The U.S. Commerce Department blocked Huawei Technologies from buying U.S. goods last week, a major escalation in the trade war between the world’s two top economies, saying the firm was involved in activities contrary to national security.
The two countries increased import tariffs on each other’s goods over the past two weeks after U.S. President Donald Trump said China had reneged on earlier commitments made during months of negotiations.
On Monday, the Commerce Department granted Huawei a license to buy U.S. goods until Aug. 19 to maintain existing telecoms networks and provide software updates to Huawei smartphones, a move intended to give telecom operators that rely on Huawei time to make other arrangements.
Huawei is still prohibited from buying American-made hardware and software to make new products without further, hard-to-obtain licenses.
Huawei founder Ren Zhengfei on Tuesday told Chinese state media that the reprieve bore little meaning for the company as it had been making preparations for such a scenario.
“The U.S. government’s actions at the moment underestimate our capabilities,” Ren said in an interview with CCTV, according to a transcript published by the Chinese state broadcaster.
The temporary license suggests changes to Huawei’s supply chain may have immediate, far-reaching and unintended consequences for its customers.
The Commerce Department said it will evaluate whether to extend the license period beyond 90 days.
China’s yuan firmed versus the dollar on Tuesday as news of the reprieve eased some worries that trade tensions would be further inflamed and inflict deeper losses on the currency.
Beijing has struck an increasingly defiant tone as the trade war has escalated, saying it will take measures to safeguard the interests of its companies, but has not said whether or how it may retaliate over the U.S. action against Huawei.
President Xi Jinping’s Monday visit to a rare-earth company in southern China sparked speculation that the sector could be the next front in the trade war, driving up shares in Chinese rare-earth related firms on Tuesday.
Finance February 4, 2021