BEIJING: The Trump administration’s announcement of tariffs on industrial materials belies the far greater potential of China’s technology advancements, with key figures in the administration suggesting that this will be the next target; Chinese consumers, however, remain bullish.

According to reporting by Bloomberg, US Trade Representative Robert Lighthizer told a Senate committee that China’s ambitions don’t lie in raw materials but in high-end technology in a variety of spaces in which the US shares an interest. “These are things that if China dominates the world, it’s bad for America,” he said.

Analysts argue that such a move on the US’s part would be far more important than steel tariffs, as it “impacts one of the key ambitions China has set for itself,” Louis Kuijs, chief Asia economist at Oxford Economics, Hong Kong, told Bloomberg. “It would increase the probability of serious frictions.”

Data from the National Bureau of Statistics, referenced by Aidan Yao, a senior economist at AXA, in the South China Morning Post, show that Chinese information, communications, and aerospace exports totalled US$200 billion in 2017, 46% of US-bound exports and 9% of the total. But the risks, he argues, go in both directions, as higher tariffs could hit American consumers in the pocket.

Meanwhile, in China, Credit Suisse has registered a growing preference for Chinese goods from young people, spurred, the bank says, by a growing sense of national pride, especially with a view to technology.

“We are surprised to see the rising of a more confident generation of consumers in China,” said Charlie Chen, head of China consumer research at Credit Suisse. Having grown up in a more open and dynamic China, young consumers are sceptical of the idea that foreign brands are better. “Like it or not, China is becoming a major power globally, which makes the younger generation feel more proud to be Chinese.”

Chen added that the shift is the result in part of government’s encouragement of Chinese cultural institutes, but is also likely in response to Chinese companies’ growing prominence around the world.

Political setbacks to Chinese companies in the US have been well documented, with Huawei’s inability to maintain a launch carrier in the US. Both AT&T and Verizon succumbed to political pressure, leaving Huawei selling phones through retailers, on top of the brand impacts of damaging political sentiment.

“Rising trade tensions reflect that as China moves up the value-added chain its economy is becoming less complementary to the U.S. and more directly competitive,” said David Loevinger, an analyst at TCW Group and a former US Treasury China specialist, speaking to Bloomberg.

The argument has moved to the future. The perception is that both countries are in tension over who will influence emerging technologies such as 5G wireless or the development of advanced artificial intelligence. With continued threats, however, the US risks spurring Chinese tech development rather than stemming it.

China has questioned the “legality and legitimacy” meanwhile of many actions taken on the grounds of national security, a Ministry of Foreign Affairs spokesperson said.

Sourced from Bloomberg, South China Morning Post, CNET; additional content by WARC staff