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In U.S.-China Tech Feud, Taiwan Feels Heat From Both Sides

TAINAN, Taiwan — The United States and China are wrestling to lead the world in artificial intelligence, 5G wireless and other cutting-edge technologies. But the real wizardry that makes those advancements possible is being performed on a yam-shaped island that sits between them, geographically and politically.

On Taiwan’s southern rim, inside an arena-size facility stretched out among lush greenery and coconut palms, colossal machines are manipulating matter at unimaginably tiny scale. A powerful laser vaporizes droplets of molten tin, causing them to emit ultraviolet light. Mirrors focus the light into a beam, which draws features into a silicon wafer with the precision, as one researcher put it, “equivalent to shooting an arrow from Earth to hit an apple placed on the moon.”

The high-performance computer chips that emerge from this process go into the brains of the latest tech products from both sides of the Pacific. Or at least they did until last month, when the Trump administration effectively forced leading chip makers in Taiwan — and elsewhere — to stop taking orders from China’s proudest tech champion, the 5G giant Huawei.

The administration’s stranglehold on Huawei shows that for all of China’s economic progress, the United States still has final say over the technologies without which the modern world could not run. Chip making relies on American tools and know-how, which gives officials in Washington the power of life and death over semiconductor buyers and suppliers anywhere on the planet.

Next in the firing line is China’s most advanced chip producer, Semiconductor Manufacturing International Corporation. The U.S. Department of Commerce told American companies last week that they needed permission to export to SMIC, saying its chips could be used by China’s military. If the administration blocks SMIC from using American software and equipment entirely, it will sharply set back Beijing’s hopes for meeting more of its own semiconductor needs.

That leaves Taiwanese chip companies — including the industry’s leading light, Taiwan Semiconductor Manufacturing Company, which owns the Tainan plant — in a tough spot.

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Credit…Bart Van Overbeeke Fotografie, via Reuters

They are forced to heed the dictates of American tech policy. Yet they can scarcely ignore the fact that so many of their customers and their customers’ customers are in China, where the Communist government is also threatening Taiwan with ever bolder displays of military force. China has for decades claimed the self-governing democracy as part of its territory.

In the high-stakes tech fight, TSMC had been playing Finland: a sometime friend to both feuding giants. But that is not the way the tech world works anymore.

“China has virtually no room for maneuver,” said Pierre Ferragu, the head of technology research at New Street Research. “The U.S. definitely has the upper hand in the struggle.”

Tensions in the Taiwan Strait are rising more broadly this year.

The Trump administration has stepped up official exchanges with Taiwan ever since its president, Tsai Ing-wen, won re-election in January over an opponent who was friendlier to Beijing. In response, Chinese aircraft and warships have menaced the island with growing frequency.

When a State Department representative, Keith Krach, visited Taiwan recently, Ms. Tsai feted him at a banquet alongside a bevy of government dignitaries and TSMC’s retired founder, Morris Chang, a nod to the company’s significance to Taiwan’s relations with the United States.

American officials have taken a great interest in TSMC, whose advanced chips are used in fighter jets and other hardware critical to America’s military edge. The company said this year that it would build a new factory in Arizona, responding to American concerns about overreliance on offshore production.

Now, the Trump administration’s campaign against Huawei has forced TSMC to turn against one of its biggest customers. With the two companies unable to work together without licenses, Huawei may find itself unable to make its late-model handsets, an important chunk of its business, once it uses up its chip inventory.

“I don’t think Huawei has much of a future unless they can find some way to get their suppliers to get export licenses,” said Matt Bryson, an analyst with Wedbush Securities.

One of Huawei’s deputy chairmen, Guo Ping, said last week that the company was assessing its options.

“Survival is our main goal,” Mr. Guo said in Shanghai. “As Alexandre Dumas once said, all of human wisdom is summed up in two words: wait and hope.”

TSMC executives sound confident that Huawei’s plight will not dent it much. If Huawei cannot order chips from the company, then its rivals will instead.

Mark Liu, TSMC’s chairman, said at an industry conference last week that Taiwan would continue improving its technology so American and Chinese companies had no choice but to keep working with the island.

“We are enjoying the success of the past,” Mr. Liu said. But for the future, “we cannot stay where we used to be before.”

TSMC could still get caught in the middle, though, if the U.S. government’s continuing attacks prompt Beijing to strike back.

A full-blown clampdown on sales to SMIC could increase the risk of Chinese retaliation “really significantly,” said Mr. Ferragu of New Street Research. Countermeasures that Beijing might once have considered too self-defeating — such as choking off Qualcomm’s or Apple’s sales in China, effectively depriving Chinese citizens of most high-end smartphones — could start to seem more acceptable.

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Credit…Alex Plavevski/EPA, via Shutterstock

“At this point, it’s really a game of poker,” Mr. Ferragu said. Apple and Qualcomm are both TSMC customers.

For Taiwan, these are not just business questions. China’s reliance on TSMC’s chips has long made people on the island see the company as a bulwark against Chinese military aggression. At its shareholder meeting this summer, an investor, Huang Hsueh-fen, approached the microphone hugging a giant bouquet.

“No matter how serious the pandemic becomes, I must still come offer flowers to the company that is our sacred mountain, protector of the nation,” Ms. Huang said.

Tech workers in Taiwan have a Mandarin rhyme about the young engineers who put in late nights and sacrifice their health for the company: “A hundred thousand youths, a hundred thousand livers, shift by shift TSMC is saving Taiwan.”

So what happens if China stops needing TSMC as much as it does now?

This could happen naturally. TSMC is working at the frontiers of physics to continue doubling the number of transistors it can fit onto a piece of silicon. That principle, known as Moore’s Law, has guided semiconductor development for decades.

Not all tech products today need the most advanced chips, though. Some work best by packaging high-end processors with less sophisticated ones. Simple “internet of things” devices do just fine with simpler chips.

“The way we design chips is changing. It just has to,” said Jay Goldberg, a tech industry consultant and former Qualcomm executive. “Moore’s Law is slowing, and we’re just having to design chips in a way to accommodate that.”

A TSMC spokeswoman, Nina Kao, said demand for the company’s latest production processes was “stronger than ever.”

China could also lessen its dependence on Taiwan by getting better at making chips itself.

Beijing last year created a $30 billion fund for investing in chip projects. In recent months, thousands of Chinese companies have said they are getting into the semiconductor business, according to an analysis by the 21st Century Business Herald, a government-owned newspaper.

