When the Trump administration blocked U.S. firms last year from providing critical parts to ZTE Corp., it quickly paralyzed the Chinese telecom company and threatened to force it into bankruptcy — until PresidentWednesday, Trump announced two measures to clamp down on Huawei Technologies Co.
Tariffs have been Trump’s main tool for exerting pressure on trading partners, but at times, he also has spoken about cutting China a break on trade if its government helped him achieve other goals, such as denuclearization of North Korea., Huawei’s chief financial officer. Meng, daughter of Huawei’s founder and chief executive, Ren Zhengfei, was arrested in Canada on U.S. charges for conspiring to violate U.S. sanctions on Iran.
But the Shenzhen-based firm relies on a long list of U.S. suppliers for its $100-billion-plus operations, including Flex, Qualcomm, Broadcom and Seagate Technology. After China, the United States is by far the largest source of supplies. Taiwan and Japan are a distant third and fourth, respectively. Moreover, the administration’s one-two punch could influence whether European countries and others decide to use Huawei equipment as they build their fifth-generation, or 5G, wireless networks. Huawei has a large presence in Europe, but the United Kingdom and Germany could have second thoughts about opening up the 5G work to Huawei if the company’s ability to deliver is seen as being jeopardized by the U.S. restrictions.
American companies that sell directly to Huawei would feel a hit as well, but the biggest suppliers to the Chinese firm, such as Flex, Qualcomm and Broadcom, derive only a small share of their overall revenues from Huawei, according to company data. Some smaller firms have much higher exposure. But Derek Scissors, a China expert at the American Enterprise Institute, said the fact that the administration did not flatly ban doing business with Huawei, as it did with ZTE, indicates that they do not want to drive the firm out of business.