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Trade War Reignited

By Kevin Zhang

On August 2nd, 2019, President Trump decided to reignite the trade war with China by setting a 10% tariff on 300 billion dollars of goods imported from China, effective starting September 1st. Many expected Trump to be more relenting towards the Chinese telecommunications and smartphone giant Huawei, but he reneged on his promises.

Currently, Washington’s trade blacklist prevents American companies from doing business with Huawei or supplying Huawei without licenses to do so. Trump had said in June that he would relax some of the restrictions, possibly with a concession to Beijing, and relief for major Huawei suppliers including Google, Intel, and Qualcomm. U.S. Commerce Secretary Wilbur Ross recently said on Tuesday that the U.S. Government would consider giving out licenses to U.S. companies in order for them to do business with Huawei. The imposing of these tariffs followed an uneventful round of trade talks, where there were no concrete promises from China to buy more U.S. agricultural goods. If Trump backs away from promises to issue licenses to Huawei’s U.S. suppliers, there will be much higher chances of negotiations breaking down and counter-tariffs being imposed by China. Huawei’s business has been hurt significantly by its ban earlier this year.

In May, Ren Zhengfei, founder of the company, acknowledged that foreign smartphone sales dropped by 40% after the trade ban. Huawei Chairman Liang Hua said on Tuesday that Huawei will continue to face difficulties this and next year. Liang still emphasized that Huawei is still a global leader in the 5G industry. However, the Huawei ban still hurts, especially for American tech firms. The ban prevents Google from supplying Huawei phones with the Android OS and apps like Gmail. Chipmakers in the U.S. have also lost a portion of their sales. The trade war ignited by Trump hurts businesses of both China and the United States, and many want it to come to a close.

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