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Credit…Taiwan Ministry of Foreign Affairs, via Associated Press

China is trying to poach more Taiwanese talent for the task. Dozens of former TSMC managers and engineers joined two ambitious Chinese chip projects last year, according to a person with knowledge of the matter.

Ms. Kao of TSMC said recent turnover was less than 5 percent, which the company considered a healthy level.

Lin Chih-chieh, a law professor at National Chiao Tung University in Hsinchu, Taiwan, said the island needed stronger laws to keep Taiwanese chip makers’ trade secrets from being spirited away to China.

Still, Ms. Lin said, Taiwan’s chip strengths prevent China from subjugating the island as quickly as it did Hong Kong, where the government has curbed civil liberties.

“At least compared to Hong Kong, we are lucky,” she said. “Hong Kong has no ‘Made in Hong Kong’ products, almost nothing.”

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U.S. Places Restrictions on China’s Leading Chip Maker

WASHINGTON — The Trump administration has placed new restrictions on exports to Semiconductor Manufacturing International Corporation, China’s most advanced maker of computer chips, a measure that could deepen the technology conflict between China and the United States.

In a letter on Friday, the Department of Commerce told American companies in the chip industry that they must first acquire a license to sell technology to SMIC and its subsidiaries. The department said it was taking the action after a review in which it determined that the Chinese company “may pose an unacceptable risk of diversion to a military end use in the People’s Republic of China.”

The measure, which could cut SMIC off from the American software and other technology it needs to make its products, comes as the Trump administration takes a harsher stance against Chinese technology companies that it has deemed a national security threat. The administration has clamped down on shipments to the Chinese tech giant Huawei, restricted exports to dozens of other Chinese companies by placing them on a blacklist this year and moved to ban the Chinese-owned social media services WeChat and TikTok.

The Commerce Department did not immediately reply to requests for comment. The letter was first reported by The Financial Times.

The Pentagon, in particular, has expressed concerns that SMIC, whose major shareholders include several Chinese state entities, has ties with the Chinese military.

A SMIC spokeswoman said on Saturday that the company had no relationship with the Chinese armed forces and that it produced chips solely for commercial and civilian use. She added that the company had not received any official notice from the Commerce Department regarding new export restrictions.

Factories in China churn out a huge share of the world’s cellphones, computers and internet equipment. But the silicon brains of that gear are often shipped in from overseas.

Last year, mainland China imported more than $300 billion in computer chips, more than it spent on crude oil. The country’s leader, Xi Jinping, has put enormous resources toward making China more self-reliant in semiconductors and other advanced technologies.

But state support has only taken Chinese chip companies so far. Though SMIC is China’s most technologically advanced chip maker, its manufacturing processes are years behind those of industry leaders like Samsung and Taiwan Semiconductor Manufacturing Company in terms of the number of transistors they can squeeze onto a piece of silicon. That means SMIC cannot make the intricate chips that best support the latest, most demanding applications.

Even to produce its less sophisticated semiconductors, SMIC relies on software and machines from American companies. Analysts at the investment bank Jefferies estimate that up to half of SMIC’s equipment currently comes from U.S. suppliers. SMIC could struggle to stay in business if those partners cannot service and upgrade the company’s manufacturing equipment.

SMIC’s business has already been hit this year by the Trump administration’s curbs on Huawei. In recent months, the Commerce Department has curtailed the Chinese tech giant’s ability to buy semiconductors anywhere in the world, including from SMIC. Huawei’s chip unit accounted for nearly one-fifth of SMIC’s sales last year, according to estimates by Credit Suisse analysts. Qualcomm, the American chip giant, is another customer of SMIC’s.

Ana Swanson reported from Washington, and Raymond Zhong from Taipei, Taiwan.

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U.K. Bars Huawei as Tech Battle Between China and the West Escalates

LONDON — Britain announced on Tuesday that it would ban equipment from the Chinese technology giant Huawei from the country’s high-speed wireless network, a victory for the Trump administration that escalates the battle between Western powers and China over critical technology.

The move reverses a decision in January, when Britain said Huawei equipment could be used in its new 5G network on a limited basis. Since then, Prime Minister Boris Johnson has faced growing political pressure domestically to take a harder line against Beijing, and in May, the United States imposed new restrictions to disrupt Huawei’s access to important components.

Britain’s about-face signals a new willingness among Western countries to confront China, a determination that has grown firmer since Beijing last month adopted a sweeping law to tighten its grip on Hong Kong, the semiautonomous city that was a British colony until 1997. On Tuesday, Robert O’Brien, President Trump’s national security adviser, was in Paris for meetings about China with counterparts from Britain, France, Germany and Italy.

Huawei’s critics say its close ties to the Chinese government mean Beijing could use the equipment for espionage or to disrupt telecommunications — a point the company strongly disputes.

Arguing that Huawei created too much risk for such a critical, multibillion-dollar project, the British government said Tuesday that it would ban the purchase of new Huawei equipment for 5G networks after December, and that existing gear already installed would need to be removed from the networks by 2027.

“As facts have changed, so has our approach,” Oliver Dowden, the government minister in charge of telecommunications, told the House of Commons on Tuesday afternoon. “This has not been an easy decision, but it is the right one for the U.K.’s telecoms networks, for our national security and our economy, both now and indeed in the long run.”

After the British government announced its decision, President Trump took aim at Huawei during a news conference at the White House, saying the United States has “confronted untrustworthy Chinese technology and telecom providers.”

“We convinced many countries, and I did this myself for the most part, not to use Huawei, because we think it’s an unsafe security risk,” Mr. Trump said.

Mr. Trump also announced that he was issuing an executive order formalizing a declaration from late May that the United States would treat Hong Kong in the same manner as China rather than as a semiautonomous territory and would impose the same tariffs that it applies to China. He also said he was signing into law a bipartisan congressional bill that encourages sanctions against Chinese officials and entities that take part in the repression of Hong Kong, as well as financial institutions that do business with those parties.

The dispute over Huawei, the world’s largest maker of telecommunications equipment, is an early front in a new tech cold war, with ramifications for internet freedom and surveillance, as well as emerging technologies like artificial intelligence and robotics.

“The democratic West has woken up late to its overdependence on a country whose values are diametrically opposed to it,” said Robert Hannigan, a former head of the British digital surveillance agency GCHQ, who is now an executive at the cybersecurity firm BlueVoyant. “Huawei and other Chinese companies present a real cybersecurity risk, but the primary threat comes from the intent of the Chinese Communist Party, as we see in Hong Kong.”

