Huawei ban can have consequences worldwide

On 16 May, the US Department of Commerce imposed sanctions on the Chinese technology giant Huawei. US companies can only do business with Huawei subject to strict conditions. The reason given for this measure was that the company was involved in „activities that conflict with the national security interests of the USA“.

Huawei is not just any Chinese technology provider, but one of the leading suppliers to the telecommunications industry, one of the world’s largest smartphone manufacturers and a major manufacturer of notebooks and smart watches. The ban is therefore aimed directly at the „heart of the Chinese technology sector“ and thus represents a further escalation in the trade conflict between the USA and China.

Only four days after the sanctions came into force, the US authorities granted a 90-day postponement, having evidently realized that the measures would affect not only Huawei but also multiple U.S. telecommunications companies and customers. Many operators of local broadband networks rely on Huawei products. In order to prevent these networks from coming to a complete standstill, the telecommunications groups affected by the ban have now been granted a 90-day period in which to search for technological alternatives. The US telecommunications providers will not be the only ones to suffer from the „Huawei sanctions” but also and above all numerous other American technology companies from the semiconductor industry and the software sector.

The escalating trade conflict between the USA and China could clearly also produce some winners – at least in the short term. But should the sanctions against Huawei last longer and even be extended to other Chinese companies, the losers in the technology sector will most likely predominate. Moreover, the repercussions are unlikely to remain limited to the technology sector. For components such as processors, sensors, modems and software solutions are a central component of products from a wide variety of industries. This means that not only will US corporations be affected but also companies, employees and customers worldwide. At this juncture, it is difficult to estimate the effect this will have, given the risk also of a cross-sector domino effect.

Ultimately, we fear that this could hamper the introduction or further development of new technologies such as „autonomous driving“, „industry 4.0“, the „Internet of Things“ and the new mobile communications standard „5G“. In addition, China can also be expected to adopt countermeasures which will probably affect completely different areas. This would have an impact on world trade as a whole and, by extension, also on growth momentum. The impact of this would likely be less pronounced in the US, given the country’s comparatively good position as net importer and its abundant reserves of raw materials.

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