In what appears to be the latest salvo in the US's escalating trade spat with China, the Wall Street Journal reported Wednesday that the Department of Justice is investigating Huawei Technologies, the Chinese smartphone giant, for possible sanctions violations related to Iran.
Last week, the White House banned US companies from selling telecoms components to China's ZTE Corp. after accusing the company of lying while negotiating a settlement with the US over - surprise - violating sanctions on Iran, provoking an outraged response from Beijing, which swiftly announced tariffs on imports of US sorghum.
But according to WSJ, the situation involving Huawei is much more serious, since the DOJ is pursuing criminal charges that could lead to Huawei being saddled with a corporate monitor, or even in the levying of criminal charges against employees who are found to be complicit in the company's behavior. Earlier this year, the Trump administration listed Huawei as a threat to US leadership in the race to develop 5-G technology.
Such a probe raises the stakes for Huawei, which is facing a series of moves by Washington to diminish its already-limited business dealings in the U.S. It could also have knock-on effects for its much larger business overseas, particularly in Europe.
Amid the heightened scrutiny in Washington, some allied countries, where Huawei has big business, have grown more wary.
Washington’s broader assault on Huawei has exacerbated tensions with Beijing, already wrangling with the U.S. over trade. The Trump administration has also recently cited Huawei, the world’s largest maker of cellular-tower electronics and other telecommunications equipment, as a threat to American leadership in the race to develop the future of mobile communication. Hauwei is also the world’s No. 3 maker of smartphones, behind Apple Inc. and Samsung Electronics Co.
The criminal investigation into Huawei follows administrative subpoenas on sanctions-related issues from both the Commerce Department and the Treasury Department’s Office of Foreign Assets Control, according to these people.
The Justice Department’s interest hasn’t been previously reported, and the existence of a criminal probe represents a more serious level of potential misconduct. The Commerce and Treasury departments can impose administrative penalties and regulatory sanctions on the company.
The report sparked a selloff in US tech stocks, adding to the losses from yesterday's session, as trade war fears escalated (though Twitter was also contributing heavily to the drop).
Nasdaq is now at 3-week lows...