The Trump government takes a first small step back in the story related to the Huawei ban, withdrawing a proposal presented only yesterday. The Pentagon said no to the new sanctions, according to which the new proposal would end up damaging only American industries, as reported by an internal source who spoke with the Wall Street Journal.
The proposal of the Department of Commerce
Currently, there is a ban on American companies to sell their products to Huawei, which has been included in the Entity List of companies deemed dangerous for national security since May 2019. So far, however, numerous companies have exploited a legal “loophole” that allows them to sell those products that are at least 75% made abroad.
The proposal presented yesterday by the Commerce Department aimed to raise this limit to 90%, making it virtually impossible to sell almost all products that were now excluded from the block. The stated purpose of the measure is to limit contacts with Huawei as much as possible, considered a serious threat due to the alleged links with the Chinese government, a hypothesis always denied by the Chinese giant and never supported by concrete evidence.
The rejection of the Pentagon
As with the famous tariffs, which mainly affect American importers, the new limitations would also have had the main result of sinking the economy of the American companies involved in trade with Huawei, which would have seen their revenues plummet.
As a first side effect there would have been a drastic cut in investments and the development of new technologies, with the real risk of losing the advantage over China, already ready to turn to other countries or to develop what is necessary on its own.
The Pentagon (Department of Defense) has realized this, and together with the Treasury Department has sharply rejected the proposal. Together with those of the State, Energy and Commerce, the two departments are called to express their opinion on a new proposal linked to the Entity List, and unanimity is needed to proceed.
The proposal had been submitted to the OMB (Office of Management and Budget) but given the objections posed by the two departments it was immediately withdrawn and currently lies in limbo.
According to the Pentagon, the new measures would have further encouraged Huawei to turn elsewhere for its needs and the Chinese giant has already shown, with Huawei Mate 30 Pro, to be able to make a smartphone completely free of American components.
What scenarios open up in the case of Huawei
The issue now moves to the next Trump government cabinet meeting, scheduled for next week, where a new revision of the proposal likely to meet the support of the bodies involved is likely to be elaborated.
In recent weeks, numerous senators and members of the Chamber have expressed their doubts about the maneuver, which in fact would have reduced control over Huawei’s supplier line, while reducing exports to China, one of the focal points of the trade war which has long opposed the two economic superpowers.
In all this, however, the issue related to Google, one of the many companies that cannot sell their products to Huawei, is still suspended. Is the US ready to lose such a large slice of business, and indirectly control over the software of Chinese smartphones, which even without Google services use Android massively, or will they decide to make some concessions to maintain leadership in the software field?