Technology is becoming the central piece of the trade war between the United States and China, with the Treasury Department currently being in the process of enacting new checks for attempted acquisitions of American firms with such “industrially significant” solutions, Reuters reports, citing a federal official with knowledge of the matter. The regulator is presently planning on preventing bids for U.S. firms from any company that has 25-percent Chinese ownership or is controlled by an entity from the Far Eastern country to an even larger degree, as per the same source. The new rules are meant to be announced this Friday but the exact ownership threshold triggering the restrictions could still change in the meantime.
The development comes shortly after Washington resolved to hit some $50 billion worth of Chinese technologies and intellectual properties with a 25-percent tariff, prompting Beijing to threaten retaliation. The first wave of stateside tariffs encompasses around $34 billion in goods and is set to come into effect on July 6, less the two largest economies in the world come to a new agreement in the meantime. The upcoming M&A restrictions will reportedly be enacted based on the 1977 International Emergency Economic Powers Act which started being used by American regulators more aggressively post the 9/11 attacks, having been seen as a quick-fix solution for cracking down on terrorist cell funding involving stateside assets.
The new M&A checks will not treat private and state-owned companies from China any differently, according to the new report. Previous insider claims suggested the U.S. administration isn’t seeking to prevent any existing deals from taking place and is primarily planning on making Chinese acquisitions of American companies more difficult moving forward. The rising tensions between Washington and Beijing are unlikely to reflect well on Huawei and ZTE, two China-based firms that have been eager to start operating in the U.S. on a more significant scale in recent times but consistently found themselves prevented from doing so on national security grounds which they repeatedly deemed as baseless accusations.