The Coming Tech Cold War With China

The Coming Tech Cold War With China

Three and a half years into its first term, the administration of U.S. President Donald Trump has finally assembled a comprehensive strategy for technological competition with China. From cutting chains that supply Chinese tech giants to barring transactions with them to regulating the undersea cables on which telecommunications depend, the Trump administration’s measures have often been incomplete, improvisational, and even detrimental to some of the great strengths of the American innovation system. They have, however, set the outlines of U.S. technology policy toward China for the near future. That policy rests on restricting the flow of technology to China, restructuring global supply chains, and investing in emerging technologies at home. Even a new U.S. administration is unlikely to stray from these fundamentals.

Beijing’s counterstrategy, too, has crystallized. China is racing to develop semiconductors and other core technologies so as to reduce its vulnerability to supply chains that pass through the United States. In pursuit of that goal, its leaders are mobilizing tech companies, tightening links to the countries participating in China’s Belt and Road Initiative, and sustaining a campaign of cyber-industrial espionage.

The contours of the “tech cold war” have become clear, but who, if anyone, will benefit from this competition remains an open question. A bifurcated technology world will likely innovate more slowly, at least in the short term. It will also be expensive. A report from Deutsche Bank estimates the costs of the tech war at more than $3.5 trillion over the next five years. Still, leaders on both sides of the Pacific hope to fast-track technological development at home by making it a matter of national security.