Huawei described the announcement on Tuesday as a disappointment and “bad news for anyone in the U.K. with a mobile phone.”

“It threatens to move Britain into the digital slow lane,” said Ed Brewster, a spokesman for Huawei U.K. “Regrettably our future in the U.K. has become politicized; this is about U.S. trade policy and not security. ”

Until the latest turn of events, Britain had been welcoming of Huawei. In 2005, it was the first country to offer Huawei a foothold in Europe, now the company’s largest market outside China. Huawei financed university research and a charity started by Prince Charles. And just last month, Huawei announced plans to spend 1 billion pounds (about $1.25 billion) on a new research center in Cambridge.

The British experience shows the challenges nations face navigating the United States-China rift. In moving forward with the ban, Britain risks retaliation from China, one of its largest and fastest-growing trading partners, when it is trying to craft a more open trade policy outside the European Union. China’s ambassador in London, Liu Xiaoming, recently warned that Britain would “bear the consequences” of treating China with hostility.

“The Huawei issue is the first of many complicated decisions we’re going to have about striking the right balance between our commercial and economic engagement with China, and our security concerns about how China uses its power,” said John Sawers, a former chief of the British intelligence service MI6.

Huawei is the leading provider for towers, masts and other critical equipment needed to build new wireless networks based on fifth-generation wireless technology, known as 5G.

New 5G networks are seen as essential infrastructure in an increasingly digital global economy. The networks will provide faster download speeds for phone users, but offer even more important potential for commercial applications in industries such as manufacturing, health care and transportation.

Image
Credit…Pool photo by Wpa

Huawei’s technological dominance in this field is viewed as a failure of industrial policy in the West. American authorities have spent more than a year pressuring allies to keep Huawei out of communications networks, warning that the company is a proxy for Beijing and a threat to national security. The Trump administration encouraged the use of other telecom equipment makers, including Sweden’s Ericsson and Finland’s Nokia.

At first, countries were resistant, unconvinced that Huawei posed a grave risk. Britain argued that it had a security system in place to ensure all Huawei equipment was reviewed before being put inside its communications networks. The announcement in January stipulated Huawei would be limited to “noncore” parts of the network.

A turning point came in May, when the Trump administration announced a rule that would bar Huawei and its suppliers from using American technology and software. The decision, slated to take effect in September, could throw Huawei’s supply chain into chaos.

In Britain, the American announcement added to pressure Mr. Johnson faced from members of his own Conservative Party to take a harder line against China, especially after the events in Hong Kong. The government announced a review of its January decision after the American punishments were announced.

“American sanctions left the U.K. with little choice,” said Priya Guha, a former British diplomat who represented the country’s interests in Silicon Valley. “There was a bit of checkmate by the U.S.”

The Trump administration has taken other steps, some conducted with little publicity, to undercut China’s position in communications networks.

The U.S. government on Tuesday published an interim rule that will bar Pentagon and NASA contractors from using technology from Huawei and other Chinese telecommunications companies. Some government contractors say the ban, passed into law two years ago, is too onerous, and the administration estimates it will cost some $12 billion.

In April, a group of agencies that calls itself Team Telecom, led by the Justice Department, moved to remove China Telecom, another big wireless company, from its operations inside the United States. It has long been operating “points of presence” in U.S. networks that help maintain internet connections. In a series of classified briefings, American intelligence agencies accused it of experimenting with rerouting American traffic through China — though the purpose of that rerouting was unclear.

The same group moved last month to block the Pacific Light Cable Network — a partnership involving Facebook and Google among others — from operating an undersea cable linking Hong Kong and the United States, in what was supposed to be the highest-capacity undersea Pacific connection for internet traffic.

The Trump administration asked the Federal Communications Commission to block the connection in Hong Kong, citing concern it “would expose U.S. communications traffic to collection” by China, through a Chinese firm operating where the cable landed. Instead, it wants the commission to approve only direct connections to Taiwan and the Philippines, undercutting China’s effort to make Hong Kong a key data transfer hub. It cited the new national security law for Hong Kong, which at the time was still being drafted.

But it remains unclear if the steps involving Huawei and others will achieve Washington’s objective. Chinese firms will still control much of Asia’s traffic, and that means calls, data and searches will still move through Chinese switching systems. At best, the U.S. moves can make it harder for China’s leaders to cut off communications in times of conflict. But it cannot protect the United States from what Sue Gordon, the former deputy director of national intelligence, called the process of “living in a dirty network.”

Still, Robert B. Blair, a senior Commerce Department official who until recently served as the Trump White House’s chief telecommunications adviser, told a meeting of the Council on Foreign Relations on Tuesday that “we scored a major victory” with Britain’s decision.

In Britain, officials warned its ban would add significant costs, and delay the rollout of 5G by around two years. The new 5G wireless systems must be built atop existing networks that Huawei had a major role in constructing. In setting a 2027 deadline, the British government said moving any faster to remove Huawei gear would produce a greater risk to the security and resilience of the network.

The ban does not apply to smartphones and other consumer products made by Huawei, or equipment used in 2G, 3G and 4G networks.

Many see the Huawei dispute as foreshadowing future conflicts, with other prominent companies becoming entangled. Secretary of State Mike Pompeo said the United States was considering actions against Chinese apps, including the hugely popular social media service TikTok, which is owned by a Chinese internet company.

Britain’s decision to bar Huawei will put pressure on other European countries. In Germany, Chancellor Angela Merkel is being urged to keep the company out of a new 5G network, but is weighing the economic fallout for German automakers, for whom China is a critical market.

“If Huawei is stopped in its tracks, that does represent a very important inflection point for China’s ability to achieve its objectives,” said Nigel Inkster, a senior adviser at the International Institute for Strategic Studies in London who has written a book on the technology battle between the United States and China.

Mr. Inkster warned that the West risks provoking China if it feels more economically isolated. “There is a serious need to think hard and deeply about whether it is realistic to disengage from China totally in these areas,” he said.

Julian E. Barnes and Edward Wong contributed reporting.

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U.K. Bars Huawei From 5G Network, Raising Tensions With China

LONDON — Britain announced on Tuesday that it would ban equipment from the Chinese technology giant Huawei from the country’s high-speed wireless network, a victory for the Trump administration that escalates the battle between Western powers and China over critical technology.

