New front in trade war spooks stocks
The White House’s move against Huawei, the world’s second-biggest smartphone maker, takes the trade war into uncharted territory.
"Here be dragons," says Christopher Beddor on Breakingviews. The White House's move against Huawei, the world's second-biggest smartphone maker, "takes the trade war into uncharted territory". The US president has added Huawei to an export blacklist on national security grounds. The order prompted Google to ban the firm from accessing some features on its Android operating system. The move follows prolonged attempts by American officials to persuade allies, including Britain, to bar Huawei from involvement in their 5G networks and potentially stokes "a new tech cold war". Stocks were unnerved at the thought. Domestic Chinese equities slipped by 4% in three days; America's S&P 500 has lost 3% from its record high.
Huawei has doubled its global share of the smartphone market in the last two years, says Jim Armitage in the Evening Standard. The latest escalation could trigger a potentially "devastating crisis" for the maker of one in five of the world's handsets. Google's move to sever ties means new Huawei phones will not have access to security updates or features such as Google maps. That might give Trump more leverage with Beijing, but it also denies consumers access to China's "cheaper, better technology".
Why now?
A black cloud over markets
This is likely to create pervasive uncertainty and volatility over the next few months, although central bank action may limit the downside for stocks. The prospect of the Fed coming to the rescue at the first sign of trouble has kept US markets buoyant, says Sarah Ponczek on Bloomberg. News of weak US retail sales actually triggered stockmarket gains last week. "Bad news is good again. As long as it doesn't involve China."