US formally blacklists Huawei and 68 affiliates

Surveillance cameras on display at the Huawei booth at the World Intelligence Congress in Tianjin, China, on Thursday. The latest US move comes as the Trump administration aggressively lobbies other countries not to use Huawei equipment in next-gener
Surveillance cameras on display at the Huawei booth at the World Intelligence Congress in Tianjin, China, on Thursday. The latest US move comes as the Trump administration aggressively lobbies other countries not to use Huawei equipment in next-generation 5G networks, and comes just days after Washington imposed new tariffs on Chinese goods amid an escalating trade war.PHOTO: REUTERS

Ban on Chinese telecom giant buying parts from US firms without Washington's approval takes immediate effect

WASHINGTON/BEIJING • The US Commerce Department has formally placed Huawei Technologies and 68 affiliates in more than two dozen countries on its so-called Entity List - a move that bans the telecom giant from buying parts and components from American firms without US government approval.

It takes effect immediately and includes non-US Huawei affiliates in Brazil, Canada, Japan, Singapore and Britain, among others.

The US government will review requests for approvals for transactions under a "policy of presumption of denial".

The order says US government representatives determined that Huawei has been involved in activities contrary to the national security or foreign policy interests of the United States.

Members of Congress and administration officials said the move will make it difficult for Huawei to sell many products.

Washington lawyer and trade expert Douglas Jacobson said there will be collateral impact on the US firms that sell to Huawei. "While the intent is to punish Huawei, ultimately, US companies are also being penalised," he said, adding that the likelihood that the Commerce Department will grant licences to allow sales is negligible.

Huawei said it will challenge the decision, warning that the ban "will do significant economic harm to the American companies with which Huawei does business".

 
 
 

It said the decision will "affect tens of thousands of American jobs and disrupt the current collaboration and mutual trust that exist on the global supply chain".

"Huawei will seek remedies immediately and find a resolution to this matter," the company said.

Huawei was the world's third-largest purchaser of semiconductors last year, accounting for 4.4 per cent of global market share, behind Samsung Electronics and Apple, according to research firm Gartner.

The US' dramatic move comes as the Trump administration aggressively lobbies other countries not to use Huawei equipment in next-generation 5G networks, and comes just days after Washington imposed new tariffs on Chinese goods amid an escalating trade war.

Shares of Huawei's US suppliers fell on fears that the Chinese company would be forced to stop buying American chips, software and other components.

The US crackdown was the latest shot fired in a US-China trade war that is rattling financial markets and threatening to derail a slowing global economy.

Trade talks had looked close to collapsing in the past week after a dispute over Chinese changes to a draft text prompted Washington to increase tariffs on Chinese goods, and Beijing to retaliate with higher duties on US products.

The US raised tariffs on a list of US$200 billion (S$275 billion) worth of Chinese imports from 10 per cent to 25 per cent, prompting China to retaliate with higher duties on a revised list of US$60 billion worth of US goods.

US President Donald Trump, who has accused China of engaging in unfair trade practices, has threatened to impose 25 per cent tariffs on a further US$300 billion worth of Chinese goods.

Chinese Commerce Ministry spokesman Gao Feng said the US should avoid further damaging ties between the world's two largest economies, and accused Washington of trade protectionism. "China will take all the necessary measures to resolutely safeguard the legitimate rights of Chinese firms," he said.

US lawmakers have long feared that Huawei's equipment could be used to spy on Americans, and Democrats and Republicans lined up in support of the Trump administration's move.

Mr Edward Alden, senior fellow at the Council on Foreign Relations, said the case was a significant complication to the resolution of the trade dispute. "Every step by the US makes it much harder for the Chinese not to push back," he said.

Meanwhile, Japan said the US' latest move could affect Japanese firms and weigh on economic growth. "There are Japanese firms that supply parts to Huawei, and supply chains are intertwined in complex ways," Japanese Finance Minister Taro Aso said yesterday after a regular Cabinet meeting.

REUTERS

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A version of this article appeared in the print edition of The Straits Times on May 18, 2019, with the headline 'US formally blacklists Huawei and 68 affiliates'. Print Edition | Subscribe