I'm definitely not an expert when it's about diplomatic warfare. Nevertheless, we see some structural developments taking place. First of all, the Chinese are doubling down their investments in other countries than the United States. They are actually much more forthcoming in helping economies that the U.S. with its "America First"-approach. The risk of the latter is that this is ultimately going to lead to isolation. Over decennia, the US has grown their influence in the world, by actively supporting countries in their endeavors to build democracies and thriving, open economies. Nowadays, the willingness to inject support is contingent to self-interest. The Chinese are supporting many regions and countries with (technological) infrastructure and investments. Of course, none of this is done from the stand-point of philanthropy, The fact that the US is reducing its investments abroad, will ultimately impact their ability to influence the world. Secondly, if you just look to population size and the economic growth of China, then their economy will become the biggest globally. The Western World, including the US needs to contemplate on their positioning. What would create the best circumstances to thrive and to be able to keep a competitive advantage from growing, Asian economies? The most important driver is to connect the world more and truly build a global economy, with centers of deep, innovative knowledge and an entrepreneurial climate. Another critical factor is to be a role model when it is about morale values and the opportunities that people have in western countries. Only when a society creates equal opportunities for education and inhabitants are stimulated to progress, the western economies can keep an edge over a more centrally-led system. What I want to say is, we can look at this incident in isolation, but that is nothing more than a symptom of a much bigger development that is taking place. The US and other western countries, will not stay ahead through exclusion, but rather by inclusion and making sure that their societies are truly free, with equal opportunities for all and a system that structurally stimulates personal growth.
Yes, we would need to fight infringements of intellectual properties and strive for full market access in China. More importantly, we need to stay in a position whereby the transformative technologies and most innovative solutions that enhance lives come from the western world. We now see that our societies become less attractive for its populations (access to good education, national support systems, etc.) with more economical polarization, while China has a strongly growing middle class with strong improvements in education and living standards. A big dilemma of western economies is linked to our beloved democratic system. The downside is that in our political climate the short term is the only focus. This leads to a short term orientation and the lack of structural solutions. The Chinese economy is a closed system, that now also allowed its President to stay-on for a very long period of time. The huge advantage is that they move much more with a long term focus. Consequentially, the incident of cutting ties with Chinese telecommunications, is definitely hurting in China in the short run, but in the long run their economy looks to have the winning hand. It's time for the western world to look beyond the next election.

That's a great question and I really don't know the answer as to what China will do next. My first thought is that they will retaliate and escalate the situation but I don't think China would want the type of isolation that would create. Look towards Europe to see what happens there as now there will be a "us or them" dynamic with all third parties to the US/China tech trade war.

I am not an expert in this field but i am sure that any trade war will affects the global economy and market no matter now trivial it would be. I believe that this trade war might as as a trigger that motivates China to further research regarding telecommunication science as they aim to be one of the pioneer in this field of technology.