U.S. President Donald Trump signed an executive order last week, declaring a national emergency, and barring the use of telecommunications equipment made by companies that are deemed a threat to national security, clearing the way for an outright ban on products made by Huawei. The Executive Order did not name China or Chinese companies specifically. However, soon after, the U.S. Commerce Department added Huawei and 70 of its affiliates to its “Entity List” after it concluded that the Chinese company was engaged in activities “contrary to U.S. national security or foreign policy interests”. Inclusion in the list means that a U.S. company, person or government agency purchasing Huawei equipment now requires a specific license “to export, reexport and/or transfer in-country.”

The decision prohibits Huawei from buying parts and components from U.S. companies without U.S. government approval and also makes it difficult if not impossible for Huawei to sell some products because of its reliance on U.S. suppliers. Republican Senator Ben Sasse said: “Huawei’s supply chain depends on contracts with American companies” and he urged the Commerce Department to look “at how we can effectively disrupt our adversary”.

Google immediately suspended doing business with Huawei, including the transfer of hardware, software and technical services except those publicly available via open source licensing. The move could hobble Huawei’s smartphone business outside China as it will immediately lose access to updates to Google’s Android operating system. The Google app store will continue to function for existing Huawei device users, but the next version of Huawei’s Android smartphones will lose access to popular services, including the Google Play Store, Gmail, the Chrome browser and YouTube. Those services are not covered by the open source license and require a commercial agreement with Google. Huawei will continue to have access to the version of the Android operating system available through the open source license, known as Android Open Source Project (AOSP), that is available for free to anyone who wishes to use it. Lenovo denied rumors that it has stopped the sale of PCs and servers to Huawei due to the latest U.S. ban. Taiwan Semiconductor Manufacturing said it will maintain supplies for the time being even though it was assessing the impact of Washington’s decision.

Huawei Founder Ren Zhengfei said he expects U.S. restrictions won’t hurt the Chinese company’s growth much, Nikkei reported. “Huawei’s growth may slow, but only slightly,” Ren told Japanese reporters. “We will not change our management at the request of the U.S. or accept monitoring, as ZTE has done,” he added. Huawei will be “fine” even if it cannot buy chips from U.S. suppliers, as “we have already been preparing for this,” Ren said. He ruled out the possibility of producing 5G equipment in the U.S. “Even if the U.S. asks us to manufacture over there, we will not go,” he said.

The U.S. government claims Huawei’s equipment poses a security risk because the company might allow the government to access networks and private user data – claims that the company and Chief Executive Ren have repeatedly denied. The Commerce Department will spend the next 150 days writing the rules to back up the order, issued under the 1977 International Emergency Economic Powers Act, which will cover any transaction pending or completed as of the order’s signing. The U.S. government has already prohibited its agencies from using devices made either by Huawei or ZTE. Inclusion on the Entity List broadens this prohibition. Huawei unveiled its 92 core suppliers in 2018, of which 33 were from the U.S., including Intel, Oracle, Microsoft and Qualcomm.

China’s Ministry of Foreign Affairs Spokesman Geng Shuang said that the U.S. was “abusing its power to maliciously smear and beat down on certain Chinese companies”. “We urge the U.S. to stop using the pretense of national security to carry out its unreasonable suppression of Chinese companies, and to provide a fair and just environment for Chinese companies investing and operating normally in the U.S. that is free of prejudice.” The latest ban on Huawei reflects Washington’s dangerous Cold War mentality that will lead to further U.S.-China decoupling, which is also casting a shadow over stalled trade talks between the two countries and will hurt the global tech industry, the Global Times newspaper quoted Chinese analysts. China will take necessary measures to safeguard the legitimate interests of Chinese companies, the Foreign Ministry said.

While competitor ZTE was forced to stop most of its business between April and July last year due to U.S. sanctions and paid a USD1.4 billion fine to lift the sanctions, Huawei is in a better position to counter U.S. sanctions. With more than USD15 billion in research and development (R&D) every year, Huawei is ranked among the top five tech firms worldwide in R&D spending, and it has been working to develop its own components from core server chipsets to operating systems. Following Trump’s executive order, Germany and the Netherlands have indicated that they don’t plan to change their stance on Huawei. French President Emmanuel Macron has also cautioned against freezing out Huawei or escalating trade tensions with China. He said that “launching a technology war or a trade war toward any country” is not the best way to defend national interests.

Asked whether China will target U.S. companies, Lu Kang, Spokesperson of the Chinese Foreign Ministry, said that foreign companies should not worry as long as they abide by the law. “But there is something I must emphasize: trade and investment must be based on equality, mutual benefit and mutual respect.”