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The trade war takes another turn

The trade tensions between the US and China seem to be going from bad to worse. Stock markets are jittery and now China is threatening to use its hold on the supply of rare earth minerals in this ongoing trade dispute.

The US government's decision to add Huawei and 70 of its affiliates to America’s “Entity List” - a move that bans the telecom giant from buying parts and components from American companies without official approval helped to trigger this latest round of angst.

The announcement restricts Huawei’s ability to manufacture some of its goods and, more seriously, could block it from buying critical components such as semiconductors from US firms, including the likes of Qualcomm.

A reported leaked internal memo at Arm suggests that it is looking to stop working with and supporting Huawei and would be one of the biggest blows to date in the US-China trade war, while Infineon has reportedly stopped shipments of chips to Huawei to conform with the US ban.

While Huawei may not need the US market, it already has a dominant share of the world’s telecoms infrastructure market, it will certainly need the key components that it gets from these companies.

President Donald Trump has declared a national emergency to protect US computer networks from "foreign adversaries" and has effectively barred US companies from using foreign telecoms who could pose a national security risk.

While Huawei has not been named specifically it is obvious it is the cause of the US decision and, as such, it has responded by arguing that restricting its business in the US would only hurt American consumers and companies.

Huawei has been in the news constantly over the past few months due to growing concerns that its products could be used by the Chinese government for surveillance.

These allegations have been vehemently denied by the company but that’s not stopped a growing number of countries looking at their relationship with Huawei.

A new UK report says Huawei’s links to the Chinese government make it a “potential security risk” and as such it should be completely banned from supplying 5G mobile networks in the UK.

In April 2018, Chinese tech company, ZTE, was barred from buying US parts after it too was placed on the same "entity list". It resumed business after reaching a deal with the US in July, is something similar likely to happen with Huawei?

Huawei has said that the move by the US will only serve to “limit the US to inferior yet more expensive alternatives.”

The Huawei issue cuts to the heart of tensions between security and economic interests.

Paul Triolo, a technology policy expert at Eurasia Group, a risk consultancy, said that the ban on US companies selling kit to Huawei was a “huge development” as any disruption to the global supply chain would hit US tech companies too.

Has the US openly declared it is willing to engage in a full-fledged technology war with China?

Neil Tyler

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