In this week's edition:

• U.S. Delegation to Taiwan 
• U.S. Tariff Policy Update
• USMCA Review Will Include Chinese EV Investments in Mexico 
• U.S.-Kenya Technology Cooperation 
• China Hawks in Congress Flag Emirati AI Deal 
• G7 Finance Ministers Meeting 
• ASML Tells U.S. Officials About Semiconductor Equipment Kill Switch 
• China, Japan, Korea Summit Revived 
• TikTok Removed Chinese Influence Campaigns 
• China Sanctions Former Leader of House Select Committee on China, U.S. Defense Companies

A bipartisan delegation of U.S. lawmakers, led by House Foreign Affairs Committee Chairman Michael McCaul (R-TX), arrived in Taiwan yesterday to show their support for newly inaugurated Taiwanese President Lai Ching-te. McCaul said at a joint news conference with Lai, “America is and always will be a reliable partner, and no amount of coercion or intimidation will slow down or stop the routine visits by the Congress to Taiwan.” Reps. Young Kim (R-CA), Joe Wilson (R-SC), Andy Barr (R-KY), Jimmy Panetta (D-CA) and Chrissy Houlahan (D-PA) were also in attendance. Lai said, “We will continue to deepen cooperation with the U.S. and other like-minded countries to jointly maintain regional peace, stability and prosperous development.”

Days earlier, during his inauguration ceremony, Lai called on China to “cease their political and military intimidation against Taiwan, share with Taiwan the global responsibility of maintaining peace and stability in the Taiwan Strait as well as the greater region.” He also pledged to maintain the cross-strait status quo. China responded by holding its most expansive military drills near Taiwan this year to date. A People’s Liberation Army spokesperson described the drills as punishment for separatist acts.

Following the delegation’s arrival, Chinese Foreign Ministry spokeswoman Mao Ning said, “China urges relevant U.S. lawmakers to stop playing the ‘Taiwan card,’ stop meddling in China’s internal affairs, stop supporting and indulging ‘Taiwan independence’ secessionist forces, and stop damaging China-U.S. relations and the peace and stability in the Taiwan Strait.” Also, just last week, the Chinese government called for an end to U.S. congressional delegations to the island.

Section 301 tariffs on Chinese EVs, steel and aluminum products, batteries, solar cells, ship-to-shore cranes, and certain medical products will take effect on August 1^st, according to the U.S. Trade Representative (USTR). Other goods will not be subject to the increases until Jan 1^st, 2025, or 2026. Stakeholders can comment on the tariff changes from May 29^th to June 28^th.

The first 6-year review of the U.S.-Mexico-Canada Agreement (USMCA) will occur in the summer of 2026. According to a former U.S. economic official, Chinese investments in electric vehicle manufacturing in Mexico will be a major issue under consideration. Everett Eissenstat, Former Deputy Director of the National Economic Council during the Trump Administration, told the Washington International Trade Association last week, “There is such bipartisan concern in the United States that China will invest in third markets that have FTAs with the United States and use that as a platform to export to the United States…The USMCA is the one at the top of the list.” During the review process, changes to the agreement can be made.

While it would be difficult for China to meet USMCA rules of origin, there is also a concern among U.S. policymakers, according to Eissenstat, that China could leverage Mexico’s most favored nation (MFN) status to import EVs into the U.S. at a tariff rate of 2.5%, even if its vehicles do not meet USMCA requirements. USMCA rules are more stringent than MFN rules, requiring 75% of a vehicle’s value to be generated in the region, in addition to metal sourcing and labor value requirements.

During a visit to the U.S. last week, Kenyan President William Ruto and President Biden announced a “new era of technological cooperation” which will include semiconductors, clean energy, and artificial intelligence. The Biden Administration has eyed African nations, in addition to countries in the Indo-Pacific, to compete against Chinese influence around the world. President Biden outlined a goal to send $1 million from The CHIPS and Science Act funds to support Kenya’s domestic semiconductor industry.

Senate Intelligence Committee Ranking Member Marco Rubio (R-FL) has expressed concerns about a Commerce Department-backed deal between Microsoft and UAE-based G42 to build an advanced Arabic large language model. G42 has historical ties to Chinese technology companies, however, under the terms of the deal it has pledged to cut ties with those companies and follow safeguards in exchange for access to Microsoft’s technology. Rubio said, “I have serious concerns that the Biden Commerce Department, under Secretary Raimondo, is not adequately safeguarding our advanced technologies and pushing U.S. companies to cut deals that may end up endangering our national security.” China hawks in Congress are concerned that the deal will allow China to access sensitive AI technology, including advanced semiconductors. Commerce Secretary Gina Raimondo, who supports the deal as a way to bring the Middle Eastern tech company closer to the U.S., has said that the deal does not put sensitive technology at risk of transfer.

Group of Seven (G7) finance ministers met in Italy at the end of last week. Ahead of the meeting, U.S. Treasury Secretary Janet Yellen again criticized China’s industrial policy of overcapacity which she said, “threatens the viability of firms around the world, including in emerging markets.” German, French, and Italian ministers called for a joint effort against China’s export capacity. Italian minister Giancarlo Giorgetti went as far as to say that the European Union may soon follow the United States’ lead on tariffs against China, given that increased U.S. tariffs on China could lead to an increase in Chinese exports to Europe.

U.S. officials have learned from ASML and Taiwan Semiconductor Manufacturing Co. (TSMC) that the companies have a plan in place to remotely disable ASML’s advanced EUV chipmaking machines based in Taiwan in the event of a Chinese invasion. U.S. officials and policymakers have made concerted efforts through export controls to prevent advanced semiconductor manufacturing equipment from being sold or transferred in any way to China. An invasion of Taiwan is one scenario through which U.S. officials believe China could acquire this technology by force.

China, Japan, and the Republic of Korea (ROK) held their first summit in over 4 years. Chinese Premier Li Qiang, Japanese Prime Minister Fumio Kishia, and South Korean President Yoon Suk Yeol attended the 2-day summit in Seoul and discussed protecting supply chains, promoting trade, and cooperating on the challenges of aging populations and emerging infectious diseases. Efforts to run cultural exchanges in 2025 and 2026 between the 3 countries were also announced. North Korea responded to the summit by launching a long-range rocket carrying a military spy satellite into orbit. ROK warplanes then conducted an airstrike drill south of their shared border in response. For China, the summit was a chance to combat U.S. influence in Japan and South Korea. To do so, China committed to restart free-trade agreement talks between the 3 nations.

TikTok announced that earlier this year it removed thousands of accounts linked to 15 China-linked influence operations aimed at the U.S. Some accounts had over 100,000 followers and promoted Chinese Communist Party policies and Chinese culture. Some impersonated celebrities and influencers to gain large followings. As TikTok faces a possible ban in the U.S., it is likely highlighting this work to gain credibility in the U.S. Going forward, TikTok said that it will release its work to combat influence campaigns in a regularly released transparency report.

China sanctioned Mike Gallagher, former Congressman and Chairman of the House Select Committee on the Chinese Community Party. As a member of Congress, Gallagher was a staunch China hawk and instrumental in U.S. legislation on TikTok.

China also sanctioned 12 U.S. companies including Lockheed Martin, Raytheon, and General Dynamics. According to China’s Foreign Ministry, the measures against the defense companies were in response to the U.S. “indiscriminately imposing unlawful unilateral sanctions on a number of Chinese entities on the basis of so-called Russia-related factors.”

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