How the US Huawei Ban will impact to Global Markets

One of the first Implications of Global Trade War is the US Huawei Ban. Here we explain How this will impact to Global Markets

Huawei is one of the largest technology company in the world. The company, which was created in China, has grown from a small operation to one that generates annual revenues of more than $30 billion. It is the second-biggest smartphone company in the world after Samsung. Last year alone, the company sold more than 200 million devices around the world. In addition to devices, the company manufactures telecommunication devices that are used by mobile couriers globally. As such, it has disrupted the industry long dominated by Western companies like Ericsson and Nokia.

The rise of Huawei is a testament to the Chinese growth. This has come at a time when the United States is starting to worry about global dominance by the Chinese economy. As a result, the company has been caught in the middle of the ongoing trade conflict between the United States and China.

In the past few months, the Trump administration has called for its allies to ban the company from the 5G transition (our suggestion about 5G companies). The country argues that the company’s technology cannot be trusted because China can hold the countries hostage. China is also famous for its anti-privacy system of governance. As such, the government can easily collect and spy on these countries. For years, Huawei has rejected that it is controlled by the Chinese government.

5 Key Assets to Watch as China and US Trade War Continue

Huawei’s Ban: The apotheosis (for now) of global trade war

Last week, a week after Donald Trump announced new tariffs on Chinese goods, he went a step further and announced that the country would ban its countries from doing business with Huawei. This was the strongest announcement to the company. Essentially, American companies will no longer be able to sell to the company.

This will have major impact for the company. This is because a large part of the company’s production relies heavily on American parts. For example, all Huawei devices work with the Android operating system. Over the weekend, Google announced that it will not offer Android to the company. However, since Android is an open-source system, the company will continue to use it but, it will not have the proprietary services offered by Google.

In addition, the company’s devices are run by chips from companies like Quallcomm and Broadcom (and some of them just join Google in the ban). While Huawei develops its chips, they are not as powerful as those offered by the American companies. Its computers run with Windows, which means that the company could be left with no operating system.

There are a few implications on this that investors should know about:

  • There are chances that many Chinese will start abandoning legacy American products like iPhone and iPads. In fact, recent data from China shows that the Apple sales are slowing down. This will affect other companies like Microsoft and Nike.
  • There is a likelihood that some American products could be banned in the country. This is a major issue because most American companies are leaning to China for growth. After the talks broke down, these companies could experience barriers to their growth.
  • The collateral damage will likely be on the American farmers. This is because China could easily ban American produce like corn and soybeans from the country. This could affect their prices, which are already depressed.

 

See also How to Trade the New Normal of Global Trade War

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