China Responds to Huawei Ban by Threatening to Blacklist U.S Firms

China has officially retaliated in response to the U.S putting Huawei on an ‘Entity list’ by stating that it will establish a list of “unreliable ” companies that damage the interests of domestic companies. This move is expected to affect several foreign firms doing business in China and Apple is one of them.

As a part of this rule, China will set up a process aimed at identifying foreign enterprises that break the rules, violate contracts, and cut off supply for non-commercial reasons. Gao Feng, Ministry of Commerce spokesman, said “Necessary measures will be taken” against those on the list.

The trade war between the U.S and China has already escalated to an unprecedented level. The U.S Government has blocked Huawei from selling equipment in the U.S and buy parts from American suppliers. China is now looking to respond by targetting unreliable American tech companies.

This weekend, the U.S is all set to implement higher tariff duties on goods entering from China. Meanwhile, Beijing has already outlined its very own retaliation plan. The negotiations between the U.S and China went sour after Trump accused China of backing from a deal. Meanwhile, Chinese officials blamed it on Americans raising their demands.

Michelle Lam, Greater China economist at Societe Generale SA, was quoted as follows, “Surely companies that have announced cutting supplies to Huawei, such as Panasonic and Toshiba, would be under threat.” He further added that “It could be very damaging to multinational companies.”

Our Take

The long-running trade dispute between the U.S and China has shaken the financial markets. Companies like Apple are affected the most. The trade war had also triggered a stock market sell-off in recent weeks. The pale economic outlook is only expected to worsen the situation.

With the relationship between the U.S. and China worsening, iPhone sales in the region are bound to take a further drop. Analysts have predicted that the trade war could mean a sharp 29% drop in Apple’s global profits. Meanwhile, the “Boycott Apple” moment seems to be picking stream in China.

We hope that both the U.S and China iron out the differences and come up with a robust sustainable foreign trade policy.

[Via Bloomberg]