Huawei Probe Adds to U.S.-China Trade Tension Ahead of Talks

News of a broad U.S. investigation of Huawei over possible Iran sanctions violations adds to the tension over trade as senior U.S. officials head to China in the coming days in hopes of a deal, according to Bloomberg.

U.S. Treasury Secretary Steven Mnuchin, who’s expected to be accompanied by U.S. Trade Representative Robert Lighthizer, will be arriving in Beijing seeking an accord that would keep the U.S. from imposing tariffs on as much as $150 billion in Chinese imports. China has vowed to retaliate with duties on everything from U.S. soybeans to airplanes.

Agents from the Federal Bureau of Investigation, which is overseen by the U.S. Justice Department, have been looking into transactions by Huawei, China’s largest maker of telecommunications equipment, according to two people familiar with the investigation. They are joined by the Treasury Department’s Office of Foreign Assets Control, or OFAC, which enforces sanctions, and the Department of Commerce, which are also looking into the transactions of the Shenzhen, China-based mobile and telecommunications giant.

The Huawei criminal inquiry grew out of an earlier sanctions-violation probe that ultimately led to penalties against another Chinese technology company, ZTE Corp., according to one of the people.

Some Huawei suppliers in Asia fell Thursday after the news, with Chinasoft International Ltd. closing down 16 percent and Sunny Optical Technology Group Co. declining about 7 percent.

Glenn Schloss, a spokesman for Huawei in Shenzhen, declined to comment about the probes. The company has said it complies with all applicable laws and regulations where it operates, including U.S. export controls and sanctions laws and regulations, and that it “actively cooperates“ with government agencies regarding its compliance.

News of the Huawei investigations also follows last week’s Commerce Department action to ban ZTE, China’s second-biggest network equipment maker, from buying U.S.-made components as punishment for violating a sanctions settlement over transactions with Iran and North Korea.

A finding of wrongdoing by Huawei and a similar U.S. supplier export ban "would have wide ramifications on various suppliers on a larger scale than peer ZTE, in our view," according to Bloomberg Intelligence technology analysts Woo Jin Ho and Anand Srinivasan. "Chip suppliers such as Skyworks and Qorvo, each with about 10 percent sales exposure to Huawei, would be affected.