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US Ban on Chinese Supercomputing Players Slims Trade Deal Chances

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US extends trade ban to Chinese supercomputing companies

The US Department of Commerce will extend its trade ban to five supercomputing companies that buy chips from US companies, such as Advanced Micro Devices, Intel, and NVIDIA, starting on June 24.

The ban comes a week before the meeting of US President Donald Trump and Chinese President Xi Jinping at the G20 Summit, where the two are expected to talk about easing trade tensions. The US ban could complicate the trade talks between the two presidents and reduce the probability of a successful negotiation.

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The trade war escalated in May after the US increased tariffs on $200 billion in Chinese goods and imposed a trade ban on China’s telecommunications component maker Huawei. The Xinhua China 25 Index (FXI) and the SPDR S&P 500 ETF (SPY) fell 10% and 5.7%, respectively, in May. Both ETFs have since recovered in June.

The poor timing of the Chinese supercomputing ban

Many trade advisers have stated that the imposition of the new supercomputing ban is ill-timed. For the last two months, China has been complaining that the US made last-minute additions to the negotiation terms that weren’t acceptable. This new ban will give China another reason to avoid negotiations with the US.

The US imposed the ban to put pressure on China to agree to its negotiation terms, but China is likely to receive it negatively and strengthen its stance rather than open up to negotiation. China has threatened to create its own unreliable entities list and restrict the listed companies’ access to the Chinese market.

President Trump has threatened to impose a 25% tariff on the remaining $300 billion worth of Chinese imports if the talks with President Jinping don’t go well. The dialogue between the two nations has been more reminiscent of a war than a truce, and the supercomputing ban is only aggravating their relations.

US companies stand to lose both in the short term via the loss of Chinese business and in the long term via growing competition from Chinese companies who are developing their own technologies to reduce their reliance on the US.

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