Tech caught in trade war

Trump administration's move to put Chinese telecom giant Huawei out of business will impose collateral damage

AuthorPublished: 22nd May 2019  12:00 amUpdated: 21st May 2019  11:46 pm

The trade war between the United States and China has escalated further with the Trump administration imposing a ban on sharing technology with Chinese telecom giant Huawei. Following this, Google and other American tech companies like Intel, Qualcomm, Xilinx and Broadcom restricted the company’s access to their products. The access to the Android operating system on which the Chinese firm’s mobile devices depend has been suspended, along with the transfer of hardware, software and technical services. Huawei is the second largest smartphone manufacturer in the world with almost half of its shipments going outside China. The move comes as the US government has added Huawei to the ‘Entity List’, which means that US companies cannot do business with the Chinese telecom major without ‘explicit approval’ from the government. Google cancelling the Android licence will have a major global impact, given Huawei’s standing in the smartphone world as almost half of its business comes from outside China. There has been a steep drop in Chinese investments in the US — down more than 90% since the tariff war began more than 10 months ago. Last week, the US barred China Mobile, the country’s largest mobile provider, over espionage concerns — the same reason it gave for blocking Huawei. The latest crackdown saw global equity markets fall on Monday. Now, one can expect countermeasures from Beijing that could include encouraging a consumer boycott of American goods, such as Apple products. China is Apple’s third-largest market by sales volume. Increased inspections or added regulatory hurdles could be other options.

Targeting Huawei may have stemmed from the US fear of losing the technological edge in the telecom sector to China. This will have far-reaching and unintended consequences. The US has long argued that Huawei poses a national security threat. It must be pointed out that there are certain legitimate reasons to worry that incorporating Huawei gear into America’s networks will leave them vulnerable both to spying and, in the event of a conflict, sabotage. But, the US is already taking other steps to prevent Huawei equipment from being used domestically. It is a disproportionate and unwise move to put the Chinese company out of business as it will impose collateral damage. Several companies around the world —including Huawei’s American suppliers — could lose business, face disruptions and incur significant new costs for no fault of theirs. It is time the major economic powers realised that there can be no real winners in such a battle in a globalised and interconnected economy. Harmonious multilateral trade is the way forward. Bilateral trade arrangements can only provide supplementary benefits. An increasingly combative approach being adopted by the Trump administration could seriously harm the multilateral trade.