The first takeaway is that the uncertainty facing companies doing business in or with China continues. Trump may or may not follow through on tariffs on $300 billion worth of goods from China. That means business people will have to make decisions about where to source and where to manufacture with major question marks hanging over their heads. I expect that to suppress some economic activity in both the United States and China, and in much of the world.
The second is that whatever trust that existed between the two governments is evaporating. Within the Trump Administration, we have seen major concerns about China being expressed at the Department of Justice and FBI, which have taken down major Chinese government-sanctioned hacking and espionage efforts, as I detail in my book, “The New Art of War; China’s Deep Strategy Inside the United States.” Military and intelligence players also are deeply alarmed by the pattern of Chinese behavior they are seeing, particularly China’s “cyber siege” of the U.S. Navy. And now the Department of Commerce has taken an important role in blocking and threatening to block Chinese access to American technologies. The fact that so many players in the U.S. government are involved means it will be extremely hard for Trump to back down and pretend that he has solved all the problems with some sort of face-saving agreement.
Third, there can be no negotiated end to the Chinese practices that are alarming U.S. leaders. The Chinese are not going to cut funding for their state-owned enterprises because they believe the state-run model has created wealth and developed a tremendous amount of technology, which it has. It’s like losing 30-0 in the fourth quarter of a football game and suddenly shouting at the opposing team, “Hey, you have to stop playing so well.” Nor can the Administration negotiate with the Chinese to stop their hacking and espionage inside the United States. We have left ourselves vulnerable.
Fourth, and last, it’s way past time for Americans to start a genuine debate about how to respond to China. So far, the vast majority of opinion leaders and politicians have believed that negotiations can work. But they can’t. That means we need to start adopting policies that harden all our IT targets. If we can’t control our information technology and communications systems, we cannot control our technological secrets. We need to devise technology policies that jump-start the technologies we have created, but ones that the Chinese have stolen and are developing faster than we are, because of their vast market and huge sums of government funding. We need to wake up and realize that we can’t control what the Chinese do. We can only control what happens inside the United States. That’s where we have to start.
