Trump moves forward with plans to tighten U.S. high-tech exports

November 20, 2018 - The Trump administration pushed ahead with plans to tighten restrictions on technology exports, a measure that Deutsche Bank AG says would have a “profound and long lasting adverse impact” on relations between the U.S. and China.

A request for public comment, published Monday on the U.S. government’s Federal Register, asks if a list of new technologies that have national security applications—from artificial intelligence to microprocessors and robotics—should be subject to more stringent export-control rules.

The Trump administration has received backing from Congress in taking a harder line over protecting critical U.S. technology from foreign threats.

In August, President Donald Trump signed a law to strengthen a panel that reviews investments from abroad for national security risks, which was widely viewed as a way to curtail Chinese investment in the U.S. The export-control measures were contained in the same package of legislation, and Monday’s register notice starts a 30-day period for industry to weigh in before Trump makes a decision on what technologies will be covered.

The Treasury Department in October announced a list of technologies that would be subject to heightened scrutiny by Committee on Foreign Investment in the U.S. Monday’s announcement would broaden that group to include more advanced innovations and represents the beginning of the administration’s effort to define the technologies that will face tougher reviews for national security risks.

“Many technologies and products are used for both military and civil purposes,” Deutsche Bank analysts Zhiwei Zhang and Yi Xiong wrote in a note. “In an economic cold war, even if the controls are not imposed on certain products at the current stage, companies will likely feel the potential risk if the tension escalates between China and the U.S. down the road.”

High-end technology has taken center stage in a burgeoning U.S.-China trade war, as Trump pushes Beijing to drop plans to dominate leading-edge industries like electric vehicles, robotics and artificial intelligence. Trump plans discuss trade at a meeting with Chinese President Xi Jinping at the Group of 20 summit in Argentina, which starts Nov. 30.

The analysts said they put the chances of a trade deal between the world’s biggest economies at 40 percent—down from 50 percent previously—after neither side showed any sign of backing down at last weekend’s Asia-Pacific Economic Cooperation summit, which ended without a joint statement for the first time in its 25-year history. Twists and turns in the trade conflict have been whipsawing markets for much of the year.

Under the proposed curbs, Apple Inc., Alphabet Inc.’s Google, IBM, Inc. and similar companies could see limits placed on the way they export the technology behind voice-activated smartphones, self-driving cars and fast supercomputers to China, the Washington Post reported on Monday.

Other comments from Deutsche Bank:

“U.S. technology companies will likely be constrained to do business in China, while companies in other advanced economies will likely have better opportunities to fill the vacuum in China. China may face difficulty competing with global players on new technologies.”
“These controls will also likely affect supply chains in China negatively. Products in the above fields may be manufactured by a global supply chain with assembly plants in China. The controls will impose legal risk on such production.”

Source: American Journal of Transportation