Although somebody is undoubtedly bending over backwards to try and spin this as yet another example of Trump playing a complex game of 3-D chess that only he understands, a simple read on proposed legislation to codify the president’s Huawei ban is that the White House underestimated how much support the administration would get on Capitol Hill when it comes to turning the screws on Beijing’s corporate crown jewel.
“American companies shouldn’t be in the business of selling our enemies the tools they’ll use to spy on Americans”, Senator Tom Cotton said Tuesday, of a bill he’s sponsoring which would make it essentially impossible for Trump to ease restrictions on Huawei without congressional approval.
Other sponsors of the bill include Senators Chris Van Hollen, Marco Rubio, Richard Blumenthal and Mitt Romney.
“The best way to address the national security threat we face from China’s telecommunications companies is to draw a clear line in the sand and stop retreating every time Beijing pushes back”, Van Hollen said, a clear reference to Trump’s conciliatory stance adopted after his meeting with Xi at the G20.
“By prohibiting American companies from doing business with Huawei, we finally sent an unequivocal message that we take this threat seriously and President Trump shouldn’t be able to trade away those legitimate security concerns”, Van Hollen continued, on the way to essentially demanding Congress make Trump’s executive order the law. “This legislation will make sure [Trump doesn’t backtrack] by codifying the original executive order on Huawei and prohibiting the Administration from relieving penalties on Huawei without the approval of Congress”.
This is, frankly, hilarious. When Trump blackballed Huawei on May 15, China experts and foreign policy wonks were quick to point out that the move was equivalent to an economic “nuclear bomb“. Trump has, at various intervals, made it clear that he isn’t opposed to nuking some folks if necessary (literally), but more than a few analysts wondered if perhaps the Huawei gambit was just that – a gambit, designed not to defend national security, but rather to secure leverage in the trade talks.
Trump’s relent late last month in Osaka gave Huawei critics ammunition and, indeed, everyone from Chuck Schumer to Marco Rubio to Kyle Bass came out of the woodwork to lambast the president’s apparent pivot.
So, to the extent Trump was simply using Huawei as a bargaining chip and never really cared all that much about “nationals security” in the first place, lawmakers are now determined to take that chip away from him and lock it in a safe on Capitol Hill.
That’s not the best news for the trade talks, because it suggests that Beijing may find itself in a situation wherein Trump simply doesn’t have the authority to grant the kinds of concessions Xi wants in order to get a deal over the finish line.
The House introduced a companion bill spearheaded by Democrats Jimmy Panetta and Ruben Gallego and Republicans Mark Gallagher and Liz Cheney.
As you can see, this has broad bipartisan support, and it sets the stage for the Trump administration to have to explain why, exactly, Huawei is a grave threat to national (indeed, global) security one month, and not really a big deal the next.
The timing is inopportune. Following Trump’s backtrack, US companies are applying for waivers that will allow the sale of equipment to Huawei and, as documented extensively here last month, some major US firms were already circumventing the ban.
Read more: How Micron Beat Trump’s Huawei Ban
One senior US official who spoke to Reuters late last week said the administration could begin approving licenses for companies to begin new sales to Huawei within 14 days”.
“Trump’s reversal, and rapid implementation by the Commerce Department, suggests chip industry lobbying, coupled with Chinese political pressure, may reignite US technology sales” to the company, Reuters wrote, adding that “two US chipmakers who supply Huawei [said] they would apply for more licenses after [recent] comments from Wilbur Ross”.
If you’re wondering whether Congress wants effective veto power over those licenses in the future, the answer is yes. The proposed legislation would explicitly empower lawmakers to disallow waivers that any administration (so, not just this administration) may grant to US companies engaged in commerce with Huawei.
When you combine this with Trump’s renewed tariff threats, you come away thinking that tensions between Washington and Beijing will likely persist indefinitely.
Given all of this, it makes sense that “Trade War” topped the “tail risk” list in BofA’s Global Fund Manager survey again this month. If you count “China slowdown” as a manifestation of the trade conflict, trade jitters have topped BofA’s tail risk list for 16 of the past 17 surveys.
Trade concerns did abate in the July installment of the closely-watched poll. “Trade war concerns fell 20ppt to 36% of FMS investors saying it is the top tail risk [as] concerns about #2 tail risk ‘monetary policy impotence’ jumped 11ppt this month”, the bank’s Michael Hartnett writes.
