China Warns That U.S. Sanctions Against Huawei Could Endanger Trade Talks

It’s not even remotely a surprise. A day after the Trump administration declared a national emergency in order to product U.S. telecommunications for foreign antagonists–with a clear eye on China and Chinese companies such as Huawei–the Chinese government has warned that slapping restrictions on Huawei’s purchase of U.S. technology products that it needs for its telecommunications products would endanger U.S.-China trade talks.

In addition the South China Morning Post is reporting that China’s Commerce Ministry is saying that it has no knowledge of plans by U.S. Treasury Secretary Steve Mnuchin to travel to Beijing. “China is not aware of the United States’ trip plan,” a ministry spokesperson told reporters. On Wednesday Mnuchin had told a Congressional hearing that he expects to visit Beijing soon to resume trade talks that are now in abeyance. “Both sides had candid and constructive communications in the last round of talks, but very regretfully the U.S. unilaterally and continuously escalated the trade conflict, which led to grave damage to the discussions,” the ministry spokesperson continued.

And it looks like China has decided for its part to ratchet up tensions.  China’s Foreign Ministry has announced the formal arrest of two Canadian citizens who were detained shortly after Canada arrested Huawei Chief Financial Officer Meng Wanzhou in December. Meng faces extradition to the United States on charges that she conspired to defraud global banks about Huawei’s relationship with a company operating in Iran. She and the company deny the charges.

On Wednesday, the Commerce Department said it was adding Huawei and 70 affiliates to its “Entity List,” which bars them from buying components and technology from U.S. firms without government approval. Today in response shares of chipmakers Qualcomm (QCOMWealth Strength IndexAAPL is Extremely Up and trending Up) and Xilinx (XLNXWealth Strength IndexAAPL is Extremely Up and trending Up), which sell chips to Huawei, fell with Qualcomm down 3.93% as of 3 p.m. New York time and Xilinx down 5.8%. Also dropping were shares of other suppliers including Analog Devices (ADIWealth Strength IndexAAPL is Extremely Up and trending Up), Finisar (FNSR), Skyworks Solutions (SWKSWealth Strength IndexAAPL is Extremely Up and trending Up), Qorvo (QRVO) and Lumentum Holdings (LITE).As of 3 p.m. the Standard & Poor’s 500 index was up 0.97% and the Dow Jones Industrial Average was ahead 0.80%. The NASDAQ Composite had gained 1.04% and the Russell 2000 small cap index was higher by 0.74%.

The Philadelphia Semiconductor Index ended Thursday down 1.7%