The US and China are pushing to regulate big tech firms 'like national security companies,' analyst says

Key Points
  • Absolute Strategy's Michael Hessel says tech is "wrapped up" in the U.S.-China trade dispute.
  • President Donald Trump has criticized tech firms including Google, Facebook, Twitter and Amazon.
  • In China, tech firms are required by law to cooperate with domestic intelligence authorities.
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The U.S. and China may be at odds on trade, but both are lining up to crack down on big tech, according to an analyst.

"I think this is actually wrapped up in the trade issue, which is around national security and tech companies," Michael Hessel, political economy analyst at Absolute Strategy Research, told CNBC's "Squawk Box Europe" on Thursday.

"There's a growing push both within China and the U.S. to regulate some of these companies increasingly like national security companies, which could have huge implications for their business model."

President Donald Trump on Tuesday made Google his latest target in a tirade against big tech, saying the firm's search service is "rigged" against conservatives in favor of left-leaning media.

The president subsequently took another shot at the tech giant on Wednesday, claiming it snubbed twice his State of the Union speeches, while promoting Barack Obama's during each year of the latter's presidency. Google later responded to this claim, saying it did promote Trump's State of the Union address this year, but not in 2017.

Chinese President Xi Jinping and U.S. President Donald Trump attend a welcome ceremony at the Great Hall of the People in Beijing on November 9, 2017.
Fred Dufour | AFP | Getty Images

It's not the first time Trump has criticized big tech companies. He has previously said Twitter "shadow bans" — limits the search visibility — of prominent Republicans. Twitter denied this was the case.

And he has railed against Amazon for paying too little in taxes and using the U.S. postal service as its "delivery boy." He also raised the possibility of antitrust claims against the company. Amazon has thus far stayed quiet on Trump's comments.

Meanwhile, in China, firms are required by law to cooperate with domestic intelligence authorities. This has led to growing national security concerns from intelligence officials in the West, who believe phones made by the likes of Huawei and ZTE could be used to spy on customers.

Absolute Strategy Research's Hessel did not expand on how he expected either country to clamp down on their respective tech industries. He said that a lack of regulation in the U.S. on tech — while the media industry is more heavily regulated — meant it could be a long-term concern for lawmakers in Washington.

"I think the regulation of the tech industry is going to be a huge issue on a three-to-five year view," Hessel said.

Many analysts have said that tech is a significant point of contention between the U.S. and China in their ongoing trade dispute, with some highlighting 5G as a key component of the escalation of tariffs imposed on each other's economies. China is also racing to become a world leader in artificial intelligence (AI) by 2030.