The US-China Trade War Just Turned Really Hot

Forget the tariff wars. They only bothered the Peeps so much. 

China's economy is huge and its dictatorship can take the pain more than democracies. That's one reason why sanctions never work. The countries being sanctioned are in the guns, not butter business. 

But President Trump's move against Huawei strikes directly at China's larger ambitions.

The move to ban Huawei from buying chips designed with US equipment is critical because while much of the manufacturing has been outsourced to Asia, American machines are still at the heart of production.

Taiwan's TSMC has already announced that it's cutting China off. That gives China's Communist oligarchy a choice between ordering Chinese companies to ignore the blacklist, resulting in the US essentially cutting off China's tech supply chain, or pulling back on its ambitions. Either one will be painful.

That or retaliate against Apple and other US companies. That will hurt some of those companies and their investors, but accelerate the decoupling of the US and PRC economies.

And the PRC understands that.

The Huawei crackdown looks like the crack shot to force a decoupling. Apple is already trying to shift to India. Other US companies are reconsidering doing business in China.

China's threats will only accelerate the process.