Possible restrictions on Chinese chip exports could do harm to U.S. growth
The Trump administration's trade war with China and the coronavirus pandemic have crippled U.S. exports this year and could worsen as the administration reportedly is considering export restrictions on China’s most advanced manufacturer of semiconductors.
Where it stands: The U.S. trade deficit has risen to its highest since July 2008 and U.S. exports of goods and services as a percentage of GDP shrank to the lowest level since 2003 in the second quarter.
Why it matters: While exports aren't a major contributor to U.S. GDP, adding such restrictions on sales to a trading partner as large as China’s Semiconductor Manufacturing International Corp. risks doing real harm to U.S. growth as companies try to bounce back from the pandemic.
Between the lines: China's economy is recovering more quickly than other countries but Beijing remains well behind in its commitments to purchase increased U.S. goods and services.
- The U.S. already has placed similar restrictions on Chinese telecom giant Huawei, another major buyer of American-made tech products.
- Chinese officials say the export restrictions have simply accelerated development of domestically produced equipment to replace the U.S. products.
The big picture: Exports as a percentage of GDP represented 12.4% of U.S. GDP as recently as the second quarter of 2018, and had remained above 12% until Q2 2019, but have fallen precipitously since.
- Trump looks to be doubling down, threatening to punish American companies that create jobs overseas and to deny those that do business in China federal contracts, in a White House news conference Monday.