The Qualcomm display area at the 2017 Global Mobile Internet Conference at China National Convention Center in Beijing Visual China Group | Getty Images

Speaking on television last week, Trump's Commerce Secretary Wilbur Ross made an unusual statement about the White House tariff plans, specifically about carve-outs for Mexico and Canada. Ross called the administration's definition of national security something new and unusual itself. "It's not the conventional definition of national security," Ross said. It's clear from Trump's post-tax-cut shift to correcting imbalances in global trade — something Trump has cared about for a lot longer and with a lot more passion than tax policy — that an evolving definition of national security is a geopolitical and stock market risk. Panic, on either front, would be an overstatement. The real threat from the new metals tariffs is that a broader, global trade war would have unintended and unpredictable consequences. And in the stock market context, a national security-defined trade war could be more significant — and harder to account for — in the market's best and most widely invested sector: technology. The damage could be much bigger than the "rounding error" within Apple earnings from the steel and aluminum trade penalties. Those fears came into much starker relief on Tuesday when reports surfaced that Trump wanted $60 billion in trade penalties directed at the Chinese, and a day after Trump killed a huge cross-border technology sector acquisition based on national security concerns. CNBC reported late on Tuesday that Trump is considering indefinite tariffs and investment restrictions targeting the Chinese tech and telecom sectors. "With potential trade wars with China front and center, and tariffs looking like the Fort Sumter that could set off a battle royale with tech space getting caught up in the crosshairs, we believe the moving definition of national security interests has gone from background noise to a more relevant issue for tech investors," said Daniel Ives, chief strategy officer and head of technology research at GBH Insights, and the analyst who said this week that the steel and metal tariffs specifically were an Apple earnings' rounding error. "China has some fighting words, and Silicon Valley and the Street are starting to get nervous with Trump igniting the match," Ives said.

Recent skirmishes in the technology trade war

There's been a year's worth of headlines reinforcing the point that technology companies can't hide from "national security" headlines. Russian meddling in elections through Facebook, of course. But much more. U.S. intel chiefs alleging that widely used antivirus software from Russian tech start-up Kaspersky Lab has KGB "bugs" embedded within it — which led Best Buy to pull the product last September even though Kaspersky's founder, a graduate of a KGB cryptology school and former Soviet military engineer, denies it. You don't hear the U.S. government warning Americans about all of the cybersecurity companies to come out of Israel's government defense agencies. Palantir, the secretive Silicon Valley start-up that has U.S. government intelligence contracts, came on CNBC this week to say that its margins will be impressive when investors see them. Though Palantir being Palantir, the company made no effort to actually show the numbers. One of its own investors said he'd be happiest if Palantir never went public. Tech stock investors don't have to worry about privately held Palantir or Kaspersky, but any Qualcomm investor already knows that the national security issue is a legitimate and growing one.

Lei Jun, the CEO of Chinese smartphone maker Xiaomi (front right), shakes hands with Qualcomm CEO Steven Mollenkopf on November 9, 2017, after signing a memorandum of understanding during a ceremony attended by President Donald Trump (obscured) and China's President Xi Jinping (back right) at the Great Hall of the People in Beijing. AFP | Getty Images

