Trump reversal: Huawei off the table during U.S.-China trade talks

Trump reversal: Huawei off the table during U.S.-China trade talks
In the middle of May, the U.S. Commerce Department put Chinese phone manufacturer Huawei on the Entity List banning it from its U.S. supply chain. While this was done for security purposes (Huawei is considered a national security threat in the U.S because it might be asked to collect intelligence by the communist Chinese government), there was some thought that it could be used as a bargaining chip during trade talks between the U.S. and China.

Both countries are embroiled in a trade war and have imposed tariffs on imports from each other. For example, starting at the beginning of this month, a number of Apple devices manufactured in China, including the Apple Watch and the AirPods, are taxed at 15% when they enter the states. Starting on December 15th, a similar tax will be imposed on the iPhone. Apple can choose to absorb all or part of the tax and pass on the remainder for U.S. consumers to pay through higher prices.

Trump changes his mind; Huawei is off the table during U.S.-China trade talks


Back in May, U.S. President Donald Trump stated that Huawei's position on the Entity List could be used to help the U.S. get better terms from China in any trade talks between the two countries. "So it’s possible that Huawei even would be included in some kind of a trade deal," the president said at the time. "If we made a deal, I could imagine Huawei being possibly included in some form, some part of a trade deal." But Huawei now seems to be off the table. According to Reuters, the U.S. doesn't plan on bringing up the company during recently announced trade talks with China.


Google recently told Reuters that it was not going to license the Google Play services version of Android, which includes the Google Play Store and its core Android apps, to Huawei for the Mate 30 line. Huawei was originally planning on becoming the world's largest smartphone manufacturer on the back of its new flagship series; but without the licensed version of Android installed, sales of the phones will most likely lag behind projections. For the first half of this year, Huawei delivered 118 million handsets (59 million in both the first and second quarter) which put it in second place behind Samsung. The Mate 30 and Mate 30 Pro will be introduced on September 19th.


Trump's stance against Huawei seems a bit contradictory considering the actions he took last year with ZTE, another Chinese phone and networking equipment manufacturer. Like Huawei, ZTE is considered a national security threat and was banned from accessing its U.S. supply chain after failing to follow punishments imposed on it by the U.S. Commerce Department. ZTE had violated U.S. and international sanctions by selling goods and services to Iran. Unable to buy components and software from its U.S. suppliers, ZTE was hurting. Then, a surprise tweet from President Trump in May of last year demanded that the Commerce Department work out a deal with ZTE. The tweet read, "President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!" Eventually, a deal was reached as ZTE paid the U.S. $1 billion, put $400 million into escrow to cover future violations, and revamped the makeup of its board and executive suite.

We'd be remiss if we didn't point out that the ban against Huawei has a huge economic effect inside the U.S. Last year, Huawei spent $11 billion on U.S. software, parts and components and companies like Qualcomm, Intel and Micron will be impacted. In fact, Huawei was Micron's largest customer last year.

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