(Preview) Trump's Memorandum on Foreign Investment; 'Reverse Nixon' Realities; Document #1; PLA Drills in the Tasman Sea
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Hello and welcome to Sharp China. I'm Andrew Sharp and you are listening to a free preview of today's episode.

Parts of the business community are very resistant. But ultimately, I think this memo is another step towards a recognition by the U.S. government that effectively there's no reason that Hong Kong and Macau should have any separate treatment or different treatment than any other PRC city would have. Yeah, no, exactly. And that's where, you know, the PRC has itself to thank for that particular development. I mean, my question reading about all of this is how much of it could be accomplished by

without Congress. I mean, they talk about working through CFIUS to restrict inbound investment, which does seem feasible. I mean, they're really sort of dual tracks in this memo. They want to restrict inbound investment from the PRC into critical industries, and then also outbound investment to the PRC in particularly anything that has military applications. And

That aspect of it, I think, is more interesting because I know Congress has been trying to pass outbound investment restrictions. Well, the Biden administration also had made some efforts to that, but they ultimately were watered down. And then in Congress, the outbound investment restrictions were, I think, effectively, for the most part— Scuttle.

scuttled by Patrick McHenry, who was the chair of the House Financial Services Committee. He was the representative from Wall Street, I mean, New York. I'm sorry, North Carolina. But he was very protective of Wall Street investor interests. And so he was one of the folks who was very much against really stringent outbound investment legislation. We'll see if that

gets revived in this Congress. I think they're having a bit of a rough day today trying to pass a budget or pass an idea of what a budget might look like. So we'll see. But when it comes to China, again, we may see a bit more support. I believe they've put out again another bipartisan bill to strip China of the permanent normal trade relations, which would

mesh with something, you know, one of the things that's in this memo. So again, the, and this is the, the note I wrote on Sunday was really, um, it was basically about how his, the, the, the recent moves in the Trump administration around personnel and policies, um,

actually are fairly hawkish, right? Because we're still all trying to figure out what exactly is Trump going to do on China? Is he going to cut some grand deal? You know, he didn't jump into 60% tariffs from day one like he promised on campaign. You know, he's ignoring the law on the books that have X TikTok to try and cut a deal for TikTok.

And so there's lots of different swirling sort of concerns and ideas about what ultimately Trump's China policy would be. This memo, you know, and then there's the memo we put out, the America First Trade EO on day one. This memo, they're languaging these documents that suggest quite a tough approach to China. It's still early days, right? That's the thing. And so we don't ultimately know, you know, is he going to go to China or will she come to Mar-a-Lago again? Will they have a summit?

But if you sort of look at... It's like trying to figure out what's going on in Beijing. What's going on inside the halls of power? And you usually don't really know. In some ways, it's really good. You look at the personnel and the policies. And at least on that level...

the decisions so far in the Trump administration are pretty hawkish towards China. Yeah. Well, and I mean, in some sense, it's not all that surprising because we knew there were elements of the administration that thought this way and saw certain actions that needed to be undertaken to address strategic vulnerabilities. Um,

the question you raised it in your piece on Sunday is all right. So how exactly is this implemented? I mean, like as far as outbound investment is concerned, there's talk in there of using the international emergency economic powers act. Yeah. And to help restrict outbound investment. I'm a little unclear on how that would work. The general tone of it though, I think you hit on it Sunday that,

For the moment, this is more confirmation that there are parts of the administration that see the U.S.-China relationship just really clearly and have identified steps that need to be taken. And the question is just how much of this thinking will translate to concrete actions.

And I mean, they are also along these lines because this was just one of several things that you identified. Per Bloomberg, the administration has also called on Mexican officials to place their own levies on Chinese imports, a move that comes after some firms from the Asian nation, China, that is, shifted production to the U.S. neighbor to avoid duties from Trump enacted in his first term.

That's also been a problem with products and industries being rerouted through other countries in Asia, like Vietnam is one example to circumvent tariffs. And so if nothing else, again, we have to wait and see what concrete actions are actually taken on any of these fronts. But I think it signals that the administration is serious about implementing tariffs that are actually effective.

at rebalancing trade and diminishing PRC leverage over some of these strategically important industries. So we'll wait and see. And I think that's right. I think the challenge though, and again, you can look at these discrete pieces and say, wow, they look like they're pretty cautious on China. But again, I think when you also then look at what they're doing around Russia, Ukraine, Europe...

