The Trade and Tech Wars Collide

As the U.S.-China trade war intensifies, both countries have moved to boost their homegrown tech sectors—AI, robotics, advanced chipsets, 5G, etc.—and blacklist the other’s.

Yesterday, President Trump signed an executive order barring U.S. companies from striking deals with foreign telcos the White House deems a security threat. No company in particular was mentioned, but the directive certainly has one in mind.

That’d be 5G first-mover Huawei, the world’s largest telecom equipment manufacturer and second largest smartphone maker.

• The White House fears Huawei’s low-cost, high-quality networking gear could leave backdoors open for China to spy on the U.S. or even stage cyberattacks.

If that was Washington's jab, here’s the left hook: The Commerce Department yesterday put Huawei and 70 affiliates on a trade blacklist, Reuters reports. That bans U.S. suppliers from selling parts to blacklisted parties without government approval.

Everyone’s feeling those geopoli-tech-cal vibes

Sinovation Ventures, a Chinese VC run by AI whisperer Kai-Fu Lee, has halted investing in the U.S., CNBC reports. Last week, I wrote about the same in reverse: U.S. VC funding has cooled in China.

Lee warned in November he would scale back investment in American startups if the U.S.-China relationship didn’t improve. Spoiler alert: it didn’t.

• Washington is getting increasingly nosy re: Chinese investment in American companies.
• Plus, why place bets outside of China when Beijing’s cultivating its own Silicon Valley?

Why this matters

Lee, armed with a Carnegie Mellon PhD and a résumé with stints atop Google China and Microsoft Research Asia, has insight on both sides of the Pacific. So when he says in his NYT bestseller (highly recommend) that China will emerge from its AI rivalry with the U.S. victorious, it carries weight. You can see why the U.S. is nervous.

Bottom line: When the two biggest economies lock horns, it’s on all fronts: geopolitics, espionage, economic competition, and tech stacks. This techno-protectionism will bring less equipment and investment from China...and shocks to global supply chains, more difficulty dealing with overseas markets, and consumers paying higher prices due to tariffs.