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On Huawei, All Trump Has to Lose Is America’s Credibility

Trump’s gamble will pay off only if allies back the U.S. hard line -- and if he doesn’t back down.  

On Huawei, All Trump Has to Lose Is America’s Credibility
A replica Statue of Liberty stands near an American flag at the Old Glory Memorial in El Paso, Texas, U.S. (Photographer: Adria Malcolm/Bloomberg)

(Bloomberg Opinion) -- When the history of the unfolding rivalry between America and China is written, the events of the past week will probably figure prominently. On May 15, the Commerce Department effectively banned U.S. companies from providing technology and components to Huawei, the Chinese telecommunications behemoth, and blocked the use of Huawei telecommunications equipment domestically.

The initial justification was that Huawei evaded U.S. sanctions on Iran. But make no mistake: There is a bigger strategic move underway. It marks the culmination of a remarkable shift in U.S. thinking about how to handle the dilemmas of interdependence with a rising challenger, and represents a gamble that Washington can use its superior power to head off some of the most dangerous aspects of Beijing’s economic ascendancy before it’s too late. Not least, Trump’s gambit underscores some of the persistent risks and downsides in his approach to China.

Over two-and-a-half years, Trump has thoroughly reoriented U.S. policy toward Beijing. For a quarter-century after the Cold War, America’s theory was that pursuing deeper interdependence with China was a form of smart, stealthy competition. Integration into the global economy would get China hooked on peace and prosperity; it would simultaneously encourage liberalization of the Chinese political system.

That approach is now widely judged to have failed, or at least not to have succeeded quickly enough to avert the rise of a formidable Chinese challenge. China has grown far richer though global trade, but not more peaceful or satisfied. It is also poised to exert its own economic leverage on the U.S. and its allies. Chinese firms are deeply embedded in supply chains for American munitions and other critical products, and Chinese companies, with Huawei at the forefront, are reaching for dominance in critical sectors such as 5G technology.

If Huawei sets the standards and builds the physical infrastructure for 5G networks around the world, China could reap vast economic dividends, gain great influence over the countries that rely on its technology, and steal or manipulate the information that traverses 5G networks. These fears have been intensified by reports that Huawei has ties to Chinese intelligence, and by Chinese laws compelling private companies to support the state’s security and espionage activities.

The Trump administration is thus seeking to roll back dangerous dependencies and give the U.S. and its allies greater strategic autonomy vis-à-vis China. This logic has informed U.S. diplomatic efforts to persuade Australia, Poland, Germany, the U.K. and other countries to ban Huawei from building their 5G infrastructure. Uneven success in that regard — the U.K. affirmed last week that it will make its own decision on Huawei, after earlier indicating it would allow the company to help build its 5G network — has probably given Trump’s team more incentive to disrupt Huawei’s supply chain.

This escalation is also based on a second key idea animating Trump’s policy — the belief that America has been underusing its unmatched power. The U.S. has been getting raw deals, Trump believes, not because it is weak but because it is timid. Unleashing American economic coercion and military threats will allow Washington to tame rogue regimes in Iran, North Korea and Venezuela; it will secure better trade deals around the world.

Although the administration has not said so explicitly, it appears to be betting that America’s vast economic power — here manifested in its ability to deprive Huawei of access to Qualcomm computer chips, Google software and the like — will allow it to cripple or at least severely weaken that company, and to further dissuade third parties from doing business with it. This attack might derail or delay Huawei’s march to 5G supremacy, and provide an opportunity for its competitors in the U.S. and other democratic countries to strengthen their own positions.

Will it work? Huawei is less vulnerable to supply-chain disruption than ZTE, the Chinese telecommunications firm that was hit with a similar ban in 2018 and nearly collapsed before Trump relaxed the sanctions. It has large cash reserves and access to an enormous domestic market. As trade tensions have increased, Huawei has been stockpiling key components such as computer chips, and the Chinese government has long backed homegrown chip manufacturers in an effort to become self-sufficient. Critics of Trump’s decision have warned that the ban could simply make Beijing work harder to achieve that self-sufficiency, dividing the world into rival economic and technological blocs.

Huawei’s products, however, are still heavily dependent on sophisticated U.S.-made chips that Chinese firms cannot easily replace, and the company will be cut off from some of the most popular apps and software on its smartphones. Huawei is strong, but it has real vulnerabilities that the Trump team means to exploit.

Unfortunately, the Trump strategy has vulnerabilities of its own. Any effort to exert economic pressure on China, or to pursue selective de-integration with Beijing, would be most effective if coupled with a concerted effort to deepen integration with America’s democratic allies. Many of them also have growing concerns about Chinese economic coercion. Yet by launching trade skirmishes not just with China but with allies in Europe and the Asia-Pacific, the Trump administration has created discord where unity is urgently needed. And by reportedly failing to coordinate this ban with close allies beforehand, the administration risks heightening widespread European anger about American unilateralism under Trump.

There is also the question of whether Trump will stick with his hard line. The president has always been conflicted in thinking about economic competition with China. He has singled out China as economic enemy No. 1. But he also seems tempted by an economic grand bargain that might focus on a peripheral issue — the bilateral trade balance — rather than the system of domestic subsidies, unfair trade practices, and other structural issues that matter most.

Given that Trump earlier pursued a strangulation strategy against ZTE only to back off when it shook his relationship with Xi Jinping, he might retreat again or simply use the campaign against Huawei as a bargaining chip in trade negotiations. The 90-day delay the Commerce Department granted on Tuesday to U.S. businesses that have dealings with Huawei could be an indication that Trump is using the ban as trade-deal leverage, although it could just be an effort to allow U.S. firms to unwind their relationships in an orderly fashion.

One thing is clear: Now that Trump has gotten rough with Huawei, he would pay a real strategic cost for backing down. It is hard enough to get European and other countries to forego the use of Huawei’s 5G technology, or commit to an economic counter-offensive against China, given the lure of Chinese trade and investment. It will be harder still if Trump shows that he will leave any allies that do take a hard line in the lurch by cutting a bilateral deal with Beijing. Trump’s move against Huawei hasn’t just ratcheted up the intensity of the U.S.-China economic conflict. It has also put the president’s credibility at stake.

To contact the editor responsible for this story: Tobin Harshaw at tharshaw@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Hal Brands is a Bloomberg Opinion columnist, the Henry Kissinger Distinguished Professor at Johns Hopkins University’s School of Advanced International Studies, and senior fellow at the Center for Strategic and Budgetary Assessments. Most recently, he is the co-author of "The Lessons of Tragedy: Statecraft and World Order."

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