The U.S.-China trade war escalated last week after Washington barred American companies from working with Huawei, China’s largest smartphone manufacturer. On Monday, the U.S. Commerce Department thought better of that decision by granting a 90-day license for mobile phone companies to maintain existing ties with the Chinese tech giant.

Summary

  • U.S. government eases restrictions on doing business with Huawei until Aug. 19.
  • Google is still able to send software updates to Huawei smartphones.
  • U.S. stocks rally amid signs of easing trade restrictions.

 

Huawei Saga: The Latest

The U.S. Commerce Department has decided to grant Huawei’s business partners a 90-day license to continue working with the Chinese tech giant to ensure existing networks remain online.

It took the U.S. Commerce Department less than two business days to exempt Huawei from Washington’s so-called Entity List, which restricts certain companies, individuals and nations from doing business with the United States. Names that appear on this list are said to pose a national threat.

Huawei and 70 affiliates were added to the list on Thursday. The decision was confirmed by Wilbur Ross, President Trump’s Commerce Secretary.

Prior to the announcement, Ross issued a statement informing the public that President Trump was looking to  “prevent American technology from being used by foreign-owned entities in ways that potentially undermine US national security or foreign policy interests.”

Now, the U.S. Commerce Department has decided to grant Huawei’s business partners a 90-day license to continue working with the Chinese tech giant to ensure existing networks remain online. This has major implications on Google, which only two days ago announced plans to cut all ties to Huawei. Google reversed that decision on Tuesday, announcing it will still send software updates to Huawei smartphones for the next 90 days.

“Keeping phones up to date and secure is in everyone’s best interests and this temporary license allows us to continue to provide software updates and security patches to existing models for the next 90 days,” a Google spokesperson told CNBC on Tuesday.

 

Stocks Rally

The apparent easing of U.S.-China trade tensions triggered a large relief rally for Wall Street on Tuesday. The Dow Jones Industrial Average rose more than 200 points and was on track to break a two-day losing streak.

Dow Jones Industrial Average Price YTD - May 21 2019

Source: Yahoo Finance

The broad S&P 500 Index of large-cap stocks also put up brisk gains, with ten of 11 primary sectors trading higher. Materials and information technology stocks were the best performers percentage-wise.

Surging tech shares lifted the Nasdaq Composite Index to gains of more than 1%. The technology-driven benchmark plunged 1.5% on Monday.

Trade tensions between the two largest superpowers have stoked heavy volatility for the global financial markets. President Trump’s Twitter tirade earlier this month, where he threatened to impose harsher tariffs on Chinese goods, upended months of steady growth for the major stock indexes. The Trump administration would eventually go through with the president’s proposed tariff hike, prompting Beijing to retaliate with its own measures.

 

Conclusion

The United States and China appear to be further away from a trade deal than ever before, but that won’t stop both sides from resuming negotiations. Officials are now eyeing the G20 Summit in Osaka, Japan on June 28-29 as a possible date for resolution. The venue will host the next face-to-face meeting between presidents Trump and Xi Jinping.