What are the effects of the sanctions applied by the Trump administration? What approach could the Biden administration take, and what changes can we expect? Let’s try to make some predictions.
In particular, since November 6, 2020, the Trump administration has taken the following actions:
1. Issued an executive order banning US individuals from trading publicly traded securities of more than 35 “Chinese military companies”.
2. The US Department of Commerce established a licensing requirement for nearly all exports to 60 previously identified firms.
3. Designated 58 entities as Chinese “military end users” under the Export Administration Regulation (EAR). This measure also restricts a wide range of high-tech exports.
4. Eliminated Hong Kong as a separate destination from China, dropping its preferential treatment for export licenses.
5. During the same period, President Trump signed an executive order blocking transactions with companies that “develop or control” certain Chinese-related mobile and desktop applications. This affected software such as Alipay, CamScanner, QQ Wallet, SHAREit, Tencent QQ, VMate, WeChat Pay, and WPS Office.
At the same time, federal courts stopped previous enforcement orders banning transactions with the owners of TikTok and WeChat. The courts suspended the effective date of these orders pending the outcome of ongoing litigation.
Compliance with the securities trading ban proved challenging for the financial community. This policy forced banks and investment companies to sell or restructure hundreds of products. These products contained listed securities of the so-called “Communist Chinese Military Companies” or entities with names closely matching the sanctioned firms.
Therefore, the prohibition includes mutual funds containing one or more subject securities. It also affects insurance policies with mutual fund options holding securities of these named entities. The NYSE announced the delisting of these companies. Similarly, both NASDAQ and MSCI will remove the listed companies from their indices.
In short, the Trump administration decided to tighten foreign policy towards China. In response, China adopted its own regulations. These rules prohibit Chinese companies and individuals from complying with punitive measures mandated by foreign governments.
Analysts are waiting to see whether and to what extent the Biden administration will implement or limit these restrictions against China. Experts expect an initial transition period. The new team will first evaluate the overall strategic approach towards Beijing.
Some analysts say the Biden administration will likely view China as a strategic competitor and a potential adversary. Hence, the challenge of dealing with China remains, as the United States still needs its cooperation on critical global issues.
Therefore, experts believe that US policy towards China under President Biden will likely proceed along four main paths:
– Selective disengagement from China in areas central to national security, while maintaining cooperation in low-risk sectors.
– Increased cooperation with allies to define shared approaches regarding China.
– Stronger arguments against China’s human rights abuses.
– More direct engagement with China on critical areas to seek shared solutions.
Within this general political framework, the Biden administration will evaluate the Chinese restrictions imposed by Trump. Of course, the Biden administration holds the legal authority to nullify or undo nearly all previous executive actions.
For these reasons, the market does not expect an imminent turnaround in US policy. Rather, analysts expect a more balanced approach than we saw over the last four years. Washington will likely refine existing sanctions to improve their effects through FAQs and specific licenses, while standing firm against China in coordination with close allies.
Join our mailing list
You will receive directly in your mailbox our proposals, promotions, updates of our services and news from the shipping world.
