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Trump invokes familiar security argument to block Qualcomm deal

Protectionist intervention and tariffs aimed squarely at China

President Donald Trump, seen here at a congressional campaign rally Saturday, has invoked national security concerns to win support for protectionist measures targeting China.   © AP

WASHINGTON/PALO ALTO, U.S. -- U.S. President Donald Trump's decision Monday to block Singaporean chipmaker Broadcom's bid for American peer Qualcomm on national security grounds is not the first time his administration has used such reasoning to shield U.S. businesses from Chinese competition.

Trump's order to scrap the $117 billion bid for the California-based chip manufacturer cited a review by the Committee on Foreign Investment in the United States, which scrutinizes acquisitions of American companies for national security risks. China figured prominently in the committee's concerns, as shown in a March 5 letter warning that "China would likely compete robustly to fill any void left by Qualcomm" in setting wireless technology standards "as a result of this hostile takeover."

Washington's objections apparently stemmed partly from Broadcom's reported ties to China's Huawei Technologies, which sells large volumes of low-priced telecommunications equipment in China and Europe. Qualcomm is a leading provider of chips used in such devices as smartphones. The U.S. worried that letting Broadcom buy the company would risk the technology behind the "brains" of American telecom networks falling into Chinese hands.

The Singaporean chipmaker had taken steps to assuage these concerns, including working to move its headquarters to the U.S. CEO Hock Tan, an American citizen, reportedly met with Department of Defense officials just hours before Trump announced the decision Monday evening.

Alarm is growing in Washington over China's technological development. Of the nine other cross-border acquisitions of American companies that the Trump administration has blocked, eight involved Chinese buyers, including bids for other U.S. semiconductor manufacturers.

The steel and aluminum tariffs Trump signed last week are aimed at China as well. Large American steelmakers, including U.S. Steel and Nucor, have repeatedly accused Chinese companies of dumping steel on the market at unfairly low prices. The Commerce Department found that rising steel imports "threaten to impair the national security."

The Trump administration and Congress are both quick to cite security concerns to justify action against China as an easy way to garner public support. With midterm elections coming up in the fall, more such measures could be on the way.

But protecting American businesses in the name of protecting the country carries risks.

Broadcom said in a statement Monday that it "strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns." The decision to block the bid on security grounds has fueled fears that the government's stance could hinder the flow of foreign capital into U.S. technology.

The Trump administration decided in January to impose tariffs of up to 30% on imported solar panels and related equipment in an effort to protect domestic manufacturers, some of which have already been acquired by Chinese or French players. Whether the measure will help the U.S. economy and employment remains unclear.

Nikkei staff writer Takashi Sugimoto in Tokyo contributed to this article.

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