U.S. telecom companies may be caught in Trump’s brewing trade war with China

Donald Trump speaking
President Trump is reportedly considering tariffs against China. (Image: Gage Skidmore / CC BY-SA 2.0)

According to a new Reuters report citing unnamed sources, President Trump is considering imposing tariffs on up to $60 billion of Chinese imports, specifically targeting the technology and telecommunications sectors.

It’s unclear exactly how the possible action – which appears to still be in the planning stages and might not happen – could affect U.S. telecom companies. However, if Trump does impose tariffs on telecom equipment from China, the action likely would raise the price of that telecom equipment for U.S. companies. Further, the action could spark a response from China – the world’s largest wireless market.

Already, Trump has imposed tariffs on aluminum and steel from China, though the Reuters article noted those tariffs aren’t as big as the ones that are currently being considered targeting telecom and technology.

But Trump has clearly signaled his willingness to wade directly into the inner workings of the U.S. telecom industry. This week he issued a presidential order barring Broadcom from pursuing a purchase of Qualcomm, with his administration arguing such a transaction would impede the nation’s security and the United States’ role in the development of 5G technology – and specifically that it would allow China to take the lead in 5G.

In response, Broadcom this morning said it would withdraw its offer for Qualcomm due to the order. “Although we are disappointed with this outcome, Broadcom will comply,” the company said in a statement.

As The Wall Street Journal notes, Qualcomm raised the prospect of Broadcom’s threat to national security in a January letter to the U.S. Treasury Department’s Committee on Foreign Investment in the U.S. (CFIUS). Qualcomm’s concerns were shared by members of the CFIUS as well as by members of Congress, including Senate Majority Whip John Cornyn.

Much of the discussion around China centers not only on a trade imbalance – Reuters noted China runs a $375 billion trade surplus with the United States – but also on China’s approach to intellectual property. Many argue that the Chinese government takes an unfair stance on IP from overseas companies and overly favors domestic suppliers.

Importantly, Trump’s potential tariffs against China targeting telecom come amid dramatic upheavals in his administration. He fired his secretary of state this week, and Gary Cohn, President Trump’s top economic adviser, said this month he would resign.