No Need to Wait for President Trump to Take Protectionist Actions Against China

by | Dec 7, 2016

President Obama is more than happy to oblige.

Thus, The New York Times reported last week that President Obama is blocking the sale of German semiconductor company, Aixtron, to a Chinese company, the Fujian Grand Chip Investment Fund. In particular, the Obama Administration is blocking the sale of Aixtron’s American shares.

The official reason for the move was national security, but it’s not immediately obvious why the sale was a national security risk in the first place. Indeed, the Treasury Department’s specific statement on the alleged national security risk involved reads similar to a book report written by a teenager who neglected to read the book. The Treasury Department said the national security risk related to “the military applications of the overall technical body of knowledge and experience of Aixtron.”

So basically, military technology often uses semiconductors and Aixtron employs smart people?

Again, it’s possible there’s something more substantial to this claim that I’m missing. But the company does not appear to be a defense contractor and it does not even cite governments among its customer base on its corporate website. This is notable because typically, we would expect companies to brag to investors about having price-insensitive governments as customers. Aixtron does not. From this, it seems that the national security risk from having this German company get purchased by a Chinese is quite indirect.

And yet Obama intervened anyway.

Of course, this isn’t protectionism in the normal sense of the word, since the justification wasn’t explicitly economic in nature. Still, it’s another illustration of the vast unilateral power the US President has assumed when it comes to intervening in the economy.

It also offers another reason for international companies to steer clear of US jurisdiction for fear of arbitrary decisions by the government.

Finally, this episode suggests there will be far more continuity between the Obama and Trump Administrations than most people understand. Worried about having a US President that makes protectionist decisions and degrades US relations with China? If so, your fears shouldn’t wait for Inauguration Day.

About Eric Schuler

Eric Schuler is a contributor to The Libertarian Institute, with a focus on economics and US foreign policy. Follow his work here and on Twitter.

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