading opportunities created by the U.S.-Chinese trade dispute boosted its soybean business last year.

The company posted record soybean export volumes from Brazil , boosting profits 12 percent vs the previous year.

Reporting by Chris Prentice and Timothy Aeppel in New York, Ana Mano in Sao Paulo, Karl Plume and P.J. Huffstutter in Chicago, Ankit Ajmera and Arathy Nair in Bengaluru, Joe White in Detroit and Stephen Nellis in San Francisco; Editing by Cynthia Osterman

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China Signals It Is Willing to Return to Trade Talks With U.S. – The Wall Street Journal

China Signals It Is Willing to Return to Trade Talks With U.S. – The Wall Street Journal

BEIJING—After weeks of escalating trade tensions with the U.S., China modulated its rhetoric, suggesting negotiations remain a priority and laying out conditions for doing so.

A government policy paper on trade issues with the U.S. released Sunday accused Washington of scuttling the negotiations, which broke down in all but name last month. It said the Trump administration’s “America First” program and use of tariffs are harming the global economy and that China wouldn’t shy away from a trade war if need be.

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Acting Defense Chief Tries to Cool Hostilities with China as Trade War Heats Up – The New York Times

Acting Defense Chief Tries to Cool Hostilities with China as Trade War Heats Up – The New York Times

Asia Pacific|Acting Defense Chief Tries to Cool Hostilities With China as Trade War Heats Up

Image

Acting Defense Secretary Patrick Shanahan with his Chinese counterpart, Wei Fenghe, on Friday in Singapore.CreditCreditLolita Baldor/Associated Press

SINGAPORE — Acting Defense Secretary Patrick Shanahan sought to lower the temperature on the Trump administration’s stew of hostilities with China on Friday, saying it was imperative to look for ways for the two competing militaries to “create upside” in their relationship, even in the middle of a trade war.

Mr. Shanahan barely mentioned China by name during a speech to a gathering of Asian military officials on Saturday, although he warned Beijing that “behavior that erodes other nations’ sovereignty and sows distrust of China’s intentions” should stop, in a clear reference to China’s militarization of disputed islands in the South China Sea.

“The United States does not seek conflict, but we know that having the capability to win wars is the best way to deter them,” Mr. Shanahan said. At the same time of Mr. Shanahan’s speech, the Pentagon released a report criticizing what it characterized as China’s aggressive moves in the region.

In fact, the deep tensions between Washington and Beijing showed no signs of abating on Friday. China remained on track to impose retaliatory tariffs of 20 to 25 percent on a slew of American products starting Saturday. That move makes China a full combatant in the trade war launched by President Trump.

During a 20-minute meeting with his Chinese counterpart, Mr. Shanahan asked that the Chinese military work to enforce United Nations Security Council sanctions against North Korea. Mr. Shanahan’s spokesman, Col. Joe Buccino, said in a statement that the two men had “discussed ways to build military-to-military relations that reduce the risk of misunderstanding and miscalculation between our nations.”

Those are standard talking points for meetings between top officials who don’t have much to say to each other, and the Pentagon statement did not mention a list of contentious issues, including tariff increases, the fight over the Chinese technology giant Huawei, American weapons sales to Taiwan or China’s militarization of the South China Sea.

In Beijing, a former top Chinese official denounced what he called the administration’s “bullying and America first” policy. According to Reuters, Dai Xianglong, a former chief of the Chinese central bank, told a seminar in Beijing that President Xi Jinping of China and Mr. Trump would find it “difficult” to make much progress in the trade fight when they meet in a few weeks.

Ahead of his speech at the annual Shangri-La Dialogue in Singapore, and just before he met with China’s minister of defense, Wei Fenghe, Mr. Shanahan told reporters that he would call out bad behavior by China.

He complained — as American officials routinely do — that China’s installation of surface-to-air missiles and long runways for military aircraft on disputed islands in the South China Sea is “overkill.”

The Chinese defense minister will be making his own speech in Singapore on Sunday, so he gets to follow Mr. Shanahan. And he also was expected to complain about what China views as American expansionism on its doorstep.

