As U.S.-China trade tensions continue to escalate with each side enforcing tariffs, President Trump took aim again at one of China’s biggest companies. As the Trump administration moves to effectively ban Huawei from selling its technology in the U.S., some of the company’s largest American suppliers fell on Thursday.
Both the White House and the U.S. Department of Commerce moved on Wednesday night to prevent the Chinese company from buying or selling parts in America, a move that experts are warning could have ripple effects in not just the U.S. but even around the world.
Specifically, the U.S. Department of Commerce said it would put the company on it’s “Entity List,” a classification that would require American companies to obtain a license from the U.S. government before they could deal with the company. President Trump also signed an executive order declaring the U.S. telecom sector was in a state of “national emergency” and authorized the commerce department to “prohibit transactions” as necessary.
One of these chipmakers, Qualcomm (NASDAQ: QCOM), fell four percent in today’s trading session as a result of the news. Various other Huawei suppliers, including Intel (NASDAQ: INTC) and Microsoft (NASDAQ: MSFT), raised concerns about the course of action taken by the administration.
It’s worth noting that the U.S. isn’t the only country to ban the company. Both Japan and Australia have banned Huawei, which happens to be one of the world leaders in building high-speed 5G networks, on concerns that it would enable the Chinese government to spy on their countries electronically. Other nations, such as Germany and the U.K., however, have yet to follow suit in this regard.
China’s foreign ministry went on to say on Thursday that this move from Washington was an abuse of export control measures” and the Beijing would take necessary steps to counteract this attack. Back in April 2018, another tech company from China, ZTE, was barred from buying US parts after it was placed on the same “entity list.” However, it managed to resume doing business after three months when it came to a deal with the U.S. government.
Analysts such as Paul Triolo, a technology policy expert at Eurasia Group, said that “The U.S. has basically openly declared it is willing to engage in a full-fledged technology war with China.” Former intelligence and national security personnel have also voiced their opinions. One of them, Don Vieira, a national security lawyer for the justice department, said that this move from Trump gave intelligence agencies the green light to “take on” the Chinese giant. “I don’t know if the U.S. can destroy Huawei, but maybe the U.S. government can get some concessions.”
So far, the semiconductor industry as a whole said that the impact of Huawei being put on this new list was still unclear. If the U.S. government was willing to issue licenses in the near future, then the decision might not have as drastic of an impact on these companies.
If not, then many of these companies are going to need to find new buyers for their goods as the Huawei might be off the table for a while. More then anything, the move is just another bargaining chip on the table as Washington seeks to come to a resolution with Beijing on trade talks.