The move reverses a decision in January, when Britain said that Huawei equipment could be used in its new 5G network on a limited basis. Since then, Prime Minister Boris Johnson has faced growing political pressure domestically to take a harder line against Beijing, and in May, the United States imposed new restrictions to disrupt Huawei’s access to important components.

Britain’s about-face signals a new willingness among Western countries to confront China, a determination that has grown firmer since Beijing last month adopted a sweeping new law to tighten its grip on Hong Kong, the semiautonomous city that was a British colony until 1997. On Tuesday, Robert O’Brien, President Trump’s national security adviser, was in Paris for meetings about China with counterparts from Britain, France, Germany and Italy.

Huawei’s critics say its close ties to the Chinese government mean Beijing could use the equipment for espionage or to disrupt telecommunications — a point the company strongly disputes.

Arguing that Huawei created too much risk for such a critical, multibillion-dollar project, the British government said Tuesday that it would ban the purchase of new Huawei equipment for 5G networks after December, and that existing gear already installed would need to be removed from the networks by 2027.

“As facts have changed, so has our approach,” Oliver Dowden, the government minister in charge of telecommunications, told the House of Commons on Tuesday afternoon. “This has not been an easy decision, but it is the right one for the U.K.’s telecoms networks, for our national security and our economy, both now and indeed in the long run.”

The dispute over Huawei, the world’s largest maker of telecommunications equipment, represents an early front in a new tech Cold War, with ramifications for internet freedom and surveillance, as well as emerging technologies like artificial intelligence and robotics.

“The democratic West has woken up late to its over-dependence on a country whose values are diametrically opposed to it,” said Robert Hannigan, the former head of the British digital surveillance agency GCHQ, who is now an executive at the cybersecurity firm BlueVoyant. “Huawei and other Chinese companies present a real cybersecurity risk, but the primary threat comes from the intent of the Chinese Communist Party, as we see in Hong Kong.”

Huawei described the announcement on Tuesday as a disappointment and “bad news for anyone in the U.K. with a mobile phone.”

“It threatens to move Britain into the digital slow lane,” said Ed Brewster, a spokesman for Huawei U.K. “Regrettably our future in the U.K. has become politicized; this is about U.S. trade policy and not security. ”

Until the latest turn of events, Britain had been welcoming of Huawei. In 2005, it was the first country to offer Huawei a foothold in Europe, now the company’s largest market outside of China. Huawei financed university research and a charity started by Prince Charles. And just last month, Huawei announced plans to spend 1 billion pounds (about $1.25 billion) on a new research center in Cambridge.

The British experience shows the challenges nations face navigating the United States-China rift. In moving forward with the ban, Britain risks retaliation from China, one of its largest and fastest-growing trading partners, at a time when it is trying to craft a more open trade policy outside the European Union. China’s ambassador in London, Liu Xiaoming, recently warned that Britain would “bear the consequences” of treating China with hostility.

“The Huawei issue is the first of many complicated decisions we’re going to have about striking the right balance between our commercial and economic engagement with China, and our security concerns about how China uses its power,” said John Sawers, the former chief of the British intelligence service MI6.

Huawei is the leading provider for towers, masts and other critical equipment needed to build new wireless networks based on fifth-generation wireless technology, known as 5G.

New 5G networks are seen as essential infrastructure in an increasingly digital global economy. The networks will provide faster download speeds for phone users, but offer even more important potential for commercial applications in industries such as manufacturing, health care and transportation.

Image
Credit…Pool photo by Wpa

Huawei’s technological dominance in this field is viewed as a failure of industrial policy in the West. American authorities have spent more than a year pressuring allies to keep Huawei out of communications networks, warning that the company is a proxy for Beijing and a threat to national security. The Trump administration encouraged the use of other telecom equipment makers, including Sweden’s Ericsson and Finland’s Nokia.

At first, countries were resistant, unconvinced that Huawei posed a grave risk. Britain argued that it had a security system in place to ensure all Huawei equipment was reviewed before being put inside its communications networks. The announcement in January stipulated Huawei would be limited to “noncore” parts of the network.

A turning point came in May, when the Trump administration announced a rule that would bar Huawei and its suppliers from using American technology and software. The decision, slated to take effect in September, could throw Huawei’s supply chain into chaos.

In Britain, the American announcement added to pressure Mr. Johnson faced from members of his own Conservative Party to take a harder line against China, especially after the events in Hong Kong. The government announced a review of its January decision after the American punishments were announced.

“American sanctions left the U.K. with little choice,” said Priya Guha, a former British diplomat who represented the country’s interests in Silicon Valley. “There was a bit of checkmate by the U.S.”

The Trump administration has taken other steps, some conducted with little publicity, to undercut China’s position in communications networks.

In April, a group of agencies that calls itself Team Telecom, led by the Justice Department, moved to remove China Telecom, another big wireless company, from its operations inside the United States. It has long been operating “points of presence” in U.S. networks that help maintain internet connections. In a series of classified briefings, American intelligence agencies accused it of experimenting with rerouting American traffic through China — though the purpose of that rerouting was unclear.

The same group moved last month to block the Pacific Light Cable Network — a partnership involving Facebook and Google among others — from operating an undersea cable linking Hong Kong and the United States, in what was supposed to be the highest-capacity undersea Pacific connection for internet traffic.

The Trump administration asked the Federal Communications Commission to block the connection in Hong Kong, citing concern it “would expose U.S. communications traffic to collection” by China, through a Chinese firm operating where the cable landed. Instead, it wants the commission to approve only direct connections to Taiwan and the Philippines, undercutting China’s effort to make Hong Kong a key data transfer hub. It cited the new national security law for Hong Kong, which at the time was still being drafted.

But it remains unclear if the steps involving Huawei and others will achieve Washington’s objective. Chinese firms will still control much of Asia’s traffic, and that means calls, data and searches will still move through Chinese switching systems. At best, the U.S. moves can make it harder for China’s leaders to cut off communications in times of conflict. But it cannot protect the United States from what Sue Gordon, the former deputy director of national intelligence, called the process of “living in a dirty network.”

In Britain, officials warned its ban would add significant costs, and delay the rollout of 5G by around two years. The new 5G wireless systems must be built atop existing networks that Huawei had a major role in constructing. In setting a 2027 deadline, the British government said moving any faster to remove Huawei gear would produce a greater risk to the security and resilience of the network.

