Telecoms: China and Huawei sanctioned by Trump

US President Donald Trump on Wednesday banned US telecommunications networks from sourcing equipment from companies deemed to be at risk. The measure is aimed primarily at China and the sector giant, Huawei. 

This is the most severe measure taken by the United States against the Chinese technology sector to date. American President Donald Trump signed a decree on Wednesday, May 15, prohibiting American telecom companies from buying equipment from foreign companies deemed to be at risk. In the midst of commercial tensions with Beijing, Donald Trump declared a "national emergency" to take this decision and is targeting the Chinese telecom giant Huawei, who has long been on the radar screen of the American authorities.

The person concerned was not mistaken: these "unreasonable restrictions will encroach on Huawei's rights", the Chinese group denounced. In addition, they will only "confine the United States to lower and more expensive alternatives" for 5G, the fifth generation of mobile telecommunications, the company warned in a statement. Huawei presents himself as "the unrivalled leader of 5G".

According to the White House, the decree is justified by the fact that "foreign opponents are increasingly exploiting vulnerabilities in information and communication technology services and infrastructures in the United States". For Beijing, on the contrary, it is an unfair manoeuvre that distorts competition.

.@POTUS is acting once again to protect U.S. national security.  This Executive Order addresses the threat posed by foreign adversaries to the nation's information and communications technology and services supply chain 
  Dry. Wilbur Ross (@SecretaryRoss) May 15, 2019 

The presidential decree ensures that it responds to "malicious acts promoted by the Internet, including economic and industrial espionage to the detriment of the United States and its people".

Trade war between the world's two leading economies 

The technological challenge currently dominates the commercial rivalry between Beijing and Washington. The world's two leading economies are facing each other through the mutual imposition of increased tariffs since Donald Trump launched hostilities after making China one of the favourite targets of his 2016 presidential campaign.

With US Secretary of State Mike Pompeo on the front line, the United States has been leading a charge against Huawei for several months on suspicion of spying on Beijing's behalf. The Pentagon has also increased its warnings.

The United States has excluded the Chinese firm from deploying 5G on its soil and is trying to convince its Western allies to do the same by warning of the multiple dangers of espionage in a world where the fifth generation will increase the number of connected objects, from cars to security cameras.

On Wednesday, the US Department of Commerce hammered the nail in by placing Huawei on a list of suspicious companies with which one can only trade after obtaining a green light from the authorities.

"This will prevent American technologies from being used by foreign entities for purposes that would harm the United States' national security or foreign policy interests," said Trade Secretary Wilbur Ross.
Our team at @CommerceGov is committed to ensuring that information and communication technology and services in the United States provide a safe and secure foundation for innovation and economic prosperity. #ICTSupplyChain
  Dry. Wilbur Ross (@SecretaryRoss) May 15, 2019 

Technological warfare "is not appropriate" 

Speaking on the subject, French President Emmanuel Macron said on Thursday that it was "not appropriate" to "launch a technology or trade war now against any country.

For him, "this is not the best way" to defend a country's national security or to "reduce tensions". 

"Our perspective is not to block Huawei or any other company but to preserve our national security and European sovereignty," said Emmanuel Macron, speaking in English, at VivaTech in Paris. He stressed that "France and Europe[were] pragmatic and realistic". "We want to develop employment, business and innovation. We believe in cooperation and multilateralism.

"At the same time, for 5G, we are very careful about access to core network technologies to preserve our national security," he said.

Chinese components, "Trojans"? 

Last year, the Trump administration almost killed the Chinese company ZTE by banning it for several months from buying electronic chips produced only in the United States.

The arrest in December of Huawei's CFO in Vancouver, Canada, at the request of the American courts, made things worse. Meng Wanzhou is suspected of lying to several banks so that Huawei could access the Iranian market between 2009 and 2014, in violation of US sanctions. She faces extradition to the United States.

Many American elected officials, both Democrats and Republicans, have adopted an increasingly suspicious attitude towards Chinese technology giants such as Huawei and ZTE, two groups closely linked to the authorities in Beijing.

