President Trump has been angling to give China’s tech industry a good punch in the mouth for quite some time. Before Trump was president – when he was still just an entertainer, crafting pro-America riffs as he polished his set between tarmacs – the would-be commander-in-chief became increasingly sure about two things: America needed a wall across its southern border with Mexico and China needed the label of currency manipulator.
Trump has continued to flirt with the idea of branding China with the scarlet letters “CM,” and his aggressive use of tariffs has fueled both an ongoing trade war between the two countries and a wave of uncertainty in domestic markets. But it was not until last week that Trump and his Justice Department, through Acting U.S. Attorney General Matthew Whitaker, took their first major swing at China’s tech industry: A pair of indictments directed at China-based Huawei Technologies, the world’s largest telecom equipment manufacturer.
For Trump, there could be no better time to attack than the present. With his “Build the Wall” initiative in limbo on the heels of the partial government shutdown, and with renewed trade discussions between China and the U.S. looming, the president must have been desperate to land a fresh blow on one of his top adversaries.
As far as Huawei goes, there was no better target for the president and the Justice Department. Huawei recently overtook Apple as the world’s second-largest manufacturer of smartphones, and in 2018, its revenue eclipsed the $100 billion mark for the first time. But Huawei has an embattled trade history in the U.S. due to cybersecurity concerns related to its telecom infrastructure, and in April 2018, the company announced its intent to pull out of the U.S. consumer market completely. And now, through these twin indictments, Huawei and its affiliates stand accused of a litany of federal offenses: in New York, it faces a string of charges including fraud, conspiracy and money laundering in an effort to evade U.S. sanctions against Iran; in Washington, it stands accused of theft of trade secrets related to the theft of proprietary phone-testing technology owned and developed by T-Mobile.
The telecommunications behemoth is sure to wage a vigorous defense with the strong backing of the Chinese government, which has already labeled the charges “unfair” and “immoral.” But neither label fits – these charges were both timely and appropriate, even when viewed against the backdrop of fractured trade relations between China and the U.S.
The indictments in the theft of trade secrets case – otherwise known as the “Tappy” case, named after T-Mobile’s testing robot at the center of the controversy – allege in detail a corporate atmosphere at Huawei focused on intellectual property theft and fueled by greed. And Huawei’s painstaking efforts to skirt U.S. sanctions on Iran are downright scary, despite the Chinese government’s well-known distaste for sanctions in general.
China and Iran often tout their “20 centuries of cooperation,” and the two countries now figure to cement a relationship that has become increasingly convenient in modern times – Iran needs China’s cover, both in the United Nations and in direct conflict with the U.S. government, and China imports a staggering amount of Iranian crude oil. Given the outsize influence the Chinese government holds over its mega-powerful corporations, Huawei’s efforts to circumvent U.S. authority to foster trade with Iran are an ominous sign.
America’s only play was to hit Huawei fast and hard. And to the extent China claims the U.S. is posturing amidst a high-stakes trade war – we’ll see who blinks first.
Blake Shuart is a Wichita attorney.