The Entity List: America's Trade War Weapon

As a result, Huawei needs a U.S.-government license to buy American technology. Being listed on the Entity List, however, does not block all dealings with the organization, according to the U.S. Department of Commerce; but in the case of Huawei, the potential damage to its business was still considerable. A number of the company's key clients and suppliers, including Intel and Google on which it is heavily reliant, promptly cancelled their business dealings with the company after the ban was announced.

In some instances, according to a Time report, U.S. suppliers of Huawei found legal loopholes in the ban that enabled them to resume selling certain products to the Chinese firm. Micron Technology, the largest U.S. maker of computer memory chips, for example, said it had started shipping some components to Huawei after its lawyers studied the detail of the export restrictions, according to the report.

Intel Corp, the largest microprocessor maker in the world, also began selling to Huawei again, according to Time. It is likely that other U.S. firms have also resumed their dealings with Chinese companies on the Entity List after finding such legal loopholes.

But the severity of the impact of Huawei being on the blacklist can be judged by the issue being on the agenda at the meeting between U.S. President Donald Trump and Chinese President Xi Jinping at the recent G20 meeting in Japan. At the meeting, a truce was called on imposing further punitive trade actions; and some of the curbs on U.S. firms doing business with Huawei were lifted. “U.S. companies can sell their equipment to Huawei. We're talking about equipment where there's no great national security problem with it,” said Trump, when justifying the decision.

Prior to the meeting, behind-the-scenes pressure had been building. According to a Bloomberg report, in multiple high-level meetings and a letter to the Commerce Department, U.S. tech companies had argued for targeted action against Huawei instead of the blanket ban the Trump administration had imposed in May. That meant identifying the specific technologies that the Chinese company shouldn't be given access to, while allowing U.S. companies to supply the rest.

China, had also threatened to retaliate by releasing its own version of the blacklist. The Chinese Ministry of Commerce announced it was developing its own Unreliable Entities List for recalcitrant foreign firms. Whereas the U.S. claims national security for its justification, the Chinese blacklist is said to apply only to those companies that flout market rules and the spirit of contracts; block supplies to Chinese companies for non-commercial reasons; or seriously harm the legitimate rights and interests of Chinese companies. For many industry observers, however, it could also be used as a powerful retaliatory weapon in the ongoing trade war, in response to the U.S. Entity List.