Huawei: China threatens to retaliate over United States sanctions

Huawei: China threatens to retaliate over United States sanctions

The U.S. Department of Commerce said Wednesday it was putting Huawei on a blacklist that could ban it from doing business with its American suppliers.

First, the White House issued an "Executive Order on Securing the Information and Communications Technology and Services Supply Chain", which boils down to granting the executive branch massive power to veto the use of "information and communications technology or services designed, developed, manufactured, or supplied, by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary".

"This action stems from information available to the Department that provides a reasonable basis to conclude that Huawei is engaged in activities that are contrary to US national security or foreign policy interest".

The other big backdrop to this week's measures is the ever-escalating trade war. While US steel companies like U.S. Steel (X) and AK Steel (AKS) supported Section 232 tariffs, automakers like Ford (F) and General Motors (GM) have been apprehensive over the Section 232 probe.

"We urge the US to stop its incorrect actions.to avoid doing additional harm to China-US economic and trade relations", Gao said.

The order doesn't mention Huawei or China by name, but it was widely seen as targeting Huawei and other Chinese companies such as ZTE.

Also on Thursday, China's Foreign Ministry announced the formal arrest of two Canadian citizens who have been detained shortly after Meng's arrest. Ltd. said it will pursue "remedies immediately and find a resolution" in face the threats of a business ban in the United States.

The company has vehemently denied the allegations and insists it is independent from state control. The US Department of Commerce has to formulate a specific implementation plan in 150 days, which means that Huawei still has 150 days to do some "free" business. It later revised the number of affiliates down to 68. "This information includes the activities alleged in the Department of Justice's public superseding indictment of Huawei, including alleged violations of the International Emergency Economic Powers Act (IEEPA), conspiracy to violate IEEPA by providing prohibited financial services to Iran, and obstruction of justice in connection with the investigation of those alleged violations of USA sanctions". Requests for approvals for transactions will be reviewed under a "policy of presumption of denial", which suggests obtaining permission will be very hard.

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Shares in Huawei suppliers in China skidded on the news as markets opened in Asia, with Luxshare Precision Industry down as much as 6.1%. It runs research and development bases around the world in an effort to wean itself off of high-end US components.

CNBC's Joe Kernen reported on two emails he received from a "well-known CEO" and a "really smart telecom investment banker", as the discussion on "Squawk Box" turned to the president's latest salvo in the U.S.

Susquehanna Financial Group analyst Christopher Rolland, who said he believed Huawei had built up a one-to-two-year supply of USA components, cut price targets on several microchip companies, including Xilinx Inc. Qualcomm fell 4 per cent, Broadcom Inc. was down 2.3 per cent and Xilinx Inc.

China retaliated on Monday with higher tariffs on a revised list of $60 billion worth of US products.

"There's other things they can do, and M&A would certainly be one thing", said Stacy Rasgon, an analyst with Bernstein.

"We didn't even know there was this decision until members of the press received a statement Wednesday night", says on industry representative who declined to be named because they were not authorized to speak publicly.

"We should also not be influenced by the threat of the economic cost of either delaying 5G or having to settle for a less capable and more expensive provider", he said.

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