Huawei banned: US takes China trade war to dangerous new level
That could scuttle an agreement entirely.
“It could potentially put the entire economic relationship up for grabs,” said Scott Kennedy, director of the Project on Chinese Business and Political Economy at the Center for Strategic and International Studies in Washington.
The barrage reached a new level of intensity on Wednesday.
The Trump administration also added Huawei to the so-called Entity List of companies it says undermine American interests. That means US companies may need a license to continue supplying Huawei with crucial components.
The details of the designation and exactly what it means for Huawei still need clarification. But the action serves as a threatening reminder: The United States could sever vital supply lines.
“China will view this as an openly hostile act and a major provocation,” Paul Triolo, head of the geotechnology practice at consultancy Eurasia Group, said in a note to clients.
Much hangs on how China responds.
But China can’t just ignore the sharp escalation in the offensive against Huawei.
“The Entities List action potentially challenges Huawei’s ability to produce equipment and service existing customers,” Kennedy said. “That’s an essential challenge to China’s most successful company.”
Nationalist sentiment in the country is already hardening, Triolo warned.
The detention of Huawei CFO Meng Wanzhou in Canada, where she faces possible extradition to the United States on charges related to the Iran sanctions case, has already whipped up significant anger.
“Beijing is unlikely to continue serious trade negotiations when it feels held hostage by the US,” Triolo said.
If negotiations do move forward, it’s unlikely that Beijing will make significant concessions to the United States, especially on the tech issues at the center of the dispute, he added.
The United States has demanded that China end the forced transfer of technology from American companies, and has pushed back on Beijing’s bid to dominate the technologies of the future.
The potential for China to retaliate against American companies operating in the country has also increased, according to experts.
“The risks are monumental, for China and for the United States as well,” Kennedy said. “This isn’t an incremental action.”