"Chinese telecom companies like Huawei are in fact the information gathering arm of the Chinese Communist Party," Republican Senator Tom Cotton said on Wednesday.

This relative of Donald Trump assimilated the computer components sold by these companies into "Trojans" that threaten computer networks around the world. Trade war: the up to Donald Trump's knees, a risky bet
The United States announced on Monday that it was ready to tax all Chinese products, including those most popular with American consumers, such as smartphones or TV sets. A strategy that goes as far as the risky booby trader.

Televisions, iPhone, ketchup, soap, anoraks, photo albums, umbrellas or bras. It's not a shopping list or a letter of greetings to Santa Claus. These are some of the 4,000 products imported from China that US President Donald Trump threatened to tax on Monday, May 13, starting in June.

This new building block of the Sino-American trade dispute "covers all imports that are not yet subject to customs duties, with the exception of certain pharmaceutical, medical and rare metal products," the US administration summarized.

Trump is playing his all-out game 

With the threat of these new taxes, Donald Trump "is playing his last trump card in order to put maximum pressure on Beijing to obtain concessions during negotiations between the two countries", explains Jean-François Dufour, a specialist in the Chinese economy and director of the consulting firm DCA China-Analysis, contacted by France 24.

Washington is also sending a very clear message to China: to win his battle, the American president "will stop at nothing, not even the prospect of dissatisfying American consumers," the French expert summarizes.

Americans have spent nearly $1 billion on products - such as cell phones, laptops and children's toys - that are on the new list, the New York Times summarizes. The proposed tariffs are expected to result in a more than 1% increase in the prices of these highly valued items in the United States, Goldman Sachs Bank calculated.

Donald Trump's bet is that this time Beijing will refuse to respond one by one. China is also coming to the end of its retaliation measures. It has already imposed customs duties on almost all American imported goods... except aeronautics. Beijing has not yet taken any action against American car manufacturers on Chinese soil either. But if China were to take action against Boeing or General Motors, "it would risk depriving itself of the technology transfers that are essential to achieve its long-term objective: to become a leader in technological innovation," notes Jean-François Dufour.

Risk of Chinese collapse 

The American president believes he is a winner every time by following a strategy to the end. If Beijing refuses to outbid, it will have had the last word, which gives it an advantage in the negotiations. If China decides to sanction Boeing and the car manufacturers, it risks falling behind in its technological development "which is, in any case, the goal pursued by the United States in this trade dispute," recalls Jean-François Dufour.

But for him, Washington is making a miscalculation. China cannot give in: "The United States is the leading market for Chinese products, but ultimately only accounts for 20% of exports, while complying with American requirements would be tantamount to causing the collapse of the Chinese economy," he says.

Indeed, the United States' demands - to put an end to technology transfers and liberalize the Chinese market to facilitate access for American companies - amount to asking Beijing to question its entire economic development model, which is precisely based on state control of the market. "Donald Trump is right to think that the only way to correct the trade imbalance in favour of China is to rethink his economic model, but he is wrong to think that he can impose it through a trade war," says Jean-François Dufour.

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The spectre of a global crisis 

A sudden change of model in China would most likely lead to a chain of company failures. To liberalise the Chinese market, the umbilical cord between companies and the central government would have to be cut and "no one knows how many of them are artificially kept afloat by banks on Beijing's orders".

The best strategy for China is to increase the number of "cosmetic" concessions - such as promises to import more and more American products - that do not have a direct impact on its economic policy, in the hope that Donald Trump will eventually find his political advantage.

Because if the American President insists at all costs on fundamental reforms of the Chinese model, the trade dispute is likely to end badly for everyone. Indeed, the two superpowers can cling to their tariffs at the risk of weakening their economies and world trade to the point of causing a new economic crisis. And if Donald Trump succeeds in bringing Beijing to its knees, the consequences of China's likely economic collapse would not be any more enviable for the world that has become accustomed to living under an infusion of Chinese growth.