Do the Charges Against China's Huawei Affect US-China Relations?

Nearly 2 months after Huawei's CFO Meng Wangzhou was arrested in Canada, tension between the US and China has risen over this issue as both Huawei and Chinese officials have vehemently denied the 23 charges made against them. However as the US has since elaborated upon the charges which include alleged theft of technology, bank fraud (through a violation of sanctions by doing business with Iran), and obstruction of justice, both China and Huawei's position has weakened.

What This Means for Huawei

As the world's second largest smartphone maker, these charges could hinder their efforts for global expansion. Currently, Huawei has its products in over 170 countries including a substantial number of countries within Europe. However, they have yet to enter the US due to tight regulations, specifically against Chinese technology.

Due to these allegations, not only will restrictions in the US tighten, but so may the restrictions in Europe. Therefore, Huawei is facing a potential loss of customers as some countries are looking so address security concerns posed by the company while countries such as Germany have reportedly begun to consider banning Huawei as well as other Chinese companies. The Czech Republic's government also recently banned Huawei from a bid to build an online system for their countries tax returns.

The Effect on China

Huawei is seen as China's number one tool for global expansion, a "champion" of sorts that has brought China onto the global stage in terms of technology through its vast expansion efforts globally. Huawei is currently leading the cellular movement with their 5G technology and is at the heart of US-China tensions However, these allegations against their top firm may put China in a negative spotlight as well as cause them to see increasing scrutiny especially in Europe. In addition, this may cause relations with the US to further deteriorate.

US and China Relations

The US and China met to discuss trade over the past week. However, little progress was made, particularly on issues such as the protection of intellectual property. This does not come as a surprise for most as China and the US have been on shaky terms as of late. The US and China are supposed to meet over the coming weeks as their truce of 90 days was set to come to an end on March 2nd. Although there is no scheduled meeting, if China and the US do meet, this could postpone an increase in tariffs promised by US Trade Representative Robert Lighthizer.

When Meng Wangzhou was arrested in Canada, there was a ripple effect throughout the stock market. Investors have been concerned over global growth as the US has seen signs of slowing growth while the slowdown in China has already begun to spill into other markets. As the 90 day truce has drawn to a close, there has been almost no progress made between the US and China. If tariffs are increased and the trade war begins to escalate, there could be a major effect on markets around the world. With the charges against Huawei being elaborated upon, both China and Huawei have less leverage against the US. However, the US most likely does not want to see an escalation of a trade war. Therefore, the US will be slow to act.

Overall, I believe that we should watch the case against Huawei with interest as this may have major implications not only within the tech industry but for global markets. This investigation plays an important role in the dispute over intellectual property between the US and China and ultimately has the potential to affect their relationship. I think that the extent to which these allegations against Huawei affect US-China relations remains to be seen. However, I am certain that this case will affect how China proceeds with their use of US technology as well as Chinese-US relations. In addition, the market will most likely see a loss regardless of the outcome of the trial due to the fact that one party, most likely even both will not be satisfied with the outcome and could potentially escalate the trade war.