The ban does not apply to smartphones and other consumer products made by Huawei, or equipment used in 2G, 3G and 4G networks.

Many see the Huawei dispute as foreshadowing future conflicts, with other prominent companies becoming entangled. Secretary of State Mike Pompeo said the United States was considering actions against Chinese apps, including the hugely popular social media service TikTok, which is owned by a Chinese internet company.

Britain’s decision to bar Huawei will put pressure on other European countries. In Germany, Chancellor Angela Merkel is being urged to keep the company out of a new 5G network, but is weighing the economic fallout for German automakers, for whom China is a critical market.

“If Huawei is stopped in its tracks, that does represent a very important inflection point for China’s ability to achieve its objectives,” said Nigel Inkster, a senior adviser at the International Institute for Strategic Studies in London who has written a book on the technology battle between the United States and China.

Mr. Inksterwarned that the West risks provoking China if it feels more economically isolated. “There is a serious need to think hard and deeply about whether it is realistic to disengage from China totally in these areas,” he said.

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Jailed Huawei Workers Raised a Forbidden Subject: Iran

The five men were all locked in disputes with their onetime employer, the Chinese technology giant Huawei. And they had all joined a group on the social app WeChat to organize.

Then, one of them wrote a message to the group that would upend their lives:

“I can prove that Huawei sold to Iran.”

The message, and the brief discussion that followed, touched on an explosive issue for the company. Huawei had just begun fighting allegations by the U.S. government that it had committed fraud to bypass sanctions against Iran. The company’s chief financial officer, a daughter of its founder, had been arrested less than two weeks earlier as part of the case.

The employees’ messages in the chat group included no hard evidence that Huawei’s activities in Iran were unlawful. Yet within weeks, the Chinese police had arrested all five men, two of them told The New York Times.

The two former employees — Li Hongyuan, 42, and Zeng Meng, 39 — said officers had questioned them about Iran and asked why they had been in contact with foreign news outlets, both topics they had discussed on WeChat.

Mr. Li eventually spent more than eight months in detention. Mr. Zeng spent three.

For over a year now, Huawei, the world’s largest maker of telecommunications equipment and a leading smartphone brand, has been the target of an intense clampdown by the Trump administration. The Justice Department has charged Huawei with stealing trade secrets and lying about its business in Iran. The company denies wrongdoing. American officials say Huawei answers to the Chinese state, which the company also denies.

But even if Huawei is not government controlled, Chinese officials often defend it as if it were a strategically vital state asset.

Beijing has vowed to retaliate for the U.S. government’s restrictions on Huawei. China’s ambassador to Germany threatened consequences if that nation’s government excluded the company from its telecom market. State propaganda outlets cast supporting Huawei as a patriotic act.

And in the case of the jailed employees, Mr. Li and Mr. Zeng said, the police appear to have arrested them in part to stop them from speaking out about Huawei’s activities in Iran.

Huawei declined to comment. It referred to an earlier statement saying that Mr. Li’s case was not a labor dispute, and that the company had reported suspected illegal conduct to the authorities. Huawei also reiterated that it was committed to complying with the law wherever it operates.

The police in the city of Shenzhen, who seized the men, didn’t respond to a faxed request for comment.

News of Mr. Li’s detention set off a wave of anger at Huawei in China last year. Internet users were outraged at what seemed to be a case of a vindictive corporation’s punishing an employee who dared to demand the pay he was owed. Censors quickly erased critical comments and articles. But at the time, the police’s interest in the employees’ discussions about Iran was not reported.

Mr. Li, Mr. Zeng and the three others were first detained in December 2018, not long after the world learned that Washington was accusing Huawei of fraud related to its Iranian business. The five men were embroiled in labor disputes with the company, and they chatted and commiserated in a WeChat group.

The discussion about Iran took place on Dec. 11, according to screenshots seen by The Times. Days later, Mr. Li was arrested in Shenzhen, where Huawei has its headquarters. Mr. Zeng was arrested shortly thereafter in Thailand, where he was vacationing, and taken back to China.

For Huawei, not all sales to Iran would have been illegal. In principle, only those involving U.S.-origin goods, technology or services would have fallen afoul of American sanctions. The company has said its sales in Iran were for commercial civilian use and did not violate sanctions.

Even so, Mr. Li said, the police asked him about his involvement in Iran, which he had mentioned on WeChat. As a former global manager in Huawei’s electrical inverter business, Mr. Li naturally had contact with colleagues in Iran, he told The Times. But he said he had never been there himself.

“I only knew so much. Whatever I knew, I told them all of it,” Mr. Li said. The police did not say why they were questioning him about Iran, he said.

The police also knew that he had been arranging to meet with a reporter for a Hong Kong news outlet that month, Mr. Li said. But he had planned to talk with the reporter about Huawei’s labor and tax practices, not Iran, he said.

“I said, ‘There’s nothing illegal about that,’” Mr. Li recalled.

Mr. Zeng said the police had explained it clearly to him: By discussing Huawei’s Iranian business and communicating with foreign news outlets, the former employees had crossed a line.

China and the United States were in a trade war, Mr. Zeng said one officer had told him. At a delicate time, weren’t they just making trouble?

It was the equivalent, Mr. Zeng said the officer had told him, of supporting Japan after it invaded China in the 1930s.

“At the time, the Meng situation was too hot,” Mr. Li said, referring to the arrest of Huawei’s finance chief, Meng Wanzhou. “They might have been afraid that we were making these noises and would cause problems for Boss Meng.”

The three other employees who were jailed couldn’t be contacted.

Mr. Zeng said he had been working as a product manager for Huawei in Morocco when the company began hinting, in 2017, that it was dissatisfied with his performance. In May the next year, he was let go, but his severance package did not include his year-end bonus, and he sued.

During that time, Mr. Zeng looked for other disgruntled Huawei workers to add to a WeChat group. Word reached Mr. Li, who was suing Huawei for his own bonus after his contract wasn’t renewed. The group eventually swelled to more than 60 people.

They knew they were probably being monitored. Huawei has a habit of infiltrating unhappy employees’ chat groups, Mr. Zeng said.

In November 2018, a WeChat group consisting of Mr. Li, Mr. Zeng and a few others split off from the larger one. They discussed how to draw the international news media’s attention to Huawei’s labor practices.

On Dec. 11, the larger WeChat group was discussing Huawei’s political troubles when someone in the group brought up Iran, screenshots of the messages show.

