US-China trade war – Bad news for South Africa

The trade war between the United States and Huawei has been escalated once again after the US ordered companies to halt business with Huawei.

This resulted in the revocation of Huawei’s Android licence, raising questions about how customers will be affected and whether the Chinese smartphone manufacturer would be able to continue developing Android smartphones.

While Huawei’s market share in the United States is not significant, this move impacts Huawei users all around the world – including South Africa.

Huawei devices are extremely popular in South Africa, and Huawei has told MyBroadband it would continue to provide support for smartphones in the country.

This will not be the only effect of the US-China trade war on South Africa, however, with flaring tensions between the two superpowers potentially hindering local economic growth.

Escalating conflict

South African central bank governor Lesetja Kganyago stated in a media briefing on 23 May that there are no winners in this trade war, Bloomberg reported.

“Trade wars are silly, you want to control your market, but you still want access to other markets so it’s illogical,” he said.

Huawei founder and CEO Ren Zhengfei recently told Chinese media that the company was prepared for a showdown with the US and has a number of backup plans for its products.

“We have ensured our business continuity step by step,” Ren said. “In fact, many parts we use in our products have been put into production. Despite this, we are open to parts from outside the company.”

While certain Chinese companies such as Huawei would be impacted by the inability to purchase US components, the United States would also not fare well in this situation.

Chinese manufacturing company Foxconn produces a number of major electronic products for US companies, including Apple iPhones, iPads, Xbox consoles, and more.

In fact, the company manufactured around 40% of the world’s consumer electronics in 2012, meaning it would be a heavy blow to US companies to lose this business.

When it comes to the trade war’s impact on South Africa, the country will be affected negatively, in a similar manner to other developing economies.

We will also be impacted by Huawei’s potential inability to continue supporting US apps and operating systems.

Economist perspective

To find out more about the local implications of the US-China trade war, MyBroadband spoke to economist Dawie Roodt.

Roodt told MyBroadband that this trade war is especially bad for emerging countries like South Africa.

“It is bad news for financial markets and the world economy, especially for emerging countries,” Roodt said.

He said that the United States would probably win against China in the long run, as it has a relatively closed economy.

If the trade war gets worse however, it will have a particularly negative effect on South Africa, Roodt said.

“It will be bad for South Africa, especially via the financial markets,” he said.

Analysis from experts and companies echoes the sentiment of Kganyago’s statement this past week – there are no winners in this trade war.

Now read: Huawei could become part of China trade deal

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US-China trade war – Bad news for South Africa