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US targets Huawei as It seeks to revive China trade talks

TheStar Thu, May 16, 2019 - 2 months ago


WASHINGTON: President Trump signed an executive order that would let the U.S. ban telecommunications gear from “foreign adversaries,” underscoring tensions with China even as the U.S. said it would likely resume trade talks soon in Beijing after reaching an impasse last week.

The developments came amid other actions from the Trump administration on Wednesday possibly suggesting it was seeking to push aside other trade issues and zero in on the disputes with Beijing that have unsettled financial markets.

Along with the executive order, the Commerce Department said it would add China’s Huawei Technologies Co. to a list of entities engaged in activities that are contrary to U.S. interests. That could restrict sales or transfers of American technology to Huawei by requiring a government license—a potential body blow to the company, which relies on some U.S. tech companies for chips. The action would also hurt U.S. chipmakers who sell to Huawei.

U.S. national-security officials say Chinese companies including Huawei and ZTE Corp. pose a threat, since under China’s Communist Party rule they are obliged to abide by Beijing’s orders.

The Chinese Embassy, Huawei and ZTE didn’t immediately respond to requests for comment late Wednesday. Asked about the prospect of such an order in Beijing earlier that day, Huawei Executive Director David Wang said such a measure would be misguided.

The executive order came hours after Treasury Secretary Steven Mnuchin said the two sides would “most likely” meet again in Beijing in an effort to salvage the trade deal after each country raised tariffs on goods from the other.

Mr. Mnuchin also signaled progress on removing steel and aluminum tariffs against Mexico. Separately, the White House postponed a final decision on whether to apply auto tariffs to Europe and Japan for at least six months, according to people familiar with the decision.

   
Along with the executive order, the Commerce Department said it would add China’s Huawei Technologies Co. to a list of entities engaged in activities that are contrary to U.S. interests. That could restrict sales or transfers of American technology to Huawei by requiring a government license—a potential body blow to the company, which relies on some U.S. tech companies for chips. The action would also hurt U.S. chipmakers who sell to Huawei.

U.S. national-security officials say Chinese companies including Huawei and ZTE Corp. pose a threat, since under China’s Communist Party rule they are obliged to abide by Beijing’s orders.

The Chinese Embassy, Huawei and ZTE didn’t immediately respond to requests for comment late Wednesday. Asked about the prospect of such an order in Beijing earlier that day, Huawei Executive Director David Wang said such a measure would be misguided.

The executive order came hours after Treasury Secretary Steven Mnuchin said the two sides would “most likely” meet again in Beijing in an effort to salvage the trade deal after each country raised tariffs on goods from the other.

Mr. Mnuchin also signaled progress on removing steel and aluminum tariffs against Mexico. Separately, the White House postponed a final decision on whether to apply auto tariffs to Europe and Japan for at least six months, according to people familiar with the decision.

The U.S. and China remain at loggerheads on a trade deal, and neither has yet moved to reverse plans to raise tariffs. Still, the prospect of new talks on China and hopeful signs on auto, steel and aluminum tariffs were enough to lift financial markets for a second day in a row.

The Dow Jones Industrial Average closed up 116 points, or 0.5%. Major indexes fell sharply last week and again Monday as talks broke down and the U.S. and China responded with tit-for-tat tariffs, fueling fears that the conflict could drag on for months.

As President Trump has often viewed the stock market as a barometer for his administration, the positive signs were likely sent for strategic reasons, said Benn Steil, the director of international economics at the Council on Foreign Relations.

“It would appear as if he’s concerned with the market reaction and is trying to soften it,” Mr. Steil said.

Mr. Mnuchin, responding to questions at a Senate Appropriations Committee hearing, said negotiators were “very close to a historic agreement with China” a few weeks ago but more recently “things had gone in a different direction.”

The U.S. has said China backed away from commitments to change its laws to carry out provisions of the trade deal in areas like intellectual property and government subsidies.

