How Trump’s 180 Degree Spin Could Help Perth

trade war, trump

Every time my wife and I travel, we grow a new appreciation for Australia.

We always enjoy our time away. But we’re also very happy to come back. Job opportunities, wildlife, beaches and plenty of things to do and see. It’s no wonder why potentially 10 million tourists could make the trip down under this year.

According to Tourism Australia, Australia saw 914,500 international tourists in February alone. Pushing those numbers out, we could see more than 10 million tourists by year end.

Making up that statistic was my wife’s friend. She had come all the way from Poland to see almost every euro travellers dream…Australia.

And of course we took her to the typical touristy destinations. First was the 12 apostles with a stop at Erskine Falls. Next was Healesville Sanctuary; Europeans absolutely love koalas. Then we drove to Ballarat, panning for gold at Sovereign Hill.

No gold strikes unfortunately.

But the trips reaffirmed to me how much of our wonderful country I had still yet to explore. It’s why earlier this year, my wife and I decided to fly to Western Australia.

While it might sound silly, I’ll remember the rail in Perth more than anything else. Probably because we rode it back and forth to Cottesloe beach so many times.

But the Perth rail could become a tourist attraction in itself. Telstra Corporation Ltd [TLS:ASX] plans to build a new communication network, which could bring driverless trains to Perth in the foreseeable future.

Be cool, it will work out

Australia’s largest telco want to build a superfast communication network across Perth. Part of that plan will be a new communication system for Perth’s rail.

It will control signalling and operations. Ideally it will be designed to run the city’s driverless train network. And potentially it could all be thanks to Trump.

Let me explain.

Over the last few months, Trump has been pushing for change. He not only wants to put Americans first. He wants to put America first on the global stage.

It’s why he has made such a big deal out of the trade situation with China. The US is losing to China in trade, according to Trump.

Not only does the US send over valuable goods from their semiconductor and microchip industry. China taxes US goods and steals trade secrets from American businesses.

So of course Trump wants to even the score. It’s why he put taxes on Chinese steel and aluminium. He also put a ban on one of China’s largest Telcos – ZTE Corp. 

It’s hard to argue that China hasn’t benefited from US technology and innovation. The Red Kingdom has taken what works and applied it to their massive ecosystem.

And so far it’s worked wonders. But as China starts to reduce their dependence on US technology, some companies are getting caught flat footed.

ZTE is one example. For now, ZTE’s core operations still depend on US technology. Most of the chips and software that goes into ZTE’s products and equipment are from America.

So imagine the spanner Trump threw in ZTE’s works when he stopped their supply of US tech. Reuters wrote:

The United States has banned American firms from selling parts and software to China’s ZTE Corp for seven years, potentially devastating for the telecoms equipment maker and exacerbating tensions between the world’s two largest economies.

‘…The U.S. Commerce Department imposed the ban following ZTE’s violation of an agreement on punishing employees that was reached after it was caught illegally shipping U.S. goods to Iran.

Soon after the ban, ZTE announced they were closing up shop. ABC NEWS writes:

Chinese telecommunications company ZTE has halted its main operations after U.S. authorities cut off its access to American suppliers as President Donald Trump steps up pressure over trade and technology issues with Beijing.

Yet we now find out Trump is actively looking at ways to keep ZTE afloat. From Bloomberg:

Trump said in a Sunday morning tweet, posted minutes after arriving at his golf course in Virginia, that he and Chinese leader Xi Jinping are working together to give ZTE “a way to get back into business, fast.”

In a major reversal for a president who has many times accused China of stealing U.S. jobs, Trump said the “Commerce Department has been instructed to get it done!” because “too many jobs in China lost.”

While most are confused by Trump’s 180 degree flip, he tweeted ‘…be cool, it will work out!

Donald Trump Tweet

[Click to open new window]

So how does this benefit Perth?

It turns out ZTE could be the one to build out Telstra’s Perth infrastructure. According to Fairfax Media, ZTE is one of two companies shortlisted for the $120 million contract. ZTE is also one of the five companies bidding to build out Telstra’s 5G network.

But it’s not just Perth or Australia ZTE, and Huawei for that matter, have their sights on. These Chinese Telcos are planning to roll out communication infrastructure worldwide.

5G is coming

Where’s future growth going to come from?

My bet is on technology. Many of the biggest companies that have climbed to the top are tech. Most of these companies are built on intangible assets and ideas. Meaning they don’t take much cash to run and they spit out tons of cash each year.

It’s why China is pushing technology hard. They want to keep economic growth high and they see technology as the answer.

It’s why they’ve made a real push for ZTE and Huawei to roll out 5G, the next generation in connectivity, as quick as possible.

With 5G so many futuristic technologies seem possible. Driverless cars, smart houses or 3D holograms…it’s all possible with 5G.

Of course there’s an opportunity here. Ride stocks that are riding the growth and innovation coming out of China. In fact, I believe there’s such a huge opportunity here I’ve launched a brand new advisory service.

It’s called Wealth Eruption.

I’ve already identified five ASX-listed stocks to significantly rise on the back of China. If you’re interested in finding out their names, click here.

Your friend,

Harje Ronngard,
Editor, Money Morning

Harje Ronngard

Harje Ronngard

With an academic background in finance and investments, Harje knows how simple, yet difficult investing can be. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation.

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