Few will be surprised the US government is looking to weaken the already limited position of Huawei in the US, the emergence of a probe from the US Department of Justice is just another stepping stone in US/Chinese tensions.
According to the Wall Street Journal, the US Department of Justice has launched an investigation to see whether Huawei violated US sanctions against Iran, which will have numerous companies throughout the US as nervous as Huawei. The whole ZTE saga started with a similar investigation and escalated to a Denial Order effecting not only the firm’s ability to sell in the US, but also source products and services from the country. Suppliers to Huawei should be watching developments here very acutely.
Sources have stated the investigation follows administrative subpoenas on sanctions-related issues from both the Commerce Department and the Treasury Department’s Office of Foreign Assets Control, those a criminal investigation from the Department of Justice is on another level. Consequences could be very severe here.
This of course isn’t the first time Huawei has received attention from the US government. US Congressman Mike Conaway was looking to have both Huawei and ZTE banned in the US in January, political pressure on AT&T ended any prospect of selling devices through the carrier, while numerous committees and investigations have pointed the espionage finger at the vendor. It was only a matter of time before the tale escalated and higher offices were brought into the picture.
There have been no official confirmations of the investigation just yet, but is there really any need? The US government has had its eyes set on ridding both ZTE and Huawei from its shores for some time now, so it should come as little surprise to anyone. The US has been battling China for control of the digital economy, with the globalisation trend threatening Silicon Valley’s (as well as the US on the whole) dominant position at the top of the technology world.
The government has already effectively banned any public sector contracts with the giant, though this will be another step along the line. While we should expect a response from the Chinese government, the fact it hasn’t done anything drastic to date suggests it has an eye on the bigger picture. In banning ZTE from US shores, there has been substantial damage done to US companies. While it might sound like the US is winning the trade war, it is isolating its own economy from the global scene, with friendly-fire scattering everywhere. It does seem to be incredibly short-sighted, especially when you look at the dependence of some of the US’ largest companies dependence on Chinese manufacturing capabilities, most notably Apple.
It was only going to be a matter of time before such an investigation kicked off, and it will only be a matter of time before the Chinese government reacts as well. We’ve said this before, but it is worth reiterating, there will be no winners as a result of this trade war. Everyone involved will only be in a worse position than today if it continues to escalate.