After the meeting on Friday between Mr. Shanahan and Mr. Wei, American officials released a statement calling the session “constructive and productive.”

Mr. Shanahan, the statement said, “hopes to build on this evening’s discussion with future engagements.”

That’s the same thing Mr. Shanahan’s predecessor, Jim Mattis, said last October, when he met with Mr. Wei in the same room of the same Singapore hotel and posed for pictures with him in front of what looked to be the same potted plants. At that meeting, held on Oct. 18, 2018, Mr. Mattis even invited Mr. Wei to Washington for a visit.

But two months later, Mr. Mattis had resigned his post and now, five months after that, Mr. Wei was going through the same protocol with a new American defense secretary, albeit one who has not yet been confirmed.

Mr. Shanahan’s confirmation hearing is expected in June, but no date has yet been set. He may face an uphill battle given concerns over his lack of military experience and his deep ties to Boeing, where he worked for 30 years.

Kori N. Schake, a former national security aide to President George W. Bush and deputy director-general for the International Institute for Strategic Studies, noted that for the past two years, when Mr. Mattis attended the same conference in Singapore, his speeches were followed by skeptical questions from audience members, which include Asian defense ministers wanting to know whether he spoke for Mr. Trump when he talked about allies in the region and great power competition.

Mr. Shanahan wanted to use his speech Saturday, which was in essence his Asia debut, to convince Indo-Pacific allies that their interests lie with the United States, not China. Defense officials billed the address as yet another “new” strategy for the region, meant to show how much the United States is focusing on Asia now after 18 years of fighting in the Middle East and Afghanistan.

Whether the Asian allies will believe him is unclear. Ms. Schake noted the Trump administration’s recent decision to send an additional 900 American troops to the Middle East to combat what the administration is describing as a rising Iranian threat. That makes it hard, she said, for Asian allies to accept that the United States is really ready to shift its military priority to great power competition with China in Asia.

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As U.S.-China tensions escalate, the trade war has morphed into a deeper, harder conflict – Los Angeles Times

As U.S.-China tensions escalate, the trade war has morphed into a deeper, harder conflict – Los Angeles Times

What started out two years ago as an effort by President Trump to wring better terms from China on the nuts-and-bolts of foreign trade now threatens to become a far wider and more ominous confrontation.

The conflict continues to be framed as a “trade war” between the world’s two biggest economies — as Washington and Beijing pursue an escalating series of tariff hikes and other retaliatory measures.

Beneath the surface, a new tone has begun to emerge since trade talks broke down in early May and Trump ratcheted up tariffs on imported goods from China, an action met with retaliatory duties from Beijing. Officials on both sides of the Pacific have begun to portray the U.S.-China relationship in nationalistic and emotion-charged terms that suggest a much deeper conflict.

Recently, for example, a private group of American economists and trade experts with long-standing experience in China traveled to Beijing, expecting their usual technical give-and-take with Chinese government officials.

Instead, a member of the Chinese Politburo harangued them for almost an hour, describing the U.S.-China relationship as a “clash of civilizations” and boasting that China’s government-controlled system was far superior to the “Mediterranean culture” of the West, with its internal divisions and aggressive foreign policy.

By Alice Su

May 13, 2019 | 9:55 AM

On the U.S. side, a senior State Department official, during a forum last month in Washington, warned of a deepening confrontation with China that she cast in something close to racial terms.

In the Cold War with the Soviet Union, said Kiron Skinner, the State Department’s director of policy planning, Washington at least faced fellow Caucasians, whereas with Beijing, Washington faces a non-white culture.

“In China we have an economic competitor, we have an ideological competitor, one that really does seek a kind of global reach, that many of us didn’t expect a couple of decades ago,” Skinner said. “And I think it’s also striking that this is the first time that we will have a great-power competitor that is not Caucasian.”

On the trade issues themselves, the two sides may still be able to reach a truce, with the best chance coming with the economic summit of major nations at the end of June in Osaka, Japan. Trump and Chinese President Xi Jinping are scheduled to attend the meeting of G-20 leaders.

Nothing short of a deal struck directly by the two leaders is likely to avert new rounds of punches and counter-punches over economic and financial ties, analysts say.

