China hack backs White House into a corner

Flags of U.S. and China are displayed at American International Chamber of Commerce (AICC)'s booth during China International Fair for Trade in Services in Beijing, China, May 28, 2019. REUTERS/Jason Lee

WASHINGTON, July 19 (Reuters Breakingviews) - When China messes with U.S. companies, the White House has three tools at its disposal: shame, tariffs and sanctions. Only the last one might work, and it’s the hardest to deploy.

The United States, European Union, Japan and other allies on Monday read more called out Beijing for a hack of Microsoft (MSFT.O) email software that affected thousands of businesses. Censure isn’t likely to outweigh the benefits of obtaining trade secrets, though. Tariffs may be another option, but they hurt American consumers too, as Treasury Secretary Janet Yellen noted last week.

Sanctions, meanwhile, have been effective in the past. In 2015, the Barack Obama administration moved to cut off Chinese companies benefiting from hacks from the U.S. financial system until Beijing pledged to rein in cyber attacks. That worked for a while, though incursions picked up again after Donald Trump took office in 2017.

The problem is that China can easily retaliate against sanctions. Brands with a big presence there, like Apple (AAPL.O) or Starbucks (SBUX.O), may be hurt. Sure, Washington can punish individual ransomware groups. But overall, companies will be largely left to bolster their own defenses. It’s in the profit margins of vulnerable firms that hacks will hit home. (By Gina Chon)

On Twitter http://twitter.com/breakingviews

Capital Calls - More concise insights on global finance:

Ocado’s robot fire may cause lingering damage read more

Oil producers do themselves a favour read more

Aussie deal hangs on iffy long-distance China call read more

Evergrande’s capital wheeze is only a paper gain read more

SPACs hit the road to Washington read more

Editing by John Foley and Amanda Gomez

Our Standards: The Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.