China dangles a potentially harmful new threat in trade war

China dangles a potentially harmful new threat in trade war
In this Monday, May 20, 2019, photo, shoppers visit a Huawei store in Beijing. Chinese tech giant Huawei has filed a motion in U.S. court challenging the constitutionality of a law that limits its sales of telecom equipment. (AP Photo/Ng Han Guan)

WASHINGTON (AP) — Facing new trade sanctions and a U.S. clampdown on its top telecommunications company, China issued a pointed reminder Wednesday that it has yet to unleash all its weapons in its trade war with the Trump administration.

Chinese state media warned that Beijing could cut America off from exotic minerals that are widely used in electric cars and mobile phones. The threat to use China’s rich supply of so-called rare earths as leverage in the conflict has contributed to sharp losses in U.S. stocks and sliding long-term bond yields.

For months, the world’s two biggest economies have been locked in a standoff over allegations that China deploys predatory tactics — including stealing trade secrets and forcing foreign companies to hand over technology — in a drive to supplant U.S. technological dominance.

The Trump administration has imposed 25% tariffs on $250 billion in Chinese imports and is planning to tax the $300 billion in imports that have so far been spared. And it escalated the stakes this month by putting the Chinese telecom giant Huawei on a blacklist that effectively bars U.S. companies from supplying it with computer chips, software and other components without government approval.

The U.S. claims Huawei is legally beholden to China’s ruling Communist Party, which could order it to spy on their behalf. Washington has offered no evidence that the Huawei has done that, however.

Huawei is trying to beat back one punitive U.S. measure in federal court. In a motion filed late Tuesday in eastern Texas, the company argued that a 2018 law that bars it from selling telecom gear to U.S. government agencies and contractors should be struck down as unconstitutional. The move for summary judgment in a case filed against the U.S. government in March says the law violates a constitutional prohibition against “trial by legislature” of individual entities. Congress thus acted unconstitutionally when it “adjudicated Huawei’s guilt and blacklisted it,” the motion argues.

An attorney representing Huawei in the U.S. case, Glen Nager of Jones Day, asserts that Congress alone cannot constitutionally impose punishment on an individual company — which the punitive law does in singling out Huawei by name.

The law “is intended to drive Huawei out of the U.S. — i.e., to banish it,” Nager argued. It “stigmatizes Huawei as a tool of the Chinese government” with no right to a fair hearing, he added.

Steven Schwinn, a professor at John Marshall Law School in Chicago, suggested that Huawei’s arguments fall short constitutionally, and “given that this relates to national security, we can expect the courts to be fairly deferential to the government.”

The nationalistic Chinese newspaper Global Times warned that China has plenty of ways to retaliate against the United States, including the threat of cutting off supplies of rare earths. China last year produced 78% of the world’s rare earths, according to researchers at Bank of America Merrill Lynch.