Trump Goes For China's Digital Jugular

(Bloomberg) --

Donald Trump just flashed the nuclear option to thwart China's rise as a superpower.

The White House yesterday threatened to blacklist Huawei Technologies from buying components from American suppliers. The move could cripple China's largest technology company just as it's set to build 5G wireless networks that will form the backbone of the modern economy, connecting everything from self-driving cars to smart homes to advanced medicine.

Following through with the measure carries huge risks: Besides hurting American chip giants, it would anger U.S. friends and foes alike that are already spending billions on 5G networks. The alternatives to Huawei are often more expensive and seen as inferior.

The threat is likely to elevate fears in Beijing that Trump’s strategic goal is to contain China, sparking a possible cold war between the world’s biggest economies. The two sides are already sparring over the arrest in November of Huawai’s chief financial officer.

Some analysts suggest Trump just wants to pressure China over trade demands as talks hang by a thread. But a number of American lawmakers may also see this moment as the last chance to prevent China from eclipsing the U.S.

“@Huawei 5G, RIP,” U.S. Senator Tom Cotton, a Republican from Arkansas, wrote on Twitter. “Thanks for playing.”

Global Headlines

Question of survival | Theresa May will meet today with rank-and-file Conservative Party members who want her to set a date for leaving office. The U.K. prime minister has survived such challenges before, but with the chances of passing her Brexit plan looking impossibly slim, her party is running out of patience. The pound dropped to a three-month low as market anxieties deepened over the likelihood of a no-deal divorce from the European Union.

What rift? | Angela Merkel acknowledged her differences with French President Emmanuel Macron, but insisted she finds a “middle ground” even if they don’t always see eye-to-eye. Macron described their relationship as “productive confrontation,” as the German chancellor made a string of public appearances in the lead-up to the EU parliamentary elections later this month in which she praised European unity.

Trump's wall | The Trump administration plans to begin awarding a tranche of contracts today to build a Mexican border wall, drawing on $2.5 billion from the Defense Department and $600 million from the Treasury Department’s Forfeiture Fund. Opponents of the barrier will urge a California judge tomorrow to block the re-allocation of funds not authorized by Congress.

Mogul pardoned | Trump pardoned yesterday former media tycoon and Hollinger International founder Conrad Black, who served 3 1/2 years in prison for illegally diverting stockholder money to himself. Black, whose company once owned some of the world’s best-known newspapers, including the Chicago Sun-Times and The Daily Telegraph, last year published a book called “Donald J. Trump: A President Like No Other.”

Cooler heads | Even Trump seems to have some doubts about his administration’s ultra-hawkish approach to Iran. The president ended a series of tweets yesterday by saying he was sure that “Iran will want to talk soon,” and said he's the ultimate decider on policy toward the Islamic Republic. The hope for a negotiated end to current tensions contradicts messages coming from others including Secretary of State Michael Pompeo, who’s questioned the value of engaging with the Iranian government and called for it to be changed.

What to Watch

• Matteo Salvini’s long quest for Italy’s premiership depends on how Italians vote in the May 23-26 European ballot. The options for the deputy prime minister include calling a snap election, overhauling his alliance with Five Star or continuing to quarrel.

• The Trump administration is increasing pressure on social media companies such as Facebook and Twitter over alleged political bias with a White House form for reporting potential censorship of political views.

And finally ... For two weeks in 2006, Australians were gripped by the harrowing and ultimately successful bid to rescue two men trapped in a collapsed gold mine. The real-life drama also unearthed an unlikely star — Bill Shorten, a former union leader who’s poised to become the nation’s prime minister. Riding on the promise of wage increases and tax reforms, the left-leaning Shorten will face the difficult task of balancing Australia’s biggest ally, the U.S., and its largest trading partner China, Jason Scott reports.

--With assistance from Karl Maier, Benjamin Harvey, Shivani Kumaresan and Tim Ross.

To contact the editor responsible for this story: Ruth Pollard at rpollard2@bloomberg.net, Anthony Halpin

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