A couple recent stories I read, both seemingly unrelated, got me thinking.
Is it possible nowadays that a trade war could turn into something even nastier than it has in the past? Something closer to real war, like cyberwar?
Here’s what I saw.
First, recently New York City was hit with outages at 6 a.m. followed by outages in Los Angeles and San Francisco later in the morning. The San Fran outage was blamed on a “substation fire.” They were widespread outages that affected transit systems.
Second, the Trump administration announced that it is exploring whether steel imports represent a threat to national security. A conclusion of “yes” would mean steel tariffs or even embargoes on foreign steel. Trump’s administration has already said it will impose an anti-subsidy 20 percent tariff on Canadian soft wood lumber.
But back to steel… the Chinese economy is supposedly reviving and Chinese steel production is expected to rise in 2017. Most of the steel will be for domestic consumption, but Chinese exports to the U.S. are still threatened by this move.
China became a steel making force about 15 years ago, and as its economy fizzled, it kept producing steel to keep the economy afloat, even if it meant dumping it into countries around the world. This has been an issue for a while.
So, what would stop the Chinese from hearing about the new protectionist trade policies, denouncing them diplomatically and then getting their cyber cadres to fire a stealth shot across the bow of the U.S. economy by shutting down the grid on two major U.S. cities?
Now, of course, maybe it’s all coincidence. But I’m guessing we’re not going to see much follow-up on the causes for these blackouts. If some other country was an actor, their tracks will be sufficiently covered and national security would dictate that the news not travel outside of intelligence circles.
There’s also the possibility it wasn’t China. It could have been Russia, North Korea, ISIS… you name it.
There’s no argument that the U.S. grid is vulnerable to cyber attack. Not much has been done to counter it except for the work of a few companies.
Even now, there are unknown ghosts inside the wires and machines and they’ve been sitting there, doing nothing. Many cyber security folks think hackers have already gotten into the phone lines and power lines just to observe.
The strategy would be for state-sponsored or independent cyberterrorists to plant these “watchtowers” in systems and then either see what happens when a system goes down or force a system down and see what countermeasures are taken.
This reveals the defensive tactics of the attacked and allows the attackers to formulate countermeasures for the next attack to get around the exposed defense.
Now, this isn’t to say we’re not doing the same thing abroad. The recent failed rocket launch in North Korea was likely thanks to our own team of hackers in the NSA or CIA. Remember, the U.S. was likely behind Stuxnet, which ruined Iran’s centrifuges.
I say likely because no one will ever really know and no one will ever admit to doing these things.
But my larger point is, we’ve usually figured these things happen to our pesky neighbors in developing countries, not the U.S. of A. But terror won’t necessarily be a backpack bomber on a subway train. It will be a hacker that shuts down the entire subway far away from ground zero.
Or, it could be starting a China Syndrome at a nuke from 6,000 miles away.
This new level of cyber attacks is far more significant to a great portion of the population than individual attacks. For example, the East Coast grid is made up of a number of interconnected grids from Ohio to Florida.
If you bring them down just right, you can shut down almost the entire East Coast. That’s bigger than a dirty bomb in the heart of a big city. The economic damage would be significant. Remember 2003? That was then the second largest blackout in history, affecting 45 million people in eight states. And that was just an accident.
I bring all this up because it pays to be prepared. If you own utilities, see what kind of cyber security they have implemented to stop hacking. The investor relations section of their website should get you started.
As far as the markets go, this is a bigger issue for big companies in the sense that they will be the targets of these cyber attacks. Bringing down your local savings and loan will hardly have the resonance of bring down Citigroup.
Of course, any cyber attack will be great for cyber security companies and these few companies that are working to overcome the problem. Let’s just hope that their success is due to them thwarting these threats before something happens rather than reacting to them after they occur.