Tech Transformers

Donald Trump is causing the US to fall behind China in tech, economist says

Key Points
  • President Donald Trump's economic policies are causing the U.S. to fall behind China in technology, one economist claims.
  • Steen Jakobsen, chief economist at Saxo Bank, said Trump needs to focus on the next generation of jobs rather than preserving existing ones.
  • The U.S. administration has previously criticized China's approach to technology development.
Trump will have negative impact on US economy, economist says

President Donald Trump's economic policies are causing the U.S. to fall behind China in the tech sector, according to a Saxo Bank analyst, who said the current government does not have the "ability of seeing the world changing."

Steen Jakobsen, chief economist at Saxo Bank, said much of the policy that Trump has enacted or talked about is "negative" and "actually against productivity."

He cited Trump's desire to reduce the U.S. trade deficit, saying that it would not be good for the average American.

"If you have a current account deficit, you are spending more money than you have. If you want a surplus you going to spend less money than you can... So if Trump actually delivers on the trade policy, he will make Americans worse off first before they get better. And in terms of productivity he wants to keep jobs, he doesn't want to create jobs," Jakobsen told CNBC in a TV interview Thursday.

"And I think that is the big change we see relatively to China who has a research and development plan. China today, on a weekly basis, almost overtakes the U.S. in different technology sections."

Saxo Bank's chief economist said China is advancing in areas like quantum computing. This refers to a new era of faster and more powerful computers. In August, China demonstrated a world first by sending data over long distances and using satellites that was potentially unhackable. It laid the basis for next generation encryption based on so-called "quantum cryptography."

US 'missing out'

In contrast to the U.S., China has a plan to develop in the technology field, according to Jakobsen.

"They have electrification. And I think electrification is the single biggest thing that's ever happened. U.S. has no policy, Germany has no policy, but China moves along," he said.

"I think the U.S. is missing out on a huge, huge ability of seeing the world changing. I think in the next 10,000 data points, we will have more change than we have ever seen in our... careers."

President Donald Trump and China's President Xi Jinping chat as they walk along the front patio of the Mar-a-Lago estate after a bilateral meeting in Palm Beach, Florida, U.S., April 7, 2017.
Carlos Barria | Reuters

China has laid out plans to become a leading player in many areas of technology. In July, the government unveiled its blueprint to become the world leader in artificial intelligence (AI) by 2030, with the aim of making the industry worth 1 trillion yuan ($147.7 billion). Another initiative, called "Made in China 2025," is China's massive government-backed push to be a world leader in a number of high-tech industries, such as medical devices, aerospace equipment and robotics.

Wilbur Ross, the U.S. commerce secretary, has criticized the Chinese government's approach to technology.

"Rather than building a globally competitive free market economy in order to compete, China has chosen instead to compel American companies that want to operate in China to turn over proprietary technology and intellectual property," Ross wrote in a column in the Financial Times earlier this year.

He said that for U.S. companies to get into China, it requires a joint venture with a Chinese firm and sometimes means the transfer of intellectual property.

US tech firms could lose lead

But Jakobsen said that the U.S. administration needs to focus on education, creating new jobs rather than preserving existing ones, and increasing spending technology research.

"So the issue in the U.S. is not about keeping jobs, it's about how next generation of jobs are being created. And they will come through electrification, from leading the mechanical engineering that will come from it," Jakobsen told CNBC.

U.S. technology companies have been investing heavily in areas such as artificial intelligence and robotics. Much of Google's new Pixel 2 smartphone announcement Wednesday focused on this, for example.

But while U.S. technology firms are leading the way now, Jakobsen said that could change in the future, partly because many of these companies aren't able to access the Chinese market.

"They have the leadership. But if you look 10 years down the road, does Google have a footprint in China? No. Do they have the ability to change that? Probably not," he told CNBC.

"So the point is yes, they (U.S. tech firms) are very, very successful, they have very high profit margins in my opinion because they have monopolies... (but) if you look down the line... there will be a Chinese version of this inside the next zero to six months."