After threatening to impose tariffs on $150bn worth of imports from China to punish what it sees as unfair trade practices, the U.S. opened another front in this simmering battle by going after China’s rapidly developing tech sector. To cut off its access to U.S. technology, the U.S.Department of Commerce last week banned Chinese telecommunications giant ZTE from purchasing American products for seven years, citing violations of a sanction settlement reached last year. It is also weighing up further restrictions to curb Chinese investment in sensitive technologies under an emergency law called the International Emergency Economic Powers Act. Analysts say these will lead to further showdown between the two countries, and China is likely to single out American tech firms — including Apple and Qualcomm — for retaliation, which could hurt the companies’ income and thwart planned deals.

Escalating Fight

Such moves will make China’s countermeasures bite harder. Beijing has already announced tariffs on $50bn worth of imports from the U.S., which cover soybeans and Boeing planes. But as U.S. exports to China totaled just $130bn last year, the country is running out of products to levy duties on if it wants to win this trade fight. Using regulatory powers to go after some American tech firms, which are heavily involved in Chinese markets, will boost its bargaining power.

“The Chinese government would need to get creative in taking action if they want to equal the $150bn in tariffs,” said Jacob Parker, vice president of China operations at the U.S.-China Business Council. “That could include extra M&A reviews and extending existing review timelines, which are something that could happen in tech sector.”

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