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This is part of a broad and escalating war on Chinese tech.

If China decided to turn punitive it could really hammer the fortunes of certain big US companies.

It’s only been in the last kind of three to six months that we’ve seen a sea change in how Donald Trump has broadened out his criticisms of China.

The big news from the front line of the US-China tech war this month has been orders issued by President Trump to ban two Chinese apps, TikTok and WeChat, from being used in the United States. This might not sound like a big deal, but what we should realise is that these two apps are huge. TikTok and it’s Chinese equivalent, Douyin, were downloaded more times than Facebook last year. And WeChat is a super app that is an essential part of life for many of the 1.1bn users of it worldwide.

I’m pretty sure for a start that Donald Trump is not using WeChat to talk to his friends in Asia, and I’m pretty sure as well that he’s not posting videos of himself dancing on TikTok, so we can rule that out. I think what’s happened is that this is part of a broad and escalating war on Chinese tech that itself is part of a wider campaign by the Trump administration to clamp down on China on a whole range of things, from trade and the economy, to espionage. Now when it comes to TikTok, I mean, TikTok is also hugely popular in America, particularly with younger people who post, you know, songs, and dancing, and have fun with it. So to many people you might say, what is the threat from this app?

And when you ask that question the answer that always comes back is data. The US says that ultimately that data either is going back or could go back to the Communist party, and that the Chinese government could then use that in many different ways. So, for example, it could use that data to try and work out, you know, who is an American CIA operative in China.

I think the other thing to mention about WeChat, which is slightly different, is that one of the concerns there that the Trump administration has is that the Chinese government essentially monitors WeChat or uses it to spy on its own citizens. The US doesn’t like that as a standalone fact, but it’s also worried that any Americans who use WeChat to correspond with anyone are also having their communications intercepted by the Chinese government. So it’s… this is part of a campaign to kind of purge the international technological universe of Chinese technology and Chinese apps.

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Well, so far, China has been relatively restrained. It did last year threaten to put US companies on what it calls an unreliable entities list, but so far, it hasn’t put any companies on that list. However, there is a fear that if China decided to turn punitive it could really hammer the fortunes of certain big US companies. For example, Apple relies on China for its manufacturing base, and about one fifth of its global revenues come through the sale of iPhones and other products in China.

And there is also a question actually over whether or not Apple could get hit by this ban in the US on WeChat. That’s because the scope of this ban is not yet clear but some lawyers think that it could extend to China, and if that happened it could give Chinese consumers the very unenviable choice of either keeping their WeChat app or keeping their Apple iPhone. And given that WeChat is such an essential part of life, I mean, people do digital payments over it, they do wealth management over it, they buy their shopping, they do all kinds of daily things on their WeChat, that they may well decide to drop their iPhone under those circumstances, and that could really hit Apple hard.

The other industry in which US companies are very much dependent on China is semiconductors. And in fact, the five US chip companies, Nvidia, Texas Instruments, Qualcomm, Intel, and Broadcom all depend on China for between about one quarter and one half of their global sales. So if China targets them it could really hit them badly.

When it comes to Donald Trump himself, I think it’s probably a little bit of both. Certainly on the emotional side Donald Trump is very angry at China because of coronavirus. He blames the Chinese Communist party for letting the virus kind of spread, ripple out of China, and spread around the world. In terms of evidence, his national security team, they will say that there is evidence that China uses some of these apps to spy. Obviously journalists have been chasing these kinds of stories now for a long time, and Huawei, which is the big telecoms equipment maker, has been in the crosshairs of American foreign policy now for a while, but the US has never publicly put out any evidence showing that it spies on behalf of China.

And one of the problems America has had around the world is that many countries have said, you’re telling us to ban Huawei or you’re telling us to ban other apps, but you haven’t shown us the evidence to prove that there’s nefarious activity. There’s two possibilities here. It’s either that there is no evidence of something malign happening so far, but the American national security officials believe that the potential for that to happen is very strong. Another possibility is that the way the US has gained intelligence on some of the things that it says China is doing is so sensitive that they don’t want to reveal it.

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But at the moment, we just don’t know. So we’re being told to go on faith, to trust that the concerns are real. And I think given the way that China operates in Xinjiang, for example, where it’s using facial recognition technology, and on a whole slew of things to commit what many people say are human rights abuses, you can see why just the mention that these threats are possibly there would resonate with other governments around the world. But again, we just we just don’t know. So we haven’t seen anything publicly that would back up a lot of these claims.

If you think back to the first three years of Trump administration, Donald Trump was very tough on China when it came to trade. But over the first three years he was very reluctant to hit back against China on other things. For example, when China clamped down on democracy protests in Hong Kong, we know that Donald Trump said to Xi Jinping at the G20 in Osaka last year that basically Trump would not be critical because he didn’t want to derail trade talks. It’s only been in the last kind of three to six months that we’ve seen a sea change in how Donald Trump has broadened out his criticisms of China.

I think one of the big things that’s driving that, which we mentioned a little earlier, is Trump is really angry at China over coronavirus. Rightly or wrongly, he thinks the American economy was doing fantastically well until Covid-19 hit. Now the US, like many other countries, is really suffering. He blames China for that.

He’s clearly decided that China is going to be a boogeyman for the 2020 election, in a similar way that he bashed China back in 2016, and it worked for him. And so I think he’s decided that there’s no point now taking a soft approach on China. He has very little to gain. I think what you’re also… is happening at the same time is a lot of his national security hawks, who’ve been trying to push him and have been frustrated that he wasn’t going to do more over the last few years, they’ve now seen an opportunity to once again kind of rev up their actions, and get him on board, and push him to do certain things that he was resistant to do before. So I think, you know, WeChat and TikTok probably fall into that category.

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So I think we’re going to see a continued slew of actions against China over the next three months by Donald Trump. I think the incentive for him not to hit China has really dissipated, and the only question is, how far is he willing to go? I think the one red line for him is probably the American stock market. He likes to say that even though the economy is doing badly and more than 160,000 people have died from coronavirus here, the stock markets are almost at record levels. If he does something that triggers a response from China, which then causes the American stock markets to plummet, I think it would be a huge risk for him.

And what about Biden? If he wins is the complexion of US-China relations going to change?

Joe Biden is going to be – whether you agree with his policy or not – he’s going to be, I would say, less unpredictable than Donald Trump. He’s unlikely to be making policy by tweet. I suspect that there will be a more organised national security decision-making process, which will probably make it easier for the Chinese to deal with the US on one level.

On the other hand, it’s also clear that in Washington the kind of hawkish view towards China is not limited just to the Trump administration and his political appointees. All across Washington, on the spectrum of doves to hawks, pretty much everyone has shifted in a more hawkish direction. Capitol Hill at the moment is famous for gridlock and partisan fighting. Pretty much the only area where Democrats and Republicans agree is on the need for the US to take a tougher stance on China. So I think no matter what happens, even if Biden wins, you’re still going to see a tougher view towards China than you did at the end of the Obama administration.

And the question really is, just how far will Biden go, and what kind of relationships will he try to establish with the Chinese, and where are Biden’s red lines? And I think when Donald Trump and Joe Biden debate on the debate stage, they’re going to have three presidential debates, I imagine that China’s going to be one topic that there’s going to be a lot of questions about. So people will be watching very closely to see, you know, who is Joe Biden when it comes to China and how different will he be from Donald Trump.

Via Financial Times