The US-China trade war just got nastier

If any conclusions can be drawn from the testy speech that the United States Vice-President Mike Pence gave today, it is that what Russia has been doing in the US elections is child’s play compared to what China has been up to[1].

The Vice President accused China of undue influence in US, using political, economic, and military tools, as well as propaganda, to advance its influence and benefit its interests.

Pence accused China of spying on its own students studying in the US universities, promoting some with scholarships while denying others, watching what they said and wrote.

“Beijing has mobilized covert actors, front groups, and propaganda outlets to shift Americans’ perception of Chinese policies,” he said. “What the Russians are doing pales in comparison to what China is doing across this country,” he added, referring to Russian state-sponsored hacking and online influence campaigns.

Listing the several ways by which China has angered the United States, Pence said China was[2]:

• Acting more aggressively in the South China Sea, including sailing some of its ships within feet of US vessels
• Stealing the intellectual property of American businesses
• Persuading countries, lately in Latin America, to no longer recognize Taiwan as a sovereign country
• Persecuting religious groups in China like Christians, Buddhists, and Muslims
• Creating a “social credit score” to reward Chinese citizens loyal to the government — and punish those who aren’t

These are serious allegations. And there is more…

Trump vows to impose penalties on all imports from China

Trump tweeted that China has been taking advantage of the United States on Trade for many years and that he was going to retaliate fast against them if they continue to match duties on imports from the US. Thus far $250 billion of imports from China are being levied duties.

…..China has been taking advantage of the United States on Trade for many years. They also know that I am the one that knows how to stop it. There will be great and fast economic retaliation against China if our farmers, ranchers and/or industrial workers are targeted!

— Donald J. Trump (@realDonaldTrump) September 18, 2018

His comments, made aboard Air Force One on his way to Fargo, N.D., signal that the trade dispute with China is unlikely to reach a quick resolution any time soon[3].

Mr. Trump added: “And I hate to say that, but behind that, there’s another $267 billion ready to go on short notice if I want. That totally changes the equation.”

China’s tiny chip that infiltrated US servers

Bloomberg Businessweek has just published in its latest issue the story of how China used a tiny chip to infiltrate America’s top companies[4]. As to how this was accomplished, we need to take a small detour…

It started in 2015. Amazon was looking to acquire a software company Elemental Technologies, a software firm that created software for compressing massive video files and formatting them for different devices (think iPhone, iPad, Android, Laptop etc.). Elemental also supplied to the Central Intelligence Agency (CIA) and this dovetailed nicely with Amazon’s secure offerings of AWS (Amazon Web Services) for the CIA.

While doing due diligence, AWS hired a third-party to look into the security aspects of Elemental’s software and it uncovered some troubling issues. Elementals’s product ran typically on servers built by a San Jose based company, Super Micro Computer Inc. On the server motherboards, the testers discovered a tiny chip, no more than the size of a grain of rice. This chip was not part of the original design of the motherboard. It was inserted at manufacturing time by the subcontractors of Super Micro in China.

Worse, this chip created a stealth entry for the hackers into any network that connected with these servers. Once connected any data could be lifted out of it. It must be kept in mind that hardware hacks, such as this one are much harder to design and can have devastating consequences. No wonder, US is breathing down China’s neck.

This is not new. Many chip manufacturers who fabricated their silicon in China have for long suspected that a secret piece of silicon was being added in to the die to enable such chips to “call home” when activated. This is even harder to detect as the chip manufacturers only know their design at a high-level language such as VHDL or Verilog.

Conclusion

So how is this going to play out? It is now evident that China has been caught by the US with its hand in the cookie jar. With Trump paranoid about November 2018 elections being handed to the Democrats (after all what goes around, comes around!) the tough talk between the two biggest economies in the world is not going to die down any time soon. Stay tuned.

References:

[1] Mike Pence’s tirade against China went way beyond trade – Oct 4, 2018, Quartz

[2] Pence says US “will not back down” from China’s aggression in fiery speech – Oct 4, 2018, Vox.com

[3] Trump Threatens Tariffs on All Imports From China, Escalating Trade Feud – Sep 7, 2018, New York Times

[4] The Big Hack – Oct 8, 2018, Bloomberg Businessweek