What remains of the global, open internet came under attack this month. The latest salvo was launched from the White House and included two executive orders sanctioning the Chinese platforms WeChat and TikTok as well as expanding a so-called clean network program. Intended to tighten the screws on China, these measures risk setting off a dangerous chain reaction far beyond their stated intent. When the orders take effect in mid-September, they will, among other things, prohibit any U.S. citizen or company from transacting with ByteDance, TikTok’s parent company, or WeChat, owned by Tencent. While the U.S. State Department says the objective is to fend off “aggressive intrusions by malign actors, such as the Chinese Communist Party,” the measures will undermine a free and open internet, strengthen the hand of authoritarian governments, and hasten the unraveling of the global economic integration that has fueled the most successful half-century in human history.
U.S. President Donald Trump knows there is bipartisan support for ratcheting up pressure on China, especially on questions related to national security and defense. He also understands that looking tough on China will be helpful for the November election, even if he has been anything but tough on China in the past. But his gambit has far-reaching technological, economic, and geopolitical implications. For one, it shatters the pretense of a free, interoperable, and global internet that has prevailed for the past three decades, and of which the United States has long been the prime guarantor and beneficiary. It also gives license to authoritarians to crack down on the flow of information, threatens to cut the digital lifelines of their citizens to the outside world, and is likely to sharply curtail global trade in digital services.
Trump’s moves are likely to speed up the onset of what some call the “splinternet.” There are already several countries that have imposed data sovereignty regulations that restrict the flow of data, information, and digital services. But the new rules decoupling the United States from Chinese internet services will likely accelerate the consolidation of the internet into at least three separate regions centered on the United States, China, and the European Union. This, in turn, will give rise to fierce and destructive trade disputes and lead to new restrictions on online activities. Complicating matters, there are few off-ramps available: Any U.S. decision-makers who oppose squeezing China with measures such as Trump’s will be cast as weak on security.
While the lawyers are still deciphering Trump’s orders, the history of U.S. prohibitions and sanctions make it easily conceivable that they will apply not just to Americans, but also to a much wider segment of the world’s population—if only because non-U.S. companies will strive to avoid regulatory risk by preemptively decoupling their digital networks and services from China, the United States, or both. Although enforcing these regulations comprehensively will be virtually impossible and legal challenges are mounting, the damage is already being done.
Most obviously, these moves to cut digital ties will deepen the rift between the United States and China. The two countries have already slipped into a Cold War mainly playing out in the arena of trade and technology, with much of the tension centered on Chinese access to technology and the competition over the future of 5G telecommunications. At the very least, the president’s latest orders will speed up deglobalization: The new legal uncertainty and sanctions threat hanging over large parts of digital technology and services is a big deal for international trade and commerce. With Chinese telecommunications products, components, and services so prevalent all over the world, virtually everyone will be affected by Trump’s rulings.
Of course, Trump’s technological saber-rattling benefits Chinese President Xi Jinping. Regardless of whether Microsoft makes a deal with ByteDance to take over its U.S. operations in time for next month’s deadline, China is likely to respond with actions against its rival. Xi has many possible targets to choose from. First, China could step up interference in November’s U.S. elections, as some believe it already has, including through sanctions disproportionately affecting swing states—potentially influencing the outcome of the election. Second, as the second-largest foreign holder of U.S. debt after Japan, China could also dump bonds, potentially increasing interest rates for a battered U.S. economy. While this might temporarily impact China’s trade balance, it could also hurt Trump’s prospects for reelection. Third, China could also put the squeeze on a U.S. ally such as Australia, creating another headache for U.S. policymakers.
Even without the likely revenge from Beijing, the wider economic implications of Trump’s moves are extensive. Major e-commerce companies such as Amazon will need to rethink how to source hardware components for cloud computing. Technology companies with direct investments in China (including through partnerships with Tencent and ByteDance) could incur heavy losses, impairments of their assets, and retaliation aimed directly at them and their products. Tencent is one of the world’s largest technology companies and has stakes in video game studios, social media apps, and music companies. Many U.S. companies including Visa, Mastercard, and Starbucks also use WeChat’s payment platform and e-commerce functions in China. Trump’s orders could force these and many other companies to expensively reconfigure—and even reconsider their footprint in China.
The U.S.-China relationship is at rock bottom now and could worsen still further as the latest U.S. moves signal a new phase of accelerated competition. The actions against TikTok and WeChat—together with recent sanctions against top Beijing and Hong Kong officials involved in implementing the new national security law—are part of a widening strategic campaign against China. The Trump administration is intent on hastening U.S. decoupling from China, and the potential for escalation is real.
One of the biggest losers of Trump’s moves could be the United States itself. Since 1989, the country has benefited from an open internet as a channel for spreading U.S. culture and values, including the extension of market capitalism. China’s Great Firewall, Iran’s “halal net,” and Russia’s sovereign internet law were to a large extent intended to reduce U.S. online influence, while also exerting domestic control and stifling opposition. A growing number of countries including India, North Korea, Saudi Arabia, Thailand, and Vietnam have followed suit. By imposing new restrictions, the United States will constrain its influence further.
What’s more, Trump’s digital decoupling risks embroiling the entire world in what is largely a U.S.-Chinese dispute. The U.S. plan, which includes the designation of over 30 so-called clean countries, will speed up the dismemberment and disintegration of the global internet, an outcome that was predicted by tech enthusiasts over a decade ago. Like Beijing, Washington is forcing countries to take sides. Not only will this undercut one of the most powerful expressions of U.S. soft power ever created, but it also risks undermining the stability of the digital economy at a time when the world can least afford it.
