The Justice Department’s criminal charges against Huawei and its CFO, Meng Wanzhou, were not exactly unanticipated—but they’re still a bombshell in the current context.
The days of threats are coming to an end, replaced by firm accusations from which the U.S. cannot easily step back. Huawei and Meng stand accused of complex, Iran-related sanctions-busting activities that involved bank fraud and obstruction of justice. Huawei is also accused of stealing trade secrets from T-Mobile, and the DOJ says it has the emails to prove the allegations. Huawei and Meng deny everything.
As Yale Law School’s Robert Williams told CNBC, it’s not accurate to say that the charges are “directly tied” to the U.S.-China trade negotiations, as “that’s just not the way the U.S. law enforcement system works.”
Fair enough, but in effect this is anything but a separate matter. Intellectual property theft is a central issue in the talks, for one thing. And Meng’s arrest in Canada, where she faces extradition to the U.S., has already made Beijing apoplectic. Even if the DOJ’s case against her is rock-solid, the argument coming from the other side is that this is all part of the game.
Witness this statement from Meng’s lawyer, Reid Weingarten, which was obtained by Fortune‘s Eamon Barrett: “The U.S. Government and China have an extremely complex, multifaceted relationship. Our client, Sabrina Meng, should not be a pawn or a hostage in this relationship.” China says the charges are “unfair and immoral” and the country has asked the U.S. to withdraw the Meng extradition request. “We strongly urge the U.S. to stop the unreasonable suppression of Chinese companies including Huawei,” the country’s foreign ministry said.
So the issue is certain to feature during the U.S.-China trade talks, which resume tomorrow in Washington. But to what end?
It wasn’t so long ago that the Trump administration stepped in to stop the Commerce Department from putting ZTE—another major Chinese telecoms equipment firm—out of business over its violation of a DOJ settlement. Trump claimed he was doing so in order to save Chinese jobs, though many saw the move as part of wider trade negotiations. (Congress pushed back but eventually caved.)
That case was also about Iranian sanctions-busting, and ZTE, like Huawei, has freaked out Western intelligence communities due to its equipment’s perceived espionage potential (side note: another Australian telco just abandoned a Huawei-powered network rollout.) Could Trump try the same thing again? If he did, the pushback at home would be much harsher since the Republicans no longer control the House, and we’re talking about an active criminal case this time.
It’s difficult to see how the affair could be made to go away in exchange for concessions from Beijing. That makes it a serious complication to what was already a fraught situation, with the deadline for the trade-war ceasefire now little more than a month away.