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Huawei crackdown

US stance on Huawei wavers as hawks push for crackdown

Trump softens rhetoric on China with eye on limiting economic risks

President Donald Trump, preparing to board Air Force One on Feb. 18, told reporters he has been "very tough on Huawei."   © Reuters

WASHINGTON -- President Donald Trump looks to strike a delicate balance on blacklisted Chinese company Huawei Technologies as hard-liners seek further restrictions on the telecom giant and moderates move to protect U.S. business interests.

Confronted by these opposing forces in his administration and political opponents hoping to take advantage of the dilemma, the president appears to be softening his rhetoric on trade.

"The United States cannot, & will not, become such a difficult place to deal with in terms of foreign countries buying our product," Trump tweeted Tuesday, noting the "always used National Security excuse."

"THE UNITED STATES IS OPEN FOR BUSINESS!" Trump wrote.

These words seemingly come in response to media reports that the Trump administration is weighing fresh restrictions against U.S. exports to China. Aircraft engines produced by General Electric were cited as a possible target for any ban on sales to China.

Trump said he would reject such a move.

"I want China to buy our jet engines, the best in the World," Trump tweeted Tuesday. "I have seen some of the regulations being circulated, including those being contemplated by Congress, and they are ridiculous."

But China hawks within his administration want to tighten the restrictions on trade with Huawei, the world's largest supplier of telecommunications hardware. The U.S. Commerce Department placed the Chinese company on its "Entity List" last May, which imposes trade strictures.

Companies currently are permitted to deliver products to Huawei without a license if they are made outside the U.S. and if American-made components do not exceed 25% of the content.

But a proposal has circulated that would lower the threshold to 10%, a source close to the Commerce Department says. Exports of foreign-made goods, such as semiconductors, created with U.S.-made production machinery would be subject to added limitations as well.

U.S. semiconductor companies such as Micron Technology continue to conduct some transactions with Huawei while adhering to the letter of the current restrictions. Commerce Department officials have decried what they call the abuse of loopholes by Huawei.

The Chinese company has "been openly advocating companies to move their production offshore to get around the fact that we put Huawei on the list," Commerce Secretary Wilbur Ross said in December.

The U.S. Justice Department gave support to the Commerce Department's position Feb. 13 by filing an indictment charging Huawei with doing business with North Korea in secret, violating sanctions involving Pyongyang. Considering ties to the reclusive regime have always been a subject of concern, a senior Commerce official says, the indictment lays the groundwork for tougher sanctions against Huawei.

Prior to the blacklisting last year, the Justice Department filed an indictment against Huawei alleging dealings with Iran in violation of sanctions, underlining the position that the tech group represented a national security risk.

But moderates in the U.S. Treasury Department are placing top priority on the American economy. Washington recently reached a "phase one" deal with Beijing that offers the potential to ease the trade and tariff war between the two countries.

Any further complications enacted against exports to Huawei risk consequences for the U.S. business community, and manufacturers have lobbied Washington to make this point. Semiconductor industry representatives appealed directly to Ross in a meeting, urging the department to let Huawei buy non-sensitive items abroad.

Businesses will have to prepare for major repercussions if tougher restrictions are put in place, a U.S. trade attorney warned. Trump is keen on avoiding potential economic fallout in an election year as well.

U.S. Defense Secretary Mark Esper signaled reservations against how the clampdown on Huawei would affect American businesses, when he spoke at the Center for Strategic and International Studies in Washington in late January.

"You have to be very conscious of not just your first-order effect -- that's the easy thing -- it's the second- and third-order effects," Esper said, noting that those issues need to be weighed against security concerns.

"That's the balance we have to strike," Esper added later. "There's always a good interagency process that debates that back and forth."

Members of Trump's Republican Party denounced what they regarded as Pentagon opposition to the Huawei trade restrictions. Sen. Rick Scott of Florida introduced a bill last week that would slash the 25% content rule to 10%.

A former senior Commerce Department official criticized the Trump administration's policy on export controls, saying it lacks consistency.

After Trump's tweets Tuesday, the president clarified to reporters that he will maintain pressure on Huawei.

"I've been very tough on Huawei, but that doesn't mean we have to be tough on everybody that does something," he said that afternoon before leaving on a flight.

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