 One of the largest tech companies in the world is getting blacklisted by the United States. On May 16, Huawei was added to the Commerce Department's Entities List, which restricts it from doing business with any U.S. company without explicit government approval. There's a small carve-out for maintaining phones that have already shipped, but basically it means a de facto ban on U.S. companies selling to Huawei. Google has already revoked the company's Android license, and Intel and Qualcomm are considering similar moves. It's part of a much bigger fight between the U.S. and China, and it goes a lot deeper than what you probably read. Your cell phone, your laptop, your air conditioner, your light bulbs, all of it was probably made in China. And if you're in the U.S., it came by the same trade route that's now breaking down. But to realize why all that's happening, you have to look at the big picture. If you wanted to put a date on the beginning of the modern electronics industry, 1980 would be a pretty good choice. It was the year of Apple's IPO, the year that the personal computer evolved from a niche hobby into a mass-market consumer product. But more importantly, it was the year China created the Shenzhen Special Economic Zone, a space where Chinese companies could trade in a free market, backed up by the power of communist central planning. If the government wanted exports to be cheaper, it could forcibly lower the exchange rate. If a bunch of houses were getting in the way of factory construction, they could just tear the houses down. Over the next 40 years, that system built Shenzhen into the greatest manufacturing hub the world's ever seen, at the same time that the tech industry was coming into its own. Those 40 years gave us the personal computer, the smartphone, the quadcopter drone, with each generation of tech relying a little bit more on the transpacific trade. It's not that we wouldn't have smartphones without China's factory push, but they might look completely different and cost a lot more. Now that system's starting to break down, and it's not just because of Huawei. We're in the middle of a really ugly trade war. In May, Trump announced a plan to raise import taxes as high as 25% on laptops and smartphones from China. Each new tariff from the US is met with more tariffs from China, which then trigger more retaliation from the US. So far the most damaging move from China has been a new tax on soybean imports, which has left the prices plummeting and cost US farmers billions of dollars. We're seeing executives arrested and jailed on both sides, risking an unprecedented collapse in trade. At first, Huawei's problems were more about security than economics. Given how much Chinese spying happens in the US, a lot of people in the intelligence community are nervous about a Chinese company operating American cell towers. But this latest move goes further, putting Huawei's entire cell phone business in jeopardy. Even the CEO admits it's really hard to build a phone without US microchips. The big picture problem is that building US goods in China just doesn't seem like that great of a deal anymore. In the 80s and 90s, leaders in both countries saw outsourcing as a win-win. American consumers got cheaper goods, and Chinese workers got lifted out of poverty and exposed to democratic ideas at the same time. In the US, it was great for microchip designers and tech shareholders, but bad for factory jobs. And it contributed a lot to the cratering of the middle class. On the Chinese side, those same factory jobs have made the country a lot richer. More imports are coming in, so China has unwound a lot of the currency manipulation that made exports so cheap to begin with. As a result, manufacturers have started looking to India and Vietnam for cheap factory labor. And Chinese tech companies want to design phones instead of just assembling them. And they're less reliant on the US market than ever. So what does all that mean for Huawei? If the commerce order holds up and the US doesn't grant any licenses, it means the company may have to make a phone without any US components. That means no Gorilla Glass and no Micron flash memory, among other parts. But all those parts have foreign competitors, even if they're more expensive and not quite as good. Huawei doesn't want to build a phone without US parts, but they probably can if they have to. You can't say the same thing for US companies. If Apple had to build an iPhone without China, or even just stop selling iPhones in the Chinese market, it would be a disaster for the company. Moving factories takes years, and it would plunge the entire industry into chaos. There's still time to avoid that, but there's no sign of either side backing down. And if we keep going, the US may have a lot more to lose than China. Thanks for watching. If you want to know more about how this is affecting gadget makers in the US, Ashley Carmen has a great video about what all the tariff stuff means. And as always, like and subscribe.
 One of the largest tech companies in the world is getting blacklisted by the United States.
