Updates to the trade tension between China and the US

Huawei has attracted a lot of public attention since the US government placed a ban on Huawei. The US government does not ban Huawei from involving in building the 5G in the US but also ban US firms from doing business with Huawei. The former was largely expected by the public, since the US government had talked about this ban for a long time and tried to make its allies also ban Huawei in their 5G building. The latter was a surprise. Banning US firms from doing business with Huawei can be expanded to a larger scale and become a ban applying to more Chinese firms. This is a two-edge sword that definitely hurts both sides, which can be shown that both the Chinese stock market and the US stock market were drugged down by the release of this US policy.

Let's talk about Huawei, which probably is the firm that attracts the most attention at the moment. Huawei has been given a reprieve that the US companies can continue doing business with the company for three more months; however, the company founder, Ren Zhengfei, said in an interview that the grace period 'doesn't mean much'. Moreover, all information that came out of the company shows that the company has prepared itself for being independent of its US suppliers including the software supplier, Google. It is undoubted that the technology gaps between China and the US in some sectors are still significantly observable. This cutting-off can affect Huawei's business, especially its overseas business. However, it also means a huge loss for the US companies. The US chip makers are making chips for Huawei as well as other Chinese smartphone makers. The smartphone makers do not perform as well as they did, except Huawei. Huawei is the only major smartphone maker that experienced a sales increase in the first quarter of 2019. The sales increase was not a minor increase, Huawei experienced a over 50% year-over-year increase and made itself the second largest smartphone maker in the global market. Losing such client is definitely a big loss to these chip makers as well as other suppliers.

Of course, it is not all bad news for Huawei. Although the US is putting efforts to push Huawei out of the 5G global market, many countries including some US allies have not shown the willingness to block Huawei from building their 5G networks. In addition, we do not exactly what benefit 5G will bring to is. Huawei is the leader in 5G and provides the lowest price in the market; without Huawei, the 5G in the US can cost much more and slow down the development in 5G, since the lower ratio of return to cost in the US due to the higher cost reduces the attractiveness in 5G investment.