The administration has provided some temporary exemptions to the blacklist, but it seems that Huawei will lose key hardware (ARM’s chip design) and software (from Google) that it relies on for its cellphones and associated technology. This move can be interpreted only as an attempt by the Trump administration to kill the company, already the world’s second-largest maker of smartphones.
The Chinese will see this as a turning point. If Washington can cut China off from American technology at will, China will be determined to build its own technological infrastructure, top to bottom. Huawei, anticipating this moment, has been developing its own operating system, which doesn’t rely on U.S. companies, and says it could be in place by year’s end. (Losing ARM would actually be a much more crippling loss for the Chinese company, making it extremely difficult for Huawei to produce its own chips.) Watching China’s technological prowess these days, it is easy to imagine the country rising to this challenge.
We might be moving toward a bipolar world in digital technology with two walled-off ecosystems: U.S. and Chinese. This division would erode the open world economy, the deep levels of interdependence and the cross-border investments and supply chains that characterize the global economy today. Before traveling down this road, the United States should ensure that it has the smartest strategy in place to deal with the real challenge from China.
First, the Trump administration should make clear the broad principles it is defending in punishing Huawei. It has so far been reluctant to outline the evidence, perhaps because it is classified. It must help the world understand that it is not simply blocking a successful foreign competitor but acting to preserve the security of networks and the privacy of individuals. The British government has concluded that it can use Huawei’s technology as long as certain safeguards are put in place. We need to understand why London is wrong and Washington is right.
Second, the United States should have built an international coalition to confront Beijing. From the start, I have supported the Trump administration’s tough stance on China. But I am still bewildered as to why it is going solo, rather than forging a broad alliance. Pulling out of the Trans-Pacific Partnership remains a foolish “own goal,” only hurting the United States and helping China. A senior European leader told me that President Trump has dismissed European offers to act together on trade.
Third, we should think through what this bipolar world would look like. China’s technology will be cheaper because of its lower labor costs, looser regulations and government assistance. Huawei is already dominant in the developing world. Many of those countries might well keep opting for the cheaper technology. In their view, whatever technology they choose comes with the risk that a government — China’s or America’s — will snoop on them.
Fourth, is it realistic to take on China through bans and blacklists? The world is so deeply interdependent. Is there a smarter way? A senior technology executive I spoke with suggested that the better response would be for the United States to become the world’s leader in encryption and countering cyberespionage. He suggested that a university such as MIT be tasked with using only Huawei products to build a system that is encrypted end to end, which would shield all data from the company. “It would be a tall challenge but definitely one America’s best engineers could solve,” he said.
Finally, isn’t the real answer to China’s extraordinary gains in technology to make the policy changes and investments that allow the United States to compete with Beijing? It is difficult to imagine that Washington would be able to shut down the economic rise and innovations of a dynamic country of 1.4 billion people that already boasts many of the globe’s top tech companies. Instead, we need our own Sputnik moment, focusing the country to outcompete China.
This technology strategy is far more consequential than trade talks. On trade, the Trump administration has many legitimate complaints about Chinese behavior. It is playing hardball with Beijing. But the end goal is to create more economic interdependence between the two countries. If there is a deal, China will buy more American goods, invest more in America and provide more market access to American companies.
A technology war would take us in a very different direction. It would lead not to a cold war but a cold peace, in a divided and less prosperous world.