If the Trump administration fractures the relationship with the EU and effectively alienates some of those countries that really are needed to work the challenge of China as the U.S. government sees it, then their policies will be less effective. And so it isn't at all clear if there's some sort of overarching strategic plan.

strategic thought going on, or we're looking at sort of discrete pieces where certain parts of the bureaucracy or certain personnel have, you know, want certain things, but at the top, it isn't necessarily being well-coordinated. It just isn't really clear at this point. It wasn't...

It wasn't that well-coordinated in Trump 1. There was some discussion, well, maybe they learned their lesson. I think they did learn some lessons from Trump 1. It looks like they maybe learned other lessons. But so again, it is a... I think the Biden administration, one of the things they did right was trying to make sure that there was more of a united front, even though there were problems in that approach. And I think things that they wanted to do

they ended up backing off on because they couldn't get some of the allies on board. And so then one of the questions will be, is Trump going to push harder on the allies to participate in some sort of a united front in certain areas against China? And what we're seeing around Ukraine and Russia won't ultimately lead to some bigger break, or will what's happening in Europe and Ukraine and Russia weaken the US's ability to shape

sort of these global trade flows in a global investment away from China as it appears to

parts of the administration wanted to. Yes. Well, and to that end, we also have news on the chips front. Bloomberg wrote this week, Donald Trump's administration is sketching out tougher versions of U.S. semiconductor curves and pressuring key allies to escalate their restrictions on China's chip industry, an early indication the new U.S. president plans to expand efforts that began under Joe Biden to limit Beijing's technological prowess.

Trump officials recently met with their Japanese and Dutch counterparts about restricting Tokyo Electron Limited and ASML engineers from maintaining semiconductor gear in China, according to people familiar with the matter. The aim, which was also a priority for Biden, is to see key allies match China curbs the U.S. has placed on American chip gear companies, including Lam Research Corp., KLA Corp., and Applied Materials.

That will be very interesting. And it comes in tandem with news earlier this month that Reuters reported Landon Heade is the nominee for assistant secretary of commerce for export administration and will be overseeing BTC.

the Bureau of Industry and Security, which is the key bureaucracy for chip-related export controls. And then on Friday, Reuters reported that the Trump administration has forced out a senior Commerce Department official overseeing export restrictions on China. Matt Borman is leaving government, as is Eileen Albanese, the longtime director of the office that processes licenses for semiconductors and other national security-controlled items.

Based on your conversations in DC, what should we make of the appointment of Landon Heade and the dismissal of Matt Borman and Eileen Albanese? So the appointment, I think, again, it's one of those signals of a tougher approach on things like chips and export controls. He was at state for a while and then he went over. He was on, I think, on the majority side of the House Select Committee on China and

And I have never met him, but I certainly have heard that he was on the very hawkish end of the spectrum, especially when it came to technology issues related to China. In terms of the forced resignation of those two long-serving commerce officials, what I've heard is just that, again, if you have a hawkish mindset, it's a targeted strike on two people who were...

you know, the industry liked having it BIS. Okay. Being the semiconductor industry. Is that really why they were asked to resign?

not clear right we've got doge going on or like to call it doggy although tashi doesn't like to be associated with that um tashi's hands are clean or tashi's paws come on we're better than that yeah so so um so is it something else with doge again it's not at all clear what's going on but i think the net result is um a bis that may be um

you know, the industry is going to have to figure out how to work with them. They had really worked out a pretty good MO under Raimondo and her team. And I think that it's not going to be the same kind of relationships going forward. If you're in the industry, better to have people you know than people you don't. That makes sense to me. And then the other thing, you know, to the first part of the discussion, or the first part of the section where you talked about the Bloomberg report on trying to get Japan and the Dutch and the Netherlands to do more

You know, the Biden team really tried quite hard in their nice Biden team way. I think that this time it's going to be not as pleasant in terms of pressure from the U.S. if Trump really wants this to happen.

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