The U.S. team is “most likely to go to Beijing at some point in the near future to continue those discussions,” Mr. Mnuchin said, but didn’t give more details. He and U.S. Trade Representative Robert Lighthizer have represented the U.S. in talks with Chinese officials.

Negotiators for both nations are discussing specific dates for the trip, most likely during the last week of May, said people familiar with the planning.

Mr. Mnuchin also said the administration is making progress resolving steel and aluminum tariffs that were applied to Canada and Mexico.

Those tariffs hadn’t been resolved during negotiations over a new trade agreement among the three countries known as the U.S.-Mexico-Canada Agreement, or USMCA.

Key Republican lawmakers have signaled they won’t vote for the USMCA deal, which needs congressional approval to take effect, unless the steel and aluminum tariffs against Canada and Mexico are removed.

“I think we are close to an understanding with Mexico and Canada” on resolving the steel and aluminum tariffs, Mr. Mnuchin said, adding resolving the tariffs is “a very important part of passing USMCA.”

Canadian Foreign Minister Chrystia Freeland said she discussed the steel and aluminum tariffs Wednesday with Mr. Lighthizer and Sen. Chuck Grassley, the Republican Chairman of the Senate Finance Committee.

“We had good conversations today,” Ms. Freeland told reporters on Capitol Hill. “The Canadian position remains as it has been from the very outset, that we believe that these tariffs need to be lifted.”

Those developments came as the White House postponed for about six months the final decision on whether to impose broad tariffs on automobile and auto-part imports, two administration officials said Wednesday.

Mr. Trump was facing a deadline this week on whether to apply the tariffs following a report from the Commerce Department about the national-security risks of automotive imports.

The U.S. and global auto industry are united in opposing the tariffs, and most industry officials were expecting a delay rather than an immediate decision to impose tariffs.

Mr. Trump has repeatedly warned he could impose tariffs on cars produced by major trading partners including the European Union and Japan, and the administration has sought to use the pressure from that threat to negotiate bilateral trade agreements.

Talks with Japan and the EU are in the early stages, however, and trade experts say the administration needs more time to seek agreements before resorting to tariffs, which could chill efforts to strike a deal.

Mr. Trump faces broad opposition from the industry and lawmakers on the tariffs, as well as legal challenges to his use of the national-security law known as Section 232 to apply them. The law allows for an additional 180 days for negotiations with trading partners.

Tariffs on the global automobile industry of 25%, as the president has threatened, would be a seismic event. Every major auto maker has complex international supply chains. Passenger cars are the single largest U.S. import, worth $173 billion in 2018; other vehicles and auto parts together represent another $199 billion a year of imports.

The prospect of a delay in the auto tariffs provided at least some temporary relief to the auto makers and suppliers Wednesday.

“We are grateful for the additional time and for additional consideration,” said Ann Wilson, senior vice president at the Motor and Equipment Manufacturers Association. She added that suppliers “fundamentally disagree” with the notion that imported components are a national-security risk.

The Trump administration is likely to formalize the delay in the coming days. It wasn’t immediately known if the coming statement would detail possible tariffs or quotas or name the trading partners that could be hit by penalties.

On yet another front, the administration has been working to ameliorate the impact on farmers of retaliatory tariffs from U.S. trading partners.

Agriculture Secretary Sonny Perdue told reporters on Wednesday that the USDA is looking to construct an aid package for farmers in a range of $15 billion to $20 billion, an amount he said corresponds to the department’s estimates of how much farmers have lost due to the trade conflict.

He said the program would likely include direct payments to farmers, just like a previous program last year, and may be able to be carried out without fresh congressional approval.

President Trump has suggested a new farm aid program could also include a humanitarian dimension. “Certainly the president’s concept of buying commodities for humanitarian purposes may also be a part of that,” Mr. Perdue said, but didn’t provide any details on how such a program would work. - WSJ

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Comments

keng ming roland choo
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Oh, I am scared ..... very scared, haha
keng ming roland choo
Like
China can reciprocate, ban all American as well, no problem.

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