The biggest phone manufacturer in China is running out of friends. It is said that Google, Qualcomm and ARM have severed ties with Huawei, which has left the company in search of partners following a presidential order. It is not clear how Huawei will respond to the new blackout, but it is likely that the company will do everything in its power to restore these supply routes. And if Huawei challenges the order in court, as is likely, the resulting legal struggle could test the limits of the president's power over international trade.
Huawei's recent problems began with a national emergency declared last week by President Trump, which gave the Secretary of Commerce the power to block information technology transactions that are considered national security risks. The order, which was reportedly under consideration for a year, had an obvious objective: Huawei, the Chinese telecommunications firm that already had a security risk to the intelligence of the United States. taking a potentially fatal blow to the Chinese company's smartphone business.
But the most remarkable part of the order is to what extent it goes beyond any business or transaction. Unlike similar actions in the past, the Trump order gives the Department of Commerce broad powers to prevent any foreign player in a mass industry from doing business with US companies. And given China's central role in the manufacture of electronic products, much of the electronics industry could be vulnerable to a similar order.
According to Alan Rozenshtein, a law professor at the University of Minnesota, it is too early to say how the executive order will be used beyond its own Huawei Presidents declare national emergencies for a multitude of reasons, so granting the Secretary of Commerce the power to block trade is not an "unreasonable" use of an executive order. But the order could, in theory, be used for any number of questionable purposes, for example, to end a company for a matter unrelated to national security, for example.
Huawei has claimed that the order was a strategy to punish China as trade negotiations intensify, and if the facts prove it, they could argue that the execution of the order has become unreasonable. Huawei has already sued the Trump government for a ban on government use, and after the executive order, suggested that a ban would pose "serious legal problems," a not-so-veiled suggestion that she might be willing to take legal action again.
The broad scope of the order could also give Huawei room to roll back. Instead of intervening in a single transaction or acquisition of the company, the executive order actually blacklists Huawei, as well as any information technology company that is considered a potential threat in the future. The order warns all Chinese technology companies, and US companies that work with them, telegraphing the message that the United States is willing to exclude them from the US market.
Charles Skuba, professor at McDonough School of Georgetown University Business, says there is little precedent for such a broad order. Usually, if EE. UU It sees a potential threat to national security in a transaction, adopts a more specific and limited approach: it signals the actions of the Foreign Investment Committee in the United States, which is used to examine transactions and is more focused than the powers granted by the Committee. executive order. If EE. UU He was worried about the sale of specific technology to Huawei, he could have used the CFIUS process, as the Obama administration did several times in cases of Chinese investment.
But instead of blocking a single agreement, or freezing a single company agreement, the Trump administration has gone further. "This is a broader prohibition that basically says that all the activities of these Chinese companies – the sales of their equipment, the acquisitions of equipment from them – are basically subject to this prohibition," says Skuba. "It's much wider." If it is irresponsibly broad, it remains to be seen.
Rozenshtein says that Huawei could act on several legal fronts. The company could argue in a lawsuit that the administration did not properly consider the effects of the order, which were "arbitrary and capricious" in its decision-making. They can also fight for constitutional reasons, arguing that the order is so broad and gives the president so much power, that it is illegal.
Still, in an unprecedented situation, it's hard to predict how well Huawei would do. The companies have presented some challenges to similar orders, such as Obama's wind farm order in 2012, but one judge ultimately rejected most of the claims in that case, and any challenge can raise thorny questions about the executive branch. Rozenshtein says that skeptical judges would be receptive to the idea. "The courts have maintained an incredibly wide use of presidential discretion for decades and decades," he says.
Even if Huawei loses the legal fight, there may be political repercussions for moving so aggressively. As Huawei likes to point out, EE. UU It has not presented public evidence that the company is an active threat to national security, and many have raised questions about why providing components to a phone manufacturer poses a threat to US interests. UU The editorial board of the Washington Post already requested greater control of the order and said the Trump administration "owes the public answers" about the measure.
Meanwhile, the decision will have broad repercussions, as US companies reflect on who could be added to the list. "If I am a US company," says Skuba, "I observe this national emergency ban and says that I must be very careful to do business with any company that has significant interrelated relationships with China."