USA and China place Huawei truce at center of trade talks

The leaders of the USA and China met on Saturday on the sidelines of the G20 meeting in Osaka, Japan, and in the shadow of the just-ended MWC Shanghai event, which showcased China’s massive advances in the 5G market so far.

Until then, the USA had been about to impose new tariffs on Chinese goods that are not covered by the current 25% tariffs – goods worth about $300bn a year. Now, those tariffs have been taken off the table. In return for the Huawei concession, China has agreed to start buying large quantities of US farm products.

Trump told a press conference that his administration needed to work out the details of how to deal with Huawei, which had been placed on the US entity list – US companies cannot trade with firms on that list without a special licence. But he confirmed that Huawei can now buy equipment and components from US firms, qualifying that by saying: “We’re talking about equipment where there’s not a great national emergency problem with it.” However, his compromise is likely to prove unpopular with hawkish factions at home, since some Congress members had been lobbying for stricter controls on Chinese participation in 5G-related deals.

John Neuffer, president of the Semiconductor Industry Association, welcomed the truce though alluded to the lack of clarity on the details, and Trump’s notorious inconsistency. “We look forward to getting more detail on the president’s remarks on Huawei,” he said. Chip providers such as Intel and Qualcomm had lobbied the government to allow them to sell to Huawei without restriction, and to resist extending sanctions to other Chinese firms like ZTE (which is a major customer of US components). They had also been concerned by Chinese hints that it would draw up a retaliatory ‘blacklist’ of US companies which would be prevented from trading with Chinese vendors and operators.

Short term, a cessation of hostilities will spark a sigh of relief, not just from Huawei itself, but from its suppliers in US and allied countries. Operators in Europe and other regions will hope the USA will also step back from its demands that its allies bar Chinese firms from 5G infrastructure deals – though the years-old bar on Huawei and ZTE in US national network contracts will remain. Even rival vendors such as Nokia and Ericsson have feared that stringent sanctions against Huawei would slow down the whole 5G project, and lead to retaliatory restrictions on their sales in China. Only Samsung may have been wholeheartedly favourable to continuing the 5G cold war, since it was being anointed as a third wheel to replace Chinese vendors and keep Nokia and Ericsson honest in networks (not to mention a possible boost for its handset business).