Economy /
Trump Administration Hits Huawei Again as Beijing Threatens Retaliation
The Trump administration continuing its fight against China-based tech giant Huawei after taking a break during the coronavirus pandemic. Previously, Washington banned the company from deploying its 5G infrastructure in the US, using an executive order to label it a national security risk. On Friday, the Trump administration went a step further to prevent global chip manufacturers from supplying Huawei — a plan that had been previously considered — causing Huawei’s stock value to slide and risking retaliation from Beijing.
American Businesses in the Crosshairs
“The U.S. has utilized national power and used the so-called national security concern as an excuse, and abused export controls to continue to suppress some particular companies in other countries,” China’s commerce ministry said in a statement issued Sunday.
As a result, American companies including Apple Inc., Cisco Systems Inc., Qualcomm Inc., and Boeing Co. will likely be targeted. A report from China-based Global Times indicated Beijing will place them on an “unreliable entity list.” China has already paused new purchases of Boeing aircraft.
The new restrictions put in place Friday extend beyond US borders by requiring foreign companies who use America technology to be licensed before providing Huawei with computer chips. The regulation applies even to Huawei-designed chips if they are produced by companies that use American technology.
The rule will also close a loophole that allowed Huawei to continue to profit off US technology, the US Department of Commerce said.
“There has been a very highly technical loophole through which Huawei has been in able, in effect, to use U.S. technology with foreign fab producers,” Commerce Secretary Wilbur Ross said in an interview with Fox Business Network on Friday.
New Requirements
Ross reiterated that the intention of banning Huawei centred on national security concerns.
“This is not how a responsible global corporate citizen behaves,” Ross said. “We must amend our rules exploited by Huawei and HiSilicon and prevent U.S. technologies from enabling malign activities contrary to U.S. national security and foreign policy interests.”
HiSilicon, Huawei’s solution to skirt around its previous ban, allowed the company to source semiconductors from other manufacturers, the New York Times reported. However, those companies often used American technology to develop the chips that Huawei had designed. Under the new regulation, they would no longer be permitted to supply the company.
After the rule goes into effect in September, companies that want to continue to do business with Huawei can apply for licenses. The US State Department said it would consider licenses on a case by case basis.
“This is a licensing requirement. It does not necessarily mean that things are denied,” a senior State Department official said. “We tend to approach Huawei with some concern but this is a measure that gives the US government visibility into what is moving.”
Trump’s Favorite Target
The Trump administration’s fight against Huawei comes amid two larger US–China conflicts: a trade war that was approaching deescalation in January and the COVID-19 pandemic for which Washington blames on Beijing. Huawei offers a big name for the US to hit economically, a target to point at and show results when its hits land.
Huawei’s smartphone sales outside of china fell by 35% as a result of the administration’s policies against the company. As business success in China is strongly intertwined with relationships with Communist Party officials, hurting Huawei indirectly affects the government of Beijing, hence its quick rush to defend the tech giant.
US President Donald Trump has made his position on China and Huawei abundantly clear and if anything, he is more eager to attack it because of the coronavirus pandemic. As the new rule does not go into affect until September, a mere two months before the US elections, it’s quite possible that Democratic candidate Joe Biden will have to continue the battle.
Biden’s close ties to China have raised eyebrows at times and he has a history of strongly supporting favorable relations with Beijing. As a senator in the 1990s, he advocated for it to be given the World Trade Organization’s most-favored-nation status. As vice president, he pushed for increased trade saying Americans “welcome this competition.”
After the Phase 1 trade deal was announced in January, Biden downplayed concerns declaring, “What are we worried about?”
‘Strangle Huawei’
However, Biden may actually take a tougher stand on China through policies outside the scope of a trade war that Americans have to foot the bill for.
“The vice president intends to do two things: hold Trump accountable for a catastrophic set of failures in his approach to China, and a colossal gap between tough talk and weak action,” said Jake Sullivan, a senior advisor for Biden. Specifically, Biden will engage other states to coordinate a joint effort to pressure China, which would be “a hell of a lot better than just the United States choosing to try to fight a trade war with China all by ourselves.”
On the technology side, Biden would also look to expand restrictions on technology that enabled China to commit genocide against its Uighur population. Against Huawei in particular, Biden said on a debate state in February that he supported a ban on the company using its network technology in the US, a rare point of a agreement between him and the president.
‘Modern Wars are Fought With Semiconductors’
Biden will also find support in Congress. Actions against Huawei have never exactly been a partisan issue with both Republicans and Democrats supporting the measure.
“The United States needs to strangle Huawei,” said Sen. Ben Sasse, R–Neb. “Modern wars are fought with semiconductors, and we were letting Huawei use our American designs. This is pretty simple: Chip companies that depend on American technology can’t jump into bed with the Chinese Communist Party.”
Long-term economic prospects between the two states depend on resolving the trade war. For that, Biden may be better as he has shown more proclivity to consider other avenues for attacking Beijing. The US trade war is only the first problem to overcome, however, and Biden may bring aboard other nations to create a united front against China, something Trump has never shown an interest in doing.
With increased calls for Beijing to allow for an independent investigation of COVID-19, the world is slowing turning against China. As a unifying candidate, Biden would be America’s best shot at settling the score, as opposed to Trump’s lone wolf mentality.
The Huawei ban is only a small piece to the larger economic struggle between the US and China. Although Trump managed to hurt the company, Biden’s holistic approach may have a longer and more widespread effect.