But whether either leader is interested in a stand-down is unclear.

The conflict, however, now goes beyond just the escalation of tariffs. Attitudes have hardened in recent days after the Trump administration blacklisted the telecom firm Huawei, effectively blocking one of China’s most successful global companies from buying crucial components and software from U.S. firms. (Huawei later got a temporary reprieve on some of the Commerce Department restrictions.)

“All of that would sap most of the remaining interest the Chinese have in negotiating with the Trump administration on trade,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies. China, he added, will probably “hunker down and try to get by until either the second term of the Trump administration or the incoming new administration.”

The widening friction has not yet had a big impact on financial markets or the broader economy. But the domestic politics, for now, seem to favor conflict, not compromise.

At home Trump mostly gets cheers for going after an adversary many Americans believe is an unfair trading partner that has stolen valuable U.S. intellectual property in its rise to superpower status. The political risk for Trump from potential Democratic opponents in 2020 isn’t from hitting China too hard, but treading too softly or coming away with a weak deal.

In China, the party’s propaganda organ has dusted off old patriotic films of the Korean War — when the Chinese army pushed back American forces advancing northward — and Xi’s recent countryside tour conveyed a message of girding up for a new “Long March” to resist a foreign bully.

At this point, many experts on U.S.-China relations say, the best one might hope for is a temporary truce, and even that will be hard to come by if Trump keeps piling on the pressure.

By the time the G-20 summit starts on June 28, the U.S. Trade Representative will have wrapped up public hearings on a proposed new tranche of tariffs, meaning it could at any time slap taxes on the remaining $300 billion of imports from China, including many ordinary consumer goods. Earlier rounds have imposed hefty 25% duties on about $250 billion of Chinese products.

China’s retaliatory tariffs, at first dollar for dollar, have been more limited in recent rounds, for the simple reason that its imports of American merchandise, about $120 billion last year, are less than one-fourth of what it sends to the United States. China has added tariffs on about $110 billion of U.S. products.

Beijing could hit back in other ways, however. Already one in five U.S. firms operating in China say they face increased inspections and slower customs clearances, according to a recent survey by the American Chambers of Commerce in Shanghai and Beijing.

China has reportedly suspended purchases of billions of dollars of U.S. soybeans, and officials have begun to signal they could restrict supplies of so-called rare-earth elements that are important for manufacturing electric cars and other high-tech products.

China is the world’s dominant producer of rare earths.

Beijing also could spur boycotts of popular American products such as Apple iPhones or curtail tourism to the United States, which would be particularly painful for states such as California. And American universities already are fretting about a potential drop-off in full-tuition-paying Chinese students.

Then there’s Boeing, the single biggest American exporter to China. Sales to China last year accounted for more than 20% of the company’s commercial aircraft revenue.

Boeing has been embattled in recent weeks by the grounding of its 737 Max fleet after two fatal crashes. The company faces several governmental probes related to the jet even as it is working with federal authorities on software fixes in the hopes of resuming service soon.

Beijing could withhold its own certificate of air-worthiness, which would keep the 737 Max from flying in and through China, with almost certain spillover effects to other countries.

“It strikes me as a logical sort of retaliation … and obvious where China has at least potential for some leverage with what’s going on with Huawei,” said David Bachman, a specialist in U.S.-China relations at the University of Washington in Seattle.

If no progress takes place on trade at the G-20 summit and a new round of tariffs and counter-tariffs takes effect, the next escalation could come in mid-August. That’s when the Commerce Department’s 90-day reprieve for Huawei runs out and the Chinese start to find out how long and well Huawei can manage without key Android software updates from Google, as well as crucial chips and other hardware from American suppliers.

For those and other reasons, including rising risks to financial markets and potentially shifting political calculus, Damien Ma, a fellow at the Paulson Institute think tank in Chicago, still sees the possibility of a limited trade deal by fall. But even then, Ma said, there’ll be no agreement unless the two presidents get personally involved and talk with each other.

“At the end of the day, they’ll need to reset the tone a little bit and try to manage a de-escalation” of the trade war, he said.

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