“I worked on IranCell projects from 2012 to 2014,” the person wrote, referring to an Iranian telecom operator. “I went on business trips.”

“I can also confirm,” Mr. Li replied. “Internally, it’s an open secret that Huawei sells to Iran.”

The police arrested Mr. Li on Dec. 16, according to a document from Shenzhen prosecutors. He was initially accused of leaking trade secrets, he said. Mr. Zeng said he was arrested two weeks later on the same accusation.

The three other employees were also in the smaller WeChat group, Mr. Zeng said. He said one was the person who had first spoken up about Iran in the larger group.

When the police took Mr. Zeng back to his Thai hotel, one officer demanded his phone, he recalled. The officer saw that he had been in contact with international news outlets, including The Times, about his colleagues’ arrests.

The officer uttered an expletive, Mr. Zeng said. Did he really have to go to the foreign media? the officer asked.

Mr. Zeng said his damp cell in Shenzhen had held more than 30 detainees. Only at midday would it get some sunlight, on a patch of wall near the toilet. They would crowd around, basking in the warmth and holding their noses.

After Mr. Zeng had spent a few weeks in detention, the police changed the accusation against him to fraud, he said. He denied wrongdoing, and in March 2019, he was released. But he said the police had first made him write a statement promising that he would not publicly go against Huawei’s company line on Iran or be manipulated by foreign forces with ulterior motives, a reference to the international news media.

The accusation against Mr. Li ended up being extortion. He was freed in August with no charges.

“China is still some distance away from having rule of law,” he said.

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Trump Effort to Keep U.S. Tech Out of China Alarms American Firms

WASHINGTON — The Trump administration’s push to prevent China from dominating the market for advanced technologies has put it on a collision course with the same American companies it wants to protect.

Firms that specialize in microchips, artificial intelligence, biotechnology and other industries have grown increasingly alarmed by the administration’s efforts to restrict the flow of technology to China, saying it could siphon expertise, research and revenue away from the United States, ultimately eroding America’s advantage.

The concerns, which have been simmering for months, have taken on new urgency as the Commerce Department considers adopting a sweeping proposal that would allow the United States to block transactions between American firms and Chinese counterparts. Those rules, on top of new restrictions on Chinese investment in the United States and proposed measures that would prevent American companies from exporting certain products and sharing technology with foreign nationals, have the tech industry scrambling to respond.

The Trump administration’s crackdown has already prompted foreign firms to shun American components and technology over concerns that access to parts they need could be abruptly cut off. American companies are watching warily as the United States considers restricting export licenses for companies that sell products or share intellectual property with China, including General Electric, which sells aircraft parts to China as part of a joint venture with Safran, a French firm.

Top administration officials plan to meet on Feb. 28 to discuss further restrictions on China, including whether to block G.E.’s license to sell jet engines and whether to further curtail the ability of Huawei, the Chinese telecom giant, to have access to American technology.

There is growing bipartisan consensus in Washington that China poses a security threat and that the United States must protect domestic industries to retain a technological edge. While President Trump’s trade war with China was aimed at forcing Beijing to end practices that gave Chinese industries an advantage, the initial deal signed last month did little to address the security concerns.

The tech industry has warned that limiting access to China, both in terms of selling and buying products, could cripple American companies and end up undercutting the United States as the biggest global hub of research and development.

Companies, along with the lawyers and consultants who advise them, say firms increasingly have no choice but to locate more research and development outside the United States, to ensure that they have uninterrupted access to China, a fast-growing consumer market and the center of the global electronics supply chain. New investment dollars are being funneled to research hubs near University of Waterloo in Canada, as well as Israel, Britain and other places beyond the reach of the American government, they say.

“Anyone who thinks our concerns are exaggerated should talk to the U.S. semiconductor industry workers who are already losing their jobs due to walling off our largest market,” said John Neuffer, the president and chief executive of the Semiconductor Industry Association, which represents chip makers. “Revenue from that big market fuels our big research investments, which allows us to innovate and drive America’s economic growth and national security.”

The RISC-V Foundation, a nonprofit that has created an open-source software standard for the chips that power smartphones and other electronics, acknowledged in recent months that it had chosen to move its incorporation from Delaware to Switzerland because of concerns from its members about more stringent regulations in the United States.

“If this administration proceeds with the current trajectory, we’ll see more defections of companies, of scientists,” said Scott Jones, a nonresident fellow with the Stimson Center. “They’ll take their toys and they’ll go elsewhere, and other economies will be the beneficiary of that.”

The most recent source of concern stems from a Commerce Department plan to vet and potentially block technology transactions that pose a risk to the United States. The proposed rule would allow the commerce secretary to block transactions involving technology that was tied to a “foreign adversary” and that posed a significant risk to the United States.

The rule grew out of an executive order Mr. Trump signed last year to try to shut out Huawei by authorizing the commerce secretary to bar any purchase of technology designed by a “foreign adversary” that put America at risk. American companies say the regulations are written so broadly that they could give the United States authority to block transactions or unwind existing ones in areas far afield from telecom gear.

While tech companies say they support efforts to protect U.S. national security, dozens of companies and industry lobbying groups have expressed concerns about the proposal.

IBM, in a January comment letter, told the Commerce Department to “go back to the drawing board” and said the rules “will lead to a broad disengagement of U.S. business from global markets and suppliers.”

“Its reach, breadth and vagueness are unprecedented,” IBM said.

The Internet Association, which counts Google and Facebook among its members, said the proposal lacked “substantive safeguards.” The Motion Picture Association warned that it could affect Hollywood’s ability to pursue transactions around special effects or animation.

The Commerce Department said in a statement that the process would ensure that “all points of view have been considered and the U.S. national security considerations are balanced against corporate commercial interests.”

The tougher measures have come in response to what the administration and even the tech industry view as a rising economic and security threat. China is gaining ground in a range of technologies that experts say could give the country an economic and military edge, including artificial intelligence, facial recognition, microchips and quantum computing.

To try to dominate these advanced industries, China has deployed subsidies, targeted acquisitions of American firms and created industrial plans like Made in China 2025 to leap ahead. The administration has repeatedly accused China and its companies of engaging in corporate espionage, hacking and intellectual property theft.

