U.S. Blacklists China’s Huawei As Trade Dispute Deepens

US, China, Huawei, Trade Dispute

The US President has taken a stand that could escalate the continuing trade war between the countries- Chinese telecoms giant Huawei has been slapped with severe sanctions on Wednesday. Treasury Secretary Steven Mnuchin said he would visit China soon for more talks.

The Commerce Department has added Huawei Technologies Co Ltd and 70 affiliates to its “Entity List”. So now, trade bans have been put on the company from acquiring components and technology from U.S. firms without government approval.

Earlier, Trump had signed an executive order barring U.S. companies from using telecommunications equipment made by firms deemed to pose a national security risk, Huawei and its affiliates is one of them. While no names have been named, U.S. officials have previously labeled Huawei a “threat” to national security. For many months now, they have been lobbying with allies not to use Huawei network equipment in next-generation 5G networks.

Huawei, which denies the allegation that its products pose a security threat, said it was “ready and willing to engage with the U.S. government and come up with effective measures to ensure product security.”

Experts say (including Huawei sources) that if Huawei products were banned from US market, it would push 5G adoption in the US back by about 5 years. This is because the ban would “limit the U.S. to inferior yet more expensive alternatives, leaving the U.S. lagging behind in 5G deployments and eventually harming the interests of U.S. companies and consumers.”

Speaking at a U.S. Senate Appropriations subcommittee hearing, Mnuchin maintained that two days of high-level talks with Chinese officials in Washington last week were constructive and that he intended to continue the dialogue sometime in the near future, without specifying when.

Meanwhile, the news of the ban brought shares of Huawei and its affiliates tumbling down in the Asian markets.

Trump has had a history of delighting in protectionism as part of an “America First” agenda, has had unsavory encounters with a number of countries even in the American continent and Europe, even Asia. Mnuchin said they were close to a resolution in the dispute over steel and aluminum tariffs imposed on Canada and Mexico last year. With tariffs that have been described as ‘unfair’ still in place, ratification of any trade treaty seems to be a tall task.

As negotiations toward resolving the U.S.-China dispute are still stalling, US has clamped increased tariffs on a list of $200 billion worth of Chinese imports to 25% from 10%. China’s retaliation came in the form of higher tariffs on a revised list of $60 billion worth of U.S. products. Any more tariffs crunching could affect both the countries and indeed the world economy very adversely. A day ago, China reported shockingly weak growth in retail and industrial output.

The US is also not unscathed, as its retail sales and industrial production fell in April, with households cutting back on purchases of motor vehicles and other goods. This could lead to a slowdown in economic growth after a boost from exports and inventories in the first quarter.