The Illiterate Mugging of Huawei Will Mug the U.S. Economy
It seems like something from another era at this point, but no doubt some readers remember just how sensitive markets were not too long ago to protectionist trade rhetoric from President Trump. Presidents have sadly been handed a lot of power in modern times to dictate trade policy, and in Trump’s case he regularly broached the subject of placing high taxes on incoming Chinese goods, along with products from Mexico, Japan, and seemingly everywhere else.
Talk of Chinese tariffs particularly scared investors. With good reason. Precisely because the Chinese people are such prodigious exporters to the United States, they’re also prodigious importers of all things American. If you’re working and producing you’re an importer, and American products represent freedom, high quality and stature to much of the world.
That’s why a visit to China might shock all too many. Though media and politicians give off the impression of evil people working feverishly to crush the United States, the on-the-ground reality there is quite a bit different.
Indeed, everywhere you look is a sign for an American company. McDonald’s are ubiquitous in keeping with China’s position as the #2 market for this symbol of American capitalism, KFCs are everywhere you turn too, plus there are over 4,200 Starbucks stores in China on the way to 7,000. China’s box office for U.S. films is second only to the U.S. Goodness, Apple sells a fifth of its iPhones in China. If the Chinese people view the Americans as the enemy, they have a funny way of showing it.
Hopefully the previous paragraph is a reminder of why President Trump’s tariff rhetoric spooked investors in U.S. equities so much. It did simply because China as a country represents huge amounts of growth for U.S. companies. Trump loved to talk up U.S. stock market performance, so did members of his base, but it was lost on Trump and all-too-many members of the base that China’s present and future growth were and are major reasons for lofty U.S. equity prices. Put another way, a Chinese economic collapse would cause U.S. equities to correct in a fashion that would make the recent market retreat seem rather tame by comparison.
That China’s economic growth excites investors in U.S. equities should also explain why talk of tariffs on China terrifies those same investors: that which limits the ability of the Chinese to sell their wares in the U.S., similarly limits their ability to buy from the U.S. For members of the U.S. political class to put a bull’s eye on the Chinese economy is for them to inadvertently take a shot at the U.S. economy. Again, rising U.S. prosperity is increasingly a consequence of growing demand for U.S. plenty in China.
All of which brings us to the ongoing efforts within the U.S. political class to bring harm to Chinese communications giant Huawei. It cannot be stressed enough that the actions are blatantly protectionist. Huawei is a brilliant company, and its growth has its U.S. competition (along with misguided politicians) very scared.
After that, it should be stressed that Huawei’s products can be found in hundreds of countries around the world not because the corporation is a creation of the Chinese state, but precisely because it isn’t. Americans used to know this. Conservatives in particular used to know this. Businesses that are reliant on government money and protection never represent real competition simply because it’s the lack of government protection, and the lack of government handouts, that most exposes businesses to the market realities without which they cannot progress.
And for those who just refuse to believe Huawei isn’t a state run entity despite all the evidence, they might stop and think just how much more potent the Shenzhen-based corporation would be absent any state handouts. What’s already a global leader would be even more effective.
Of course, the expressed reason for the mugging of Huawei is that as a puppet of the state, Huawei will help the Chinese government spy on the U.S. Let’s count the reasons why such a view is laughable. For one, a state-run tech corporation would never be a threat to gain market share in the U.S. to begin with. See the previous two paragraphs. For two, why would such a successful company risk continued growth by offending U.S. consumers in what is the world’s biggest market? For three, has anyone ever stopped to consider what possible “intelligence” the Chinese would want to lift from here? Think about it. At present U.S. politicians on all levels are forcing economic suicide on the American people through their one-size-fits-all lockdowns. What “intelligence” could the Chinese reasonably lift from our witless politicians?
Considering the insinuations that Huawei violated U.S. sanctions on Iran, that Huawei products are prominently used globally, including in the United States, helps answer the ludicrous charge. When U.S. political types float this kind of innuendo, they’re loudly showcasing their economic ignorance. That’s the case because in a global economy, we’re all trading with one another. Even though the U.S. has an embargo on Iran, U.S. products are all over the country, including iPhones. There’s no accounting for the final destination of any good. So long as some of the world’s greatest companies are located in the U.S. and China, the products of those companies will be found everywhere, and regardless of embargoes.
So while the U.S. is foolishly moving forward with attempts to limit Huawei’s access to products made by Taiwan Semiconductor (among others), let’s be clear that such moves speak yet again to economic ignorance on the part of U.S. officials. If Huawei can’t buy directly from Taiwan Semiconductor, it certainly can buy from those Taiwan Semiconductor sells to. Problem solved.
What’s not solved is the U.S.’s hideous treatment of Huawei, and its wholly protectionist attempts to limit its ability to prosper. This is the equivalent of the Chinese government routinely harassing Apple, Amazon, or Microsoft. It wouldn’t go over well in the U.S. Neither is what U.S. officials are doing to Huawei going over well in China.
We must consider the above truth in light of our present economic condition. Word is Beijing has had it, and is talking harsh countermeasures against the U.S. So with the U.S. economy already contracting thanks to the imposition of command-and-control in response to a virus, it’s possible the reasonably fed up Chinese will pile on. Is this what we want?
Let’s hope not. Let’s hope reason prevails. Huawei is a great company, which means its greatness will redound to Americans in much the same way that the greatness of Apple redounds to the Chinese.
In that case, let’s please stop the irresponsible, economically illiterate mugging of Huawei. That which harms those trying to produce for us logically harms us.