US President Donald J. Trump on September 13th blocked the acquisition of a US technology firm by a Chinese company. President Trump issued an executive order citing the Defense Production Act of 1950 to keep Chinese private equity firm Canyon Bridge Capital Partners from purchasing US chipmaker Lattice Semiconductor Corporation for a reported $1.3 Billion.
The executive order gives Canyon Bridge 30 days “to fully and permanently abandon the proposed transaction.”
Treasury Secretary Steve Mnuchin issued a statement on the same day stating the reason for blocking the sale of Lattice Semiconductor Corporation to Canyon Bridge.
“Consistent with the administration’s commitment to take all actions necessary to ensure the protection of US national security, the President issued an order prohibiting the acquisition.”
White House Press Secretary Sarah Huckabee Sanders issued a separate statement that “the national security risk posed by the transaction relates to, among other things, the potential transfer of intellectual property to the foreign acquirer.”
However, a tweet posted by the President shortly after the deal was blocked indicated that the executive order may have been in line with the administration’s policy of economic nationalism.
China has a business tax rate of 15%. We should do everything possible to match them in order to win with our economy. Jobs and wages!
— Donald J. Trump (@realDonaldTrump) September 14, 2017
Former Trump Chief Strategist Steve Bannon described economic nationalism as the anti- thesis of globalism. In his view, globalism favoured the economic interests of the elite and multinational firms over those of the average, everyday working-class American.
Globalism encouraged businesses to patronize international locations which presented comparative cost advantages and economies of scale. They could increase output while decreasing costs of production.
In time, host economies acquire the technologies and become economically prosperous to a point that income differentials between the strategic partners begin to diminish.
Economic nationalism aims to bring the benefits back to the United States by undoing the trade arrangements of the previous administration which in President Trump’s view weakened the country’s trading position with its partners in the Pacific.
China has been on President Trump’s radar since the campaign. He has accused China of currency manipulation; deliberately lowering the value of the Yuan in order to give its exports a competitive advantage.
The US has also been wary of China’s intrusion in the Western Philippine Sea. It has been building military outposts in the disputed Spratly Islands despite the landmark ruling by the UN-backed Permanent Arbitration Court giving the Philippines sovereign rights over the islands.
The Spratly Islands are a vital waterway for trading and provides a key area for military strategy. With tensions running high between North Korea and Japan, the US would not want China to build its military presence in the disputed waters.