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Huawei is preparing for "major layoffs" in the United States, the the Wall Street newspaper reported on July 13th. This latest development could put the trade agreement between China and China on the stones. Huawei operates R & D through its subsidiary Futurewei Technologies, located in the United States. The subsidiary has approximately 850 employees. According to the report, "some of Huawei's Chinese employees in the United States had the opportunity to go home and stay with the company."
Huawei is struggling in the United States
The layoffs planned by the world's second largest smartphone manufacturer come after several months of struggle in the country. In December 2018, Canadian authorities arrested Meng Wanzhou. She is the financial director of Huawei and the daughter of Ren Zhengfei, the founder of the company. The United States has accused Wanzhou of concealing Huawei's "ties with a company that tried to sell equipment to Iran despite the sanctions," Reuters reported.
On May 15, Trump signed a decree banning Huawei from selling devices in the United States. The order cites threats to national security. Trump also banned Huawei from dealing with US suppliers. These providers include Google (GOOG), Qualcomm (QCOM), Micron (MU), Advanced Micro Devices (AMD), NVIDIA (NVDA), Intel (INTC) and Broadcom (AVGO). The move came weeks after the United States accused China of backtracking on agreed terms of negotiations. The dispute has blocked US-China trade talks and intensified trade tensions.
On May 21, the Trump administration eased the trade restrictions imposed on Huawei. To do this, he issued a three-month license to receive software updates and patches for Android devices.
Earlier this month, Trump confirmed that it would ease Huawei's ban. This decision means that it can deal with US suppliers. Trump's decision was made after meeting Xi Jinping at the G20 summit. The Trump-Xi meeting also helped to ease trade tensions between the United States and China.
The trade agreement between the United States and China on the ropes
Although the United States may not be directly opposed to Huawei's layoffs in the United States, this decision could be a problem for US companies that invest heavily in China. Trump launched his presidential campaign in 2020. Issues related to employment are at the center of concerns.
Trump has targeted large US companies, including Ford (F) and General Motors (GM), accusing them of harming the US job market. He also tried to convince Apple (AAPL) to relocate the manufacture of its products from China. Trump told the New York Times in November 2016, he "would ask Apple to build a big factory in the United States." He made this statement with reference to his conversation with Apple CEO Tim Cook.
Last week, Commerce Secretary Wilbur Ross suggested that Huawei still needed licenses to purchase products from US suppliers. Ross's statement suggests that Huawei continues to be a turning point in the US-China trade relationship. Therefore, Huawei's layoff plans in the United States could maintain the China-China trade agreement on a solid footing.
Stocks and focus
On July 15, the S & P 500 Index, the NASDAQ Composite Index and the Dow Jones Industrial Average Index opened unprecedented highs. Today at 12:10, Apple, Google, Qualcomm, Micron, Broadcom and AMD were up 0.8%, 0.3%, 0.6%, 0.3%, 0.7% and 3%. 5%, respectively. In contrast, Intel and NVIDIA are down 0.1% and 0.4%, respectively. GM and Ford are down 0.5% and 0.9%, respectively, today.
Factors such as the ongoing trade deal negotiations, the Fed's expectations of a Fed rate cut in July, and investors' high expectations for second quarter results continue to drive volatility in US equities.
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