What’s The Trade War Really About?

China is an emerging economic juggernaut.

China’s annual GDP growth rate was 6.5% last quarter. Technically, the growth rate is around 10%, but there’s 4% inflation. And China has maintained an even higher average growth rate over the past few decades.

Some people doubt these official numbers. But disposable income in China is also rising by around 6.6%, and I believe the numbers for the most part.

Chinese tech companies have gone global in a big way. They are increasingly presenting real challenges to American giants like Apple, Cisco, Qualcomm, and Google.

Huawei is a prime example. The Chinese company makes phones, mobile processors and networking equipment. And it’s now handily beating Apple in China. In the last three months of 2018, Huawei sold 30 million smartphones in China, three times more than Apple. Growth in Europe is also strong, and Huawei expects to surpass Samsung as the world’s largest phone maker next year.

Huawei’s networking business has soared over recent years as well. And it’s in direct competition with Cisco and others to build new 5G cellular data networks.

The U.S. has been saying Huawei equipment is a security risk since at least 2012. Huawei’s CFO was arrested in Canada last December on a fraud charge at the request of the U.S. government. In 2014, the government banned Huawei from bidding on government contracts. And there’s a rumor that President Trump may ban Huawei hardware completely. Officials are actively trying to get allies to ban Huawei equipment abroad as well. They claim that China could be spying through Huawei equipment, but no proof has been offered so far.

The argument to ditch Huawei has been a tough sell, according to The Wall Street Journal, because customers really like using Huawei equipment. And they save a lot of money since Huawei offers products that are both cheaper and (arguably) more advanced than the competition.

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