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Why the Huawei Scandal Will Reignite the US-China Trade War

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huawei us-china trade war
The Huawei scandal could inflame the U.S.-China trade war. | Source: Shutterstock

A widening federal probe of China’s Huawei Technologies Co. could spark renewed tensions between Washington and Beijing at a critical juncture in their negotiations to end the trade war. According to The Wall Street Journal, federal prosecutors are already in hot pursuit of a criminal investigation into the company for allegedly stealing U.S. trade secrets.

Huawei in Federal Crosshairs

Federal prosecutors are following up on civil lawsuits against Huawei by launching a wider investigation into the company and its trade practices, the Wall Street Journal reported Thursday. Sources familiar with the matter say the investigation is at an advanced stage and could lead to an indictment shortly.

A civil lawsuit filed against Huawei by T-Mobile was one of the primary catalysts for the investigation. In a case brought forward in 2014, Huawei was charged with misappropriating robotic technology from one of T-Mobile’s labs in Washington state. However, the Chinese company told the Journal that the matter was resolved in an undisclosed settlement in 2017. Huawei also maintains it was an isolated incident that involved two employees who acted inappropriately.

Impact on Trade Talks

donald trump xi jinping trade war dow jones
President Donald Trump has suggested that the U.S. is close to striking a deal with China to end the trade war. The Huawei controversy might change that. | Source: AP Photo/Andy Wong, File

Although the controversy surrounding Huawei is nothing new, the alleged criminal investigation could widen the chasm between American and Chinese trade delegates at a time when both sides appear to be making important progress on a bilateral trade deal. Beijing has already shown it is deadly serious about the Huawei dispute after it applied the death penalty to a Canadian citizen accused of drug smuggling. In a hurried retrial, Robert Lloyd Schellenberg was sentenced to death this week after originally receiving a 15-year prison sentence in 2016.

China is being accused of upping the ante in an ongoing dispute with Canada after a high-ranking Huawei executive was arrested in Vancouver last month, where she faces extradition to the United States. Meng Wanzhou, Huawei’s chief financial officer, faces fraud charges in the United States over allegedly violating U.S. sanctions on Iran through a corporate subsidiary.

Many within the Trump administration have attempted to expose China’s intellectual property theft of U.S. businesses, and have called on the president to apply harsher duties on Chinese imports. U.S. lawmakers have also banded together to ban chip sales to Huawei, ZTE, and other mainland companies to over sanctions violations.

The potential fallout from the Huawei investigation could prompt Beijing to retaliate in unpredictable ways, which could erode confidence in the ongoing trade negotiations. As CCN recently reported, a U.S. trade delegation met with Chinese officials last week for longer than expected, highlighting the seriousness of the matter. Both sides agreed on several key issues, including the purchase of U.S. farm and energy commodities and increased access to China’s domestic market. It was the first face-to-face meeting between the two superpowers since President Trump and China’s Xi Jinping agreed to a 90-day trade war truce in December.

Featured image courtesy of Shutterstock.

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