One imagines the relative “potency” of any monetary policy response will be put the test in the event the trade war ramps back up.
Full press release
Washington, D.C. – Senators Tom Cotton (R-Arkansas) and Chris Van Hollen (D-Maryland), along with Senators Marco Rubio (R-Florida), Mark Warner (D-Virginia), Richard Blumenthal (D-Connecticut), and Mitt Romney (R-Utah) today introduced legislation to reinforce the Trump administration’s efforts to prevent the Chinese-owned telecom company Huawei from threatening America’s national security. The Defending America’s 5G Future Act would codify President Trump’s recent Executive Order and would prohibit the removal of Huawei from the Commerce Department Entity List without an act of Congress. It also would empower Congress to disallow waivers that any administration might grant to U.S. companies engaged in commerce with Huawei. Representatives Mike Gallagher (R-Wisconsin), Jimmy Panetta (D-California), Liz Cheney (R-Wyoming), and Ruben Gallego (D-Arizona) have introduced companion legislation in the House of Representatives.
“Huawei isn’t a normal business partner for American companies, it’s a front for the Chinese Communist Party. Our bill reinforces the president’s decision to place Huawei on a technology blacklist. American companies shouldn’t be in the business of selling our enemies the tools they’ll use to spy on Americans,” said Cotton.
“The best way to address the national security threat we face from China’s telecommunications companies is to draw a clear line in the sand and stop retreating every time Beijing pushes back. By prohibiting American companies from doing business with Huawei, we finally sent an unequivocal message that we take this threat seriously and President Trump shouldn’t be able to trade away those legitimate security concerns,” said Van Hollen. “This legislation will make sure he doesn’t by codifying the President’s original executive order on Huawei and prohibiting the Administration from relieving penalties on Huawei without the approval of Congress.”
“This bill codifies Huawei’s addition to the Commerce Department’s banned Entity List, and thus protects one of the Trump Administration’s most important moves in America’s long-term strategic competition with the totalitarian Chinese government and Communist Party,” said Rubio. “Huawei, a malign Chinese state-directed telecommunications company that seeks to dominate the future of 5G networks, is an instrument of national power used by the regime in Beijing to undermine U.S. companies and other international competitors, engage in espionage on foreign countries, and steal intellectual property and trade secrets.”
“President Trump’s executive order and the Department of Commerce’s Entity List designation reflect the reality that companies like Huawei represent a threat to the security of U.S. and allied communications networks. It shouldn’t be used as a bargaining chip in a larger trade negotiation. This bipartisan bill will make sure that Congress has a chance to weigh in if the President attempts to make concessions on our national security,” said Warner.
“Huawei poses an alarming and unacceptable threat to our nation’s critical telecommunications networks. Our bipartisan bill is a no-brainer. Preventing Huawei from doing business in the United States protects our national security. We must act swiftly to make sure this dangerous company does not cause us harm,” said Blumenthal.
“We must make a concerted effort to confront the threat China poses to U.S. national security, intellectual property, and technology,” said Romney. “Our bill will prohibit U.S.-based companies from doing business with Huawei until they no longer pose a national security threat.”
“Huawei is an appendage of the Chinese Communist Party and should be treated as such,” said Rep. Gallagher. “The President’s actions to protect America’s telecommunications supply chain and restrict the sale of American technology to Huawei were critical steps to protect the future of 5G. It is time we codify these decisions into law and ensure American innovation does not fuel Huawei’s CCP-directed campaign to dominate the global telecommunications market.”
“Huawei is a threat to our international communications and, thus, our national security. This bipartisan legislation prevents compromises of our communications and stops foreign adversaries from benefiting from our ingenuity. It is time for Congress to come together and reassert its authority to protect American business and consumers and the safety of our constituents,” said Rep. Panetta.
“Huawei is a serious threat to American prosperity and security, and the United States must remain vigilant against this Chinese state-directed company and its efforts to gain access to American data, defense supply chain, and other crucial information. The Defending America’s 5G Future Act codifies the President’s wise decision to blacklist Huawei, and sends a clear message that Huawei continues to be a vehicle the Chinese Communist Party is using to gain commercial and security advantages and threaten the United States,” said Rep. Cheney.
“The threat from Huawei to U.S. and allied information networks is real. We cannot allow safeguards and restrictions placed on them to backslide without Congress having a say in the matter. I’m proud to work across the aisle to ensure that American and allied communications are protected against this problematic company for the foreseeable future,” said Rep. Gallego.