The Trump administration had issued an order that had barred American firms from selling components and software to Huawei on the basis that its ties with the Chinese government makes them a national security risk to the U.S. Huawei’s placement on the entity list has taken a real shot to their business, but if this escalation in the U.S. versus China trade war continues, everyone loses.
The fallout began when Google cut off support to Huawei recently for many Android hardware and software services. Aside from the U.S., UK-based chip designer ARM has ceased all activities with the brand, and multiple retailers and networks around the world have had to stop dealing with Huawei for fear of more sanctions from the US Government. The red flags around Huawei have begun to rise and the Chinese government is defending them.
The U.S. Commerce Department has temporarily lifted its ban on Huawei. This will last three months until August 19. Huawei has until then to prove to the U.S. Government that they are not a national security risk and ultimately remove their name from the entity list.
Huawei’s equipment is essential for many wireless carriers that serve sparsely populated regions in the U.S. because its gear for transmitting cell signals often costs way less than competitors.
“The technological upgrade changed lives,” wrote NYT writer Cecilia Kang, recounting how the high-speed internet emitted from the cell tower assisted farmer Kevin Rasmussen. “The connection worked with software on the iPad to help direct where the tractor poked holes in the soil and dropped seeds and fertilizer.”
“I can sit up here in my tractor and do my banking, monitor six weather apps and read up on things like trade and Huawei, all on my phone,” Rasmussen said. “Rural America needs this so badly.”
The case couldn’t be clearer for residents of rural areas. Nemont, the carrier that services the city of Opheim in Montana, has only 11,000 paying customers. Such a small base of customers makes upgrades through much more expensive services near impossible. Without having Huawei as a cost-effective and affordable option, small carriers like Nemont may be put out of business. Leaving 11,000 customers without service.
The image on a man on a tractor, scrolling through an iPad isn’t the first image that comes to mind when anybody thinks of a farmer. It may seem that in rural areas wireless service is a non factor, but those who grow our food rely heavily on technology to help them. Farming nowadays is much more a calculated science than in previous decades. There are many other small carriers that provide rural areas with service that are at risk with the Huawei bans.
“Restricting Huawei from doing business in the U.S. will not make the U.S. more secure or stronger,” Huawei said in a statement. “Instead, this will only serve to limit the U.S. to inferior yet more expensive alternatives.”
There are other potential, far-reaching implications outside of the rural breadbaskets.
“The loss of Huawei as a major player in the global smartphone market could also have a wider impact on the smartphones other vendors are pushing out,” wrote Gareth Beavis of TechRadar. “The Chinese brand’s aggressive development of new technological capabilities has forced rivals to significantly improve their devices and push out new advancements of their own, and any diminution of its influence would likely slow the rate of development.”
To give an example, Huawei has been a major player in the development of high-tech cameras in smartphones, subsequently forcing Samsung and Apple to follow suit. The argument can be made there is enough competition between Apple and Samsung to drive the industry but Huawei’s aggressive business model will at least keep another runner in the race.
The tech industry runs on low-cost chinese parts so it is not out of the ordinary to see the precedent a decision like this might affect the future of the tech industry. China’s new national surveillance tactics don’t exactly abide by the moral guidelines of other developed nations. Given China’s oppressive government and questionable human rights, it is no surprise that the U.S. is concerned about security threats. Although, if we have been sourcing parts from China for decades, now we have to ask ourselves a tough and concerning question: how do we know our security hasn’t been compromised already? The Chinese government certainly has the power and willingness to do such a thing.
The fact that the economy of the United States runs on Chinese labor is very concerning considering the growing tensions that have been building between the two countries. Leaning on your adversary is a dangerous game when you keep on aggravating their wallets. Earlier this month the President raised tariffs to 25 percent from 10 percent on $200 billion dollars a year on imports from China. If that wasn’t enough, he’s threatening to target even more Chinese goods with tariffs.
Bloomberg reports that China has put preparations in place to restrict exports of rare earth minerals to the U.S. as well as setting up its own ‘unreliable entities’ blacklist as retaliation for the Huawei ban. The Chinese government’s response was to just copy-and-paste what the US did to them with an extra punishment attached to it. These rare earth minerals, such as neodymium – which is commonly used in magnets and headphones – are exports that can only be easily sourced from China. Luckily, so far they have only threatened the US with this extra consequence, but if this trade war continues it will be implemented.
The cat and mouse game that the President is employing will not only hurt our economy but the world economy and the whole concept of free trade as we know it. China alone was responsible for $737 billion in trade with the US in 2018.
“China needs the American export market to keep its economy going and wants advanced technology like computer chips and software from the United States to foster its economic development,” emphasized NYT Writer Carlos Tejada.
The United States and China depend on each other to fuel their economies. Trump’s stance seems to distance himself from China as if we weren’t relying on them. His egocentric view of trade politics affects our relationships with many other nations as well, but China remains at the forefront.
Much like the Cold War, this current trade war will guarantee that every action between the U.S. and China will be magnified. The clock is ticking:by August 19th, Huawei will either resume its business with the U.S. or China will make us pay for or our President’s short-sighted trade decisions.