June 15, 2018

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Silicon Valley Blasts Trump’s Tech Tariffs

By
Steven Overly
Politico

(This article originally appeared in Politico on June 15, 2018)

President Donald Trump argued Friday that his steep tariffs on technology goods from China will help Silicon Valley, but the industry's leading trade groups said the sanctions will harm their bottom line.

"You know, we have the great brain power of Silicon Valley, and China and others steal those secrets and we're going to protect those secrets.  Those are crown jewels for this country," Trump said in an interview on "Fox & Friends."  "You read so much about China, you read so much about other countries, we have the great brain power right in this country."

The Trump administration is slapping a 25 percent tariff on $50 billion worth of Chinese imports.  The first round is slated to take effect July 6 and will primarily target products containing “industrially significant" technologies, such as aerospace, robotics and automobiles.

The tariffs are meant as a penalty for what many U.S officials see as China's history of intellectual property theft, including policies that require American tech firms to turn over proprietary information about their products — so-called forced technology transfers — when doing business there.

But U.S. tech companies have been pushing back for months on the notion that tariffs are the right solution to Trump's trade grievances.  They have a lot at stake: Many manufacture products in China because of the low labor costs, rely on Chinese-made components for their supply chains or see China and its burgeoning middle class as an attractive consumer market.

“By imposing tariffs on consumer goods and key components of such goods, the president would needlessly take money out of Americans’ pockets — harming the very people he hopes to help, not punishing China," said Dean Garfield, president of the Information Technology Industry Council, a trade group whose members include Amazon, Apple and Google.

He pointed out that LED screens, printer and scanner parts and sensors — all components of electronics sold in the U.S. — are among the items on the administration's list.

TechNet CEO Linda Moore flatly called the tariffs a "mistake."

"We hope the Trump Administration will realize this action is ill-advised and reverse course before the U.S. economy, our workers, and consumers begin to feel the pain," said Moore, whose group represents companies like Facebook, Microsoft and AT&T.  "There is no question pressure on China is needed to address significant concerns about their trade policies and practices, but tariffs are not the way to do it."

While Silicon Valley is paying close attention to the issue, tech CEOs have so far been reluctant to speak out, instead leaving the public statements to their trade groups.  Executives face a field of landmines: They fear being seen as too willing to bend to China's will, but also worry they'll be shut out of the country's lucrative market.

One exception is Apple CEO Tim Cook, who has criticized the White House's decision to pursue tariffs and talked about how he raised the issue with Trump.  Apple manufactures iPhones and other products in China and sees the country of 1.4 billion as a promising growth market.

"I talked about trade and the importance of trade, and how I felt that two countries trading together make the pie larger," Cook said last month about an April meeting at the White House, adding, "I felt that tariffs were not the right approach there. I showed [Trump] some analytical kind of things to demonstrate why."

The Trump administration may have other plans for China that could rattle the tech industry.

U.S. Trade Representative Robert Lighthizer told Fox Business on Friday the tariffs would be followed in a few weeks by restrictions on Chinese investments in technology-intensive industries.  That could limit the flow of Chinese money into U.S. tech firms, which see the country’s investors as a rich source of capital for growth or acquisitions.

"Right now, they're limited in terms of national security," Lighthizer said of the current restrictions on Chinese firms investing in U.S. tech. "This will be a broader definition of national security."

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