Last week, the U.S. government charged Huawei and two of its subsidiaries with federal racketeering and conspiracy to steal trade secrets from six American companies. It also charged four members of China’s military with hacking into Equifax, one of the nation’s largest credit reporting agencies, and stealing trade secrets and the personal data of about 145 million Americans in 2017.

Beijing’s actions have created an overwhelming fear in Washington that China will come to dominate advanced industries and put American competitors out of business, in the same way it did for steel, furniture and solar panels. But the stakes are even higher this time, given that many of these new technologies are critical for the military.

“The Chinese have long been a commercial people, but for China, purely economic success is not an end in itself,” Attorney General William P. Barr said in a speech this month. “It is a means to wider political and strategic objectives.”

The Trump administration’s response has been to offer a new definition of national security, one that encompasses economic threats. The distinction has allowed the United States to enact powerful rules restricting commercial exchanges with China.

Mr. Trump has cited national security in his decision to tax foreign metals, propose new limits on the technology that can be transferred outside the United States and bar Chinese companies like Huawei from buying American components.

While tech companies found a way around the initial Huawei ban, the administration is considering much more severe restrictions. A new proposal would extend the reach of the U.S. government to regulate products made around the world, prohibiting companies from using American components and technologies in foreign-made products that are then supplied to Huawei.

The proposals have set off panic within the technology industry, which fears the new restrictions will hamper its ability to tap into the Chinese market. Industry lawyers and trade groups have begun warning that, unless the administration can persuade its allies to adopt similar restrictions, companies will decide the safest course is to try to limit their use of American technology.

Critics point to past incidents where tight regulation pushed American industries offshore — including machine tool makers in the 1990s, and commercial satellites in the 2000s. While it is illegal for companies to move existing operations abroad to try to circumvent export control rules, there are no such constraints on new investments.

“Their incentive is shareholder value and making money,” Jim McGregor, the chairman of greater China for APCO Worldwide, said of America’s biggest technology companies. “It’s not defending what is good for America. You can say that’s terrible, but that’s the way our system works.”

Mr. McGregor said the economic incentives of the Chinese market would encourage companies to “decouple from America.”

Chinese companies are also working to weed American components out of their supply chains — a long-running effort toward self-sufficiency that has accelerated under the threat of harsher U.S. measures.

In recent months, some Chinese companies have begun asking their suppliers to certify that their products are made with a minimal amount of American content, so they are not at risk from American export controls, people familiar with the conversations say.

Chinese telecom companies have been asked to find an alternative to using Oracle’s software in their systems. And CITIC Capital, a giant investment management firm with deep links in China, has embraced helping Chinese companies find alternatives to American technology as an investment theme for this year.

Some who favor tougher China rules say companies are exaggerating the potential impact in an attempt to influence new regulations. They say that the United States retains big advantages in research and development, and that companies are trying to scare the government into loosening rules by saying they will leave.

Others say the national security threat from China is so serious that some short-term revenue loss is warranted.

“You can’t avoid paying that price,” said Clyde Prestowitz, a former Reagan administration official who led trade negotiations with Japan and China. “Your only choice is to pay it now or later. Now, you still have a cutting-edge industry that will take a hit, but that can survive and prosper if high tech does not become a Chinese playground.”

The administration’s view is not monolithic. Within the Commerce Department, some are pressing for stricter rules while others say crippling American business will do more to endanger national security.

The Pentagon is also split, with some officials calling for tighter regulations and others saying the government should not put innovation at risk, given that military technologies typically draw on commercial products.

Some China experts say that American companies are deluding themselves and that, without safeguards, China will eventually steal their technology and drive them out of business.

“We’ve seen what happens to many foreign firms who ‘have to be there’ in steel, telecom, et cetera,” Derek Scissors, a resident scholar at the American Enterprise Institute, said of China. “They get progressively more desperate, until they die.”

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SARS Stung the Global Economy. The Coronavirus Is a Greater Menace.

In 2002, when a lethal, pneumonialike virus known as SARS emerged in China, the country’s factories were mostly churning out low-cost goods like T-shirts and sneakers for customers around the world.

Seventeen years later, another deadly virus is spreading rapidly through the world’s most populous country. But China has evolved into a principal element of the global economy, making the epidemic a substantially more potent threat to fortunes.

International companies that rely on Chinese factories to make their products and depend on Chinese consumers for sales are already warning of costly problems.

Apple, Starbucks and Ikea have temporarily closed stores in China. Shopping malls are deserted, threatening sales of Nike sneakers, Under Armour clothing and McDonald’s hamburgers. Factories making cars for General Motors and Toyota are delaying production as they wait for workers to return from the Lunar New Year holiday, which has been extended by the government to halt the spread of the virus. International airlines, including American, Delta, United, Lufthansa and British Airways, have canceled flights to China.

China’s economic growth is expected to slip this year to 5.6 percent, down from 6.1 percent last year, according to a conservative forecast from Oxford Economics that is based on the impact of the virus so far. That would, in turn, reduce global economic growth for the year by 0.2 percent, to an annual rate of 2.3 percent — the slowest pace since the global financial crisis a decade ago.

Returning from a long holiday for the first time since the coronavirus’s threat became clear, Chinese investors sent shares in China down about 8 percent on Monday. Stock markets around the world have plunged in recent days as the sense takes hold that a public health crisis could morph into an economic shock.

In a sign of deepening concern, China’s leaders on Sunday outlined plans to inject fresh credit into the economy. That will include a net $22 billion to shore up money markets as well as looser borrowing terms for Chinese companies.

Though China’s factories still produce a mind-bending array of relatively simple, low-value products like clothing and plastic goods, they have long since achieved dominance in more advanced and lucrative pursuits like smartphones, computers and auto parts. The country has evolved into an essential part of the global supply chain, producing components needed by factories from Mexico to Malaysia.

China has also risen into an enormous consumer market, a nation of 1.4 billion people with a growing appetite for electronic gadgets, fashion apparel and trips to Disneyland.

The trade war waged by the Trump administration has prompted a partial decoupling of the United States and China, the two largest economies on earth. Multinational companies that have used factories in China to make their wares have sought to avoid American tariffs by shifting production to other countries — especially Vietnam. The coronavirus might accelerate that trend, at least for a time, should global companies find themselves locked out of China.

The outbreak of the virus in Wuhan, a city that is home to 11 million people, prompted the Chinese government to effectively quarantine the metropolis and much of surrounding Hubei province, barring people from moving around.

