Trump vs. Huawei: How will China respond to U.S aggression?

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BEIJING – Huawei said it will continue to offer updates and services to its users of smartphones and tablets of the Android operating system. But it is possible that the future of the company will be affected, if the US president does not back down with his decision to prohibit companies from his country to trade with Chinese companies.

The new battle began on Friday, when US President Donald Trump decreed – through an executive order – a national emergency motivated by alleged threats to information technologies and national security in his country. The order did not name Huawei or ZTE, the other Chinese company at stake, but it was suspected that both would be the recipients.

Since then, official information is scarce. The specialized publication Bloomberg announced that Intel, the main supplier of chips for Huawei, Qualcomm that provides processors and modems, Xilinx and others, would stop trading immediately with the Chinese company. This would seriously affect hardware provisions.

But the news is worse when it comes to software. According to Reuters sources, Google has already suspended new business with Huawei in everything that requires hardware and software transfer, with the exception of products covered by open source licenses. Android, the operating system provider also did the same.

According to preliminary announcements, Huawei customers worldwide could continue to download applications but will not access system updates. Dr. Carlos Aquino, a specialist in Asian economics, said that the response from China is inescapable but the possible scenarios are several.

At the discretion of the expert, the least effective would be a tariff offensive, because the Asian country sells a lot to the United States but buys little, so it does not have a large merchandise base to impose taxes.

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A more violent option, but with collateral damage, would be the sale of the trillion dollars of US Treasury bonds held by Beijing. Alternative that, according to the economist, would lower the price of the dollar, but also leave a China “damaged by the fall in the value of its assets”.

On the other hand, something more profitable would be to focus on the prohibition or limitation of US companies in their territory, or even on “the devaluation of the currency to increase the competitiveness of its national products”.

The possibilities with respect to these last two options are high, but what is more is the use of the so-called ‘rare earths’ (as the 17 chemical elements widely used in the technological industry are known) in retaliation to the protected North American industry.

This was suggested by Chinese President Xi Jinping in an impromptu visit on Monday 20 to a land and mineral processing facility.

“China is one of the largest producers of ‘rare earths’ in the world, these are materials used in many lithium batteries and high-tech products, and China produces 70% of the world’s supply,” said Aquino.

The United States imports 80% of its requirements for these materials from its Asian rival, which could jeopardize its industry in the event of retaliation in that order.

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