US curbs on high-tech exports could worsen China's struggling phase one purchases

October 1, 2020
US curbs on high-tech exports could worsen China’s struggling phase one purchases

Through the first eight months of 2020, semiconductors and the equipment required to produce them constituted nearly 25 percent of China’s total imports of goods covered by the phase one agreement with the United States. In fact the two sectors were on pace to meet Trump’s phase one purchase targets. New US export restrictions, however, have suddenly dimmed that bright spot. 

The restrictions, designed to limit Chinese telecommunications giant Huawei’s access to US semiconductors, also prevent American companies from selling items to firms in third countries that sell to Huawei. This could sharply cut sales of US semiconductor manufacturing equipment to other, non-Chinese markets.

Other US exports to China covered by the phase one deal are lagging. Through August, their combined year-to-date sales were 58 percent lower than Trump’s prorated targets. At the current pace, China will fall well short of its total 2020 purchase pledge. Without the buoyancy of semiconductor purchases, China’s purchase pledge for 2020 will likely slip farther out of reach.

This PIIE Chart was adapted from Chad P. Bown’s blog post, “How Trump’s export curbs on semiconductors and equipment hurt the US technology sector.”

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