Until now, the impact on factories was limited by the fact that the outbreak was unfolding during the Lunar New Year, the most important holiday of the year. Many businesses are closed during the holiday, while hundreds of millions of migrant workers return home to their families in the countryside.

In a bid to keep people home and halt the spread of the virus, the government extended the holiday through Sunday, adding three days. But the fear of the virus is so widespread and intense that many workers are likely to remain away from factory towns this week.

A frightening epidemic coinciding with a major holiday will almost certainly spell a substantial loss of sales for China’s tourism and hospitality industries. Hotels and restaurants that would normally be full of revelry are empty. Concerts and sporting events have been canceled. IMAX, the large screen film company based in Toronto, has postponed the release of five films it had intended to showcase in China during the holiday.

Even as the holiday officially ends, business is unlikely to return to normal. Many major industrial areas — including Shanghai, Suzhou and Guangdong province — have lengthened the holiday by at least another week, preventing workers from returning.

With flights to China limited and emergency public health restrictions in place, the Chinese operations of multinational companies are likely to be constrained. Major banks, including Goldman Sachs and JPMorgan Chase, are directing that employees who have visited mainland China stay home for two weeks.

General Motors last year sold more cars in China than in the United States. Its Chinese factories will be closed for at least another week at the request of the government. Ford Motor has told managers in China to work from home while its factories remain idled, said a company spokesman.

All of this could play havoc with businesses that depend on China for components, from auto factories in the American Midwest and Mexico to apparel plants in Bangladesh and Turkey.

If customers cannot buy what they need from China, Chinese factories could, in turn, slash orders for imported machinery, components and raw material — computer chips from Taiwan and South Korea, copper from Chile and Canada, factory equipment from Germany and Italy.

“This could potentially disrupt global supply chains,” said Rohini Malkani, an economist at DBRS Morningstar, a global credit rating business. “It’s too early to say how long it is going to last.”

Similar worries accompanied the outbreak of SARS in 2002 and 2003, when the virus emerged in the southern province of Guangdong before spreading across China and around the world, killing nearly 800 people in at least 17 countries.

China had just joined the World Trade Organization, gaining access to markets around the globe. It was harnessing its seemingly limitless supply of low-wage workers to produce cheap consumer goods. Its economy centered on exports. Its consumer market remained in its infancy.

In the years since, China’s annual economic output has multiplied more than eightfold, to nearly $14 trillion from $1.7 trillion, according to the World Bank. Its share of global trade has more than doubled, to 12.8 percent last year from 5.3 percent in 2003, according to Oxford Economics.

Its economic output per person has multiplied to roughly $9,000 last year from about $1,500 in 2003, giving households additional cash for an enormous range of consumer goods.

“China today accounts for about one-third of global economic growth, a larger share of global growth than from the U.S., Europe and Japan combined,” Andy Rothman, an economist at Matthews Asia, an investment fund manager, noted during recent testimony before a congressional panel.

The American semiconductor industry is particularly entrenched in China, which is both a major manufacturing hub and a market for its products. Intel’s customers in China accounted for about $20 billion in revenue in 2019, or 28 percent of its total for the year.

Qualcomm, the dominant maker of chips for mobile phones, is even more dependent on China, drawing 47 percent of its annual revenue — or nearly $12 billion — from sales in the country.

No one knows how long the coronavirus outbreak will last, how far it will spread, or how many lives it will claim. It is impossible to calculate the extent to which it will disrupt China’s economy. But China’s formidable stature in the world economy means that the impact of the current outbreak is likely to substantially exceed that of SARS.

“The knock-on effects for the global economy are going to be much larger than they were,” said Nicholas R. Lardy, a China expert at the Peterson Institute for International Economics in Washington.

For manufacturers, the timing of the outbreak may limit the damage. They just completed the fourth quarter, when production increases to meet demand for the winter holidays. The end of January is typically slow.

But the effects of the virus on supply chains, which have grown notoriously complex, are difficult to anticipate. A single part of an advanced product like a smart TV may be made of dozens of smaller components, with each of these assembled from other pieces. Companies themselves often do not know the suppliers that are three and four rungs down the chain.

“If you run out of widgets that are essential to production processes and all those widgets come from China, then it may well be that your production lines go to a halt,” said Ben May, global economist at Oxford Economics in London. “These problems are likely to be popping up all over the world.”

This became a problem in the aftermath of the 2011 earthquake and tsunami in Japan, which devastated manufacturers. Many companies assumed they were buying parts from a diverse range of suppliers, protecting them from shortages, only to realize that critical components were produced by single plants.

If that plays out in China, the consequences are likely to be great.

“We’re talking about a potentially vast swath of a country that the whole world depends on as a manufacturing workshop,” said Susan Helper, an economist at Case Western Reserve University and the former chief economist at the Commerce Department. “The effects will be unexpected.”

Apple assembles most of its products in China. The company has severely restricted travel in China for its employees, its chief executive officer, Timothy D. Cook, said on an earnings call on Tuesday.

Apple disclosed much wider volatility in its potential revenues for the current quarter in the face of uncertainties around factory production and sales of its products.

Those uncertainties deepened on Saturday. Apple, which derives about one-sixth of its sales from China, announced that it would close its 42 stores in the country.

Walmart buys vast volumes of its products from Chinese factories while operating 430 stores in the country, including in areas shut down by quarantine. The company has reduced hours at some stores, a Walmart spokeswoman said.

“We may still be in the early stages,” of the coronavirus crisis, Judith McKenna, who runs Walmart’s International business, wrote in an internal memo on Friday.

China is the world’s largest manufacturer of toys. At the International Toy Fair in Nuremberg, Germany, many Chinese suppliers expressed confidence that their factories would soon reopen, said Rick Woldenberg, chief executive of Learning Resources, a family-owned manufacturer of educational products and toys in Illinois.

“But no one’s quite sure how much of this information can be relied upon,” Mr. Woldenberg said.

Because of the trade war, the toy industry was effectively prepared for a moment in which its access to Chinese suppliers was imperiled, Mr. Woldenberg said. In December, when the Trump administration was threatening to impose an additional 15 percent tariff on Chinese imports, many toy companies sped up their orders to beat the deadline. Some shifted production to Thailand and Vietnam to avoid the tariffs altogether.

Toymakers will soon need to rebuild inventory. “If this goes on for four more months, we are talking about a big problem,” said Jim Silver, chief executive of TTPM.com, a consumer research site.

After SARS, China suffered several months of economic contraction and then rebