Tech War: Trump Admin Considered Nuclear Option In Banning Huawei From US Banking System

A trade deal between the U.S. and China becomes less likely by the day... A decoupling of the world's largest economies is underway.

Sources told Reuters that the Trump administration considered banning Huawei from using the U.S. financial system as a nuclear option to crush the company.

The strategy by the White House National Security Council was to place China's Huawei Technologies Co Ltd. on the Treasury Department's Specially Designated Nationals (SDN) list. This would've meant Huawei would've been barred from the U.S. financial system and banned from using U.S. dollars in transactions, along with prohibiting it from transacting with any U.S. entities or persons.

One source, who supports the move, said Huawei could be placed on the SDN list in the coming months, depending on trade war developments. 

Considering President Trump's statements on Tuesday morning of how a trade deal might be delayed until after the 2020 election, it seems that Huawei could be imminently placed on the list.

Another source said White House officials drafted a memo and held several meetings on the issue, which shows the extent the Trump administration is willing to damage China's economy in the trade war.

Instead of the nuclear option, President Trump opted to blacklist Huawei on trade over the summer, which forces U.S. suppliers to obtain individual licenses to do business with the Chinese company. But this leaves the door open for Trump to use the nuclear option to pressure China into signing a deal.

Annie Fixler, a cyber expert at the Foundation for Defense of Democracies think tank, told Reuters that placing Huawei on the SDN list "would have broad, widespread implications for Huawei across the globe."

Fixler noted that banning the company from using dollars in the global financial system would be devastating for the company. It would also open the doors for Beijing to unleash countermeasures on U.S. firms, like Apple, etc...

Huawei understands that more sanctions are coming, and the trade war could quickly deepen in 2020. To avoid having their assets frozen in the U.S., the company has announced that it will shift a U.S. research center to Canada.

"The research and development center will move from the United States, and Canada will be the center," Huawei's CEO Ren Zhengfei told Toronto's Global and Mail newspaper.

Judging by the headlines on Tuesday from the Trump administration, the likelihood of a trade deal between the U.S. and China before the 2020 election is slim. This means that an escalation in the trade war could be seen as soon as Dec. 15.