 On May 16, Huawei was added to the Commerce Department's Entities List, which restricts
 it from doing business with any U.S. company without explicit government approval.
 There's a small carve-out for maintaining phones that have already shipped, but basically it means
 a de facto ban on U.S. companies selling to Huawei. Google has already revoked the company's
 Android license, and Intel and Qualcomm are considering similar moves. It's part of a
 much bigger fight between the U.S. and China, and it goes a lot deeper than what you probably read.
 Your cell phone, your laptop, your air conditioner, your light bulbs,
 all of it was probably made in China. And if you're in the U.S., it came by the same
 trade route that's now breaking down. But to realize why all that's happening,
 you have to look at the big picture.
 If you wanted to put a date on the beginning of the modern electronics industry,
 1980 would be a pretty good choice. It was the year of Apple's IPO, the year that the personal
 computer evolved from a niche hobby into a mass-market consumer product. But more importantly,
 it was the year China created the Shenzhen Special Economic Zone, a space where Chinese companies
 could trade in a free market, backed up by the power of communist central planning.
 If the government wanted exports to be cheaper, it could forcibly lower the exchange rate. If a
 bunch of houses were getting in the way of factory construction, they could just tear the houses down.
 Over the next 40 years, that system built Shenzhen into the greatest manufacturing hub the world's
 ever seen, at the same time that the tech industry was coming into its own.
 Those 40 years gave us the personal computer, the smartphone, the quadcopter drone, with
 each generation of tech relying a little bit more on the transpacific trade.
 It's not that we wouldn't have smartphones without China's factory push, but they might
 look completely different and cost a lot more. Now that system's starting to break down,
 and it's not just because of Huawei. We're in the middle of a really ugly trade war. In May,
 Trump announced a plan to raise import taxes as high as 25% on laptops and smartphones from China.
 Each new tariff from the US is met with more tariffs from China, which then trigger more
 retaliation from the US. So far the most damaging move from China has been a new tax on soybean
 imports, which has left the prices plummeting and cost US farmers billions of dollars. We're
 seeing executives arrested and jailed on both sides, risking an unprecedented collapse in trade.
 At first, Huawei's problems were more about security than economics. Given how much Chinese
 spying happens in the US, a lot of people in the intelligence community are nervous about a Chinese
 company operating American cell towers. But this latest move goes further, putting Huawei's entire
 cell phone business in jeopardy. Even the CEO admits it's really hard to build a phone without
 US microchips. The big picture problem is that building US goods in China just doesn't seem like
 that great of a deal anymore. In the 80s and 90s, leaders in both countries saw outsourcing as a
 win-win. American consumers got cheaper goods, and Chinese workers got lifted out of poverty and
 exposed to democratic ideas at the same time. In the US, it was great for microchip designers and
 tech shareholders, but bad for factory jobs. And it contributed a lot to the cratering of the middle
 class. On the Chinese side, those same factory jobs have made the country a lot richer. More
 imports are coming in, so China has unwound a lot of the currency manipulation that made exports so
 cheap to begin with. As a result, manufacturers have started looking to India and Vietnam for
 cheap factory labor. And Chinese tech companies want to design phones instead of just assembling
 them. And they're less reliant on the US market than ever. So what does all that mean for Huawei?
 If the commerce order holds up and the US doesn't grant any licenses, it means the company may have
 to make a phone without any US components. That means no Gorilla Glass and no Micron flash memory,
 among other parts. But all those parts have foreign competitors, even if they're more expensive and
 not quite as good. Huawei doesn't want to build a phone without US parts, but they probably can if
 they have to. You can't say the same thing for US companies. If Apple had to build an iPhone without
 China, or even just stop selling iPhones in the Chinese market, it would be a disaster for the
 company. Moving factories takes years, and it would plunge the entire industry into chaos.
 There's still time to avoid that, but there's no sign of either side backing down. And if we keep
 going, the US may have a lot more to lose than China. Thanks for watching. If you want to know
 more about how this is affecting gadget makers in the US, Ashley Carmen has a great video about
 what all the tariff stuff means. And as always, like and subscribe.