In a letter this week from Broadcom's chief to the U.S. Congress, the Singapore-based company stated it would not sell any critical national security assets to any foreign companies if its $117 billion deal to buy chipmaker Qualcomm is approved. On Monday, Sen. Tom Cotton, a vocal Republican voice on foreign policy, said, "Qualcomm's work is too important to our national security to let it fall into the hands of a foreign company." Cotton won that argument — Trump stopped the deal dead in its tracks for "national security" reasons. The Broadcom furor comes not too long after AT&T backed out of a deal to sell smartphones from Chinese company Huawei in the United States — allegedly under pressure from lawmakers. In maybe the most surprising move, U.S. intel chiefs announced last month in congressional hearings that they would advise Americans not to buy smartphones made by Chinese companies, including Huawei. Intel chiefs have long warned about Chinese telecom company ZTE and its telecom infrastructure equipment. The U.S. government has also long referred to Huawei as "effectively an arm of the Chinese government." The United States blocked Huawei and ZTE from bidding on a Sprint roll-out as far back as 2010 and investigated them in detail in 2012. The United States also has barred multiple Huawei investments. But the warnings previously had not been taken to the level of the smartphone itself, which puts this national security dust-up squarely in the sweet spot of the market's most beloved stock, and a stock whose fortunes are increasingly tied to sales in China: Apple. Tempers have been running hot: Huawei's chief said earlier this year as national security issues flared up that the United States is trying to stifle competition among phone makers. Just last week one of Huawei's top executives called the developments in the United States "ridiculous" and "unfair" — and Huawei moved immediately to distance itself as a company from the comments.

China has some fighting words, and Silicon Valley and the Street are starting to get nervous with Trump igniting the match. Daniel Ives chief strategy officer and head of technology research at GBH Insights

"Right now the Street is largely dismissing the national security issues on tech, although the Qualcomm move was a wake-up call and the Apple/China situation is an albatross investors are trying to handicap," Ives said. On Tuesday, after headlines that Trump was reportedly looking for $60 billion in tariffs on Chinese products hit the wires, tech stocks sold off. To be clear, it was also a risk-off day for the stock market with the firing of Secretary of State Rex Tillerson, and tech stocks which have seen big gains can make big moves when investors get a surprise. And Apple shares had just hit an all-time high on Monday, even smid signs that the Broadcom deal was likely doomed. But even before the Broadcom deal was killed by Trump and the $60 billion in potential Chinese penalties was being reported, investors were starting to discount some risk from a potential China trade war and run through worst-case and best-case scenarios for the top 15 to 20 tech vendors, Ives said. From FANG names to chip plays, Wall Street is modeling the potential financial risk on both the top and bottom line for tech names and which vendors are most exposed. Qualcomm is the most at risk if China walks the walks instead of just talking the talk, Ives said. "With Qualcomm depending on China for a good piece of its renaissance of growth, and with the Broadcom bid up in the air, they have the most to lose in our opinion, and it's a worry for investors." Apple and Qualcomm media teams did not respond to requests for comment.

China had it coming, based on its own policies

Many China analysts believe it's the Chinese government that has had this coming, because when it comes to technology, China's own practices reflect the broader claims about "unfair" trade policies. "In China the line between industrial policy and national security policy is super-thin to sometimes nonexistent," said Scott Kennedy, deputy director at the Center for Strategic and International Studies. "They use national security arguments to promote industrial policy outcomes. ... Their existing regulatory environment is highly discriminatory against American and foreign telcos," Kennedy said. He said China could make a highly protectionist system even worse and go one step further and make life more difficult for American companies. But he added, "I don't think anything said by the U.S. government would bring it close to what the Chinese already do. ... In terms of due process, you can't defend the U.S. from top to bottom, but the U.S. does have a relatively robust system with some checks and balances, while China has none." Kennedy doesn't believe that the rhetoric from U.S. officials has reached a level equivalent to China, where industrial policy and national security policy are deeply entwined, but he was surprised that the intel chiefs went as far as advising Americans to stay away from Chinese smartphones. He noted it was not in written statements, but instead revealed by intel chiefs as part of responses to hearing questions posed by politicians. "It wasn't clear how precisely they meant to refer to handsets. They could be right that our cellphones are vulnerable to surveillance. Where they had been before [the handset warning] was more concern about equipment. Telecom equipment has been a longtime concern, and that's not industrial policy," Kennedy said. He also noted that any American consumer can buy a Huawei phone or a phone from another big Chinese phone maker, Xiaomi, right off the shelf and then go to AT&T or Verizon and have it turned on. He also contended that, like Palantir, being private allows Huawei to share as much or as little information as it wants.

Apple now in middle of US/China tug-of-war