One of the largest tech companies in the world is getting blacklisted by the United States on May 16. Wally was added to the Commerce Department's entities list which restricted from doing business with any US company without explicit government approval is a small carveout for maintaining phones of Artie shipped but basically it means it's a fact to ban on US company selling the quality Google is already revoked the company's android license and Intel and Qualcomm are considering similar groups as part of a much bigger fight between the US and China and it goes a lot deeper than what you probably read your cell phone your laptop your air conditioner your light bulbs. All of it was probably made in China. If you're in the US came by the same trade group that's now breaking down, but to realize why all that's happening yet to look at the big picture if you want to put a date on the beginning of the modern electronics industry 1980 would be a pretty good choice.
It was ear of apples IPO. The personal computer of all for a niche hobby into a mass-market consumer product, but more importantly it was the year China created the Shenzhen special economics space for Chinese companies Katrina free-market backed up by the power of communist central plant if the government wanted experts to be cheaper he could forcibly lower the exchange rate if a bunch of houses were getting in the way of factory construction. They could just tear the houses down over the next 40 years. That system built Shenzhen into the greatest manufacturing hub worlds ever seen at the same time that the tech industry was coming into its own those 40 years give us the personal computer the smart phone quad copter drone with each generation of tech relying a little bit more on the transpacific trade so that we wouldn't have smart phones without China's factory push, but they might look completely different and cost a lot more now that system starting to break down and it's not just because of following were in the middle of a really ugly trade in May, Trump announced a plan to raise import taxes as high as 25% on laptops and smart phones from China. Each new tariff in the US is met with more tariffs from China, which then trigger more retaliation from the US. So far, the most damaging move from China has been a new tax on sleeping imports, which is let the prices plummeting and cost US farmers billions of dollars receiving executives arrested and jailed on both sides, risking an unprecedented collapse in trade the first always problems were more about security than economics. Given how much Chinese spying happens in the US a lot of people in the intelligence community are nervous about a Chinese company operating American cell towers, but this latest move goes further, putting Wally's entire cell phone business in jeopardy. Even the CEO admits it's really hard to build a phone without US microchips, the big picture problem is that billing US goods in China just doesn't seem like that great of a deal anymore in the 80s and 90s leaders in both countries sought. Outsourcing is a win-win. American consumers got cheaper goods and Chinese workers got lifted out of poverty and exposed to democratic ideas of the same talking in the US. It was great for microchip designers and tech shareholders, but bad for factory jobs and it contributed a lot to the cratering of the middle class on the Chinese side seam factory jobs have made the country a lot richer, more imports are coming in. So China has unwound a lot of the currency manipulation that made exports are cheap to begin with. As a result, manufacturers of start looking to India and Vietnam for cheap factory labor and Chinese tech companies want to design phones instead of just assembling and are less reliant on the US market than ever. So what is all I mean for Huawei if the commerce server holds up in the US doesn't grant any licenses means the company may have to make a phone without any US components that means no gorilla glass and new micron flash memory, among other parts all those parts have foreign competitors, even if there more expensive and not quite as good probably doesn't want to build a phone without US parts, but they probably can. If they have to. You can see the same thing for US companies. If people had to build an iPhone without China, or even just stop selling iPhones in the Chinese market it would be a disaster for the company. Moving factories takes years and it would plunge the entire industry into chaos there still time to avoid that. But there's no sign of either side backing down. If we keep going. The US may have a lot more to lose than trying.