Despite a softer tone, the Trump administration surprised everyone with a warning that it’s moving ahead with tariffs on $50 billion worth of Chinese imports and restrictions on Chinese investment in U.S. technology.
The shift comes ahead of another round of trade talks with Beijing and is seen as a way to give U.S. negotiators some leverage to get China to commit to concrete measures to reduce its trade deficit with the U.S., such as by further opening up its domestic markets to foreign competition.
It’s also likely the result of backlash to President Trump’s announcement that he would find ways to help Chinese tech firm ZTE stay in business after the U.S. government imposed crippling sanctions on it for breaking the terms of its agreement for violating trade restrictions.
No matter what the outcome of these talks, investors on both sides of the Pacific are going to be much more cautious about doing business with each other. That could have damaging implications for both sides as the capital and ideas that have cross pollinated China and the U.S. start to dry up.
We’ve closely followed the rise of Chinese investors in Silicon Valley. Now, we may be watching their retreat.