The News
US officials announced expanded curbs to China’s access to cutting-edge semiconductors, a last gasp in the Biden administration’s years-long efforts to counter Beijing’s tech progress.
Washington restricted exports to 140 China-based companies, limited sales of particular kinds of semiconductor, and imposed stricter rules on the transfer of chipmaking tools ahead of President-elect Donald Trump’s return to the White House. Trump has promised to introduce even more restrictions, including levies of up to 60% on all Chinese products.
SIGNALS
Washington’s curbs have only partially hindered China
Washington’s success in curbing Beijing’s technological ascent, particularly in artificial intelligence, has been uneven, the most-watched US analyst on the subject noted in a recent paper: China prioritized indigenizing its semiconductor industry long before the US turned up the heat and is making advances, especially in chipmaking equipment. At the same time, the controls have succeeded in hindering Chinese firms somewhat, particularly in the manufacturing and designing of key parts for smartphones. For now, China still needs to import its most powerful chips, sourcing less than 15% of its chips domestically, The Economist reported.
China is already preparing retaliation, which could hurt US businesses
China is already readying its retaliation to Trump’s promised tariffs, with options including restricting the export of key minerals, targeting US companies, and courting some of the US’ traditional allies, Bloomberg reported. American businesses, in particular, could be in for a bumpy ride if China enforces retaliatory measures, CNBC noted citing a US-China Business Council report, which estimated more than 800,000 jobs could be lost by 2025. “The worst part is the consumer brands that are not of a strategic nature ... and would not be subject to export restrictions might be punished by the local consumer because of their nationality,” the president of the American Chamber of Commerce in China told the outlet.
Trump tariff approach likely to be a ‘probing exercise,’ not an assault
While many on Wall Street hope Trump’s rhetoric is merely a negotiation tactic, the President-elect will likely follow through with his plans, but his approach will be more akin to a “probing exercise” than “a full-scale assault,” a former IMF adviser wrote for the Atlantic Council think tank. A lot has changed since Trump’s first term, when he launched his tariff offensive: Some of the world’s largest economies aren’t growing like they used to; countries have had time to adapt to Trump’s hawkish stance; and the spectrum of high inflation is looming in the US. Trump, who is “highly sensitive to market signals,” will have to adjust tariffs if they impact prices and inflation significantly.