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Trade Ripples - May 21, 2019

“In Many Ways the Contours of the Emerging World Order Are Unclear”

 Earlier this month, trade talks failed to produce any resolution and the US and China are slinging mud again. Alongside tariffs, President Trump signed an executive order that led Google to suspend business with Huawei, the world’s number two phone maker. As an article from The Verge eloquently phrases it,

“Deprived of Google’s software, Huawei would be selling featherless chickens to smartphone buyers used to having Play Store access.”

The government has since walked back the restriction and granted Huawei a 90-day reprieve.

In addition to software complications, Huawei is also facing problems with acquiring chips needed for their phone. However, they anticipated potential supply problems and have “been preparing for a scenario of survival in extreme conditions” according to an article from China Plus. Meanwhile, the “Boycott Apple” movement in China appears to be gaining steam, as reported in this article from 9to5Mac. This is an echo of the informal boycott Malcolm Scott reported on in a January article for Bloomberg. Scott focused on analysis from BofAML economists, who presciently warned,

“Given the battles around high tech, this spillover from politics into sales could be particularly high in the cell phone market.”

Though short-term theatrics have lead headlines, by Chas W. Freeman, Jr.’s recent speech captured our attention. Ambassador Freeman, whose many accomplishments include serving as U.S. Ambassador to Saudi Arabia and editing the entry on “diplomacy” in the Encyclopedia Britannica, said the trade war “has quickly metastasized into every other domain of Sino-American relations.” Highlighting the lack of policy process and direction displayed by the current administration, Freeman carefully weeds through the complaints lodged against the Chinese, both legitimate and illegitimate, and describes how Sino-American relations have evolved. Freeman argues that China’s “transformation owes a great deal to the breadth and depth of American engagement with it.” He then discusses the various facets of US-Chinese antagonism, concluding that current policies do “not add up to a fruitful approach to dealing with the multiple challenges that arise from China’s growing wealth and power”. Finally, Freeman offers “a few suggestions” and concludes by saying “hostile coexistence between two such great nations injures both and benefits neither”. While on the lengthy side, Freeman’s speech is well worth the read as it not only strikes at the central cultural issues but also explains what happens when love breaks down.

 Free Content! Take advantage of our exclusive opportunity to read a piece from our institutional product, ‘US-China: When Love Breaks Down’.

 

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