US holds off on Huawei licenses as China stops buying farming goods

The decision rattled stocks, bonds and currencies around the world

People walk past a Huawei store in Shenzhen, Guangdong province, China July 10, 2019. Picture taken July 10, 2019. REUTERS/Stringer  ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY A THIRD PARTY. CHINA OUT.

The White House is holding off on a decision about licenses for US companies to restart business with Huawei after Beijing said it was halting purchases of US farming goods, according to people familiar with the matter.

Wilbur Ross, US commerce secretary, whose department has vetted the applications to resume sales, said last week he has received 50 requests and that a decision on them was pending. American businesses require a special license to supply goods to Huawei after the US added the Chinese telecommunications giant to a trade blacklist in May over national-security concerns.

The US decision rattled stocks, bonds and currencies around the world.

Huawei suppliers Micron and Western Digital declined as much as 2.2 per cent after news of the delay in license approvals, while Qualcomm, Xilinx and NeoPhotonics all fell more than 1 per cent.

President Donald Trump said in late June after agreeing to a now-broken trade truce with Chinese President Xi Jinping in Japan that some restrictions on Huawei would be loosened. But that promise was contingent upon China beefing up its purchases from American farmers, which Mr Trump has complained the country has failed to do.

In the past week, tensions have escalated further as Mr Trump said he would impose a 10 per cent tariff on $300 billion of Chinese imports as of September 1 and his treasury department formally labelled China a currency manipulator.

Still, Mr Trump said last week there were no plans to reverse the decision he made in Japan to allow more sales by US suppliers of non-sensitive products to Huawei. He said the issue of Huawei is not related to the trade talks.

The White House had no immediate comment and the commerce department declined to comment. Huawei also declined to comment. China’s foreign affairs and commerce ministries didn’t immediately respond to faxed requests for comment.

Technology companies have already made their pitch to the White House for a rapid granting of licenses that would allow them to resume some shipments of components to Huawei.

The Chinese company is one of the world’s biggest purchasers of semiconductors. Continuing access to that market is crucial to the fortunes of chipmakers such as Intel, Qualcomm and Broadcom, who sent their chief executives to meet Mr Trump in July.

Companies such as Xilinx and Micron have publicly said they have applied for licenses and called on the US to allow them to resume doing business with Huawei. They argue that many of their products are easily obtainable from their overseas rivals, making a ban ineffective and harmful to the industry that the trade dispute with China is supposed to be helping.

Some US-based makers of electronic components have already reported earnings and given forecasts that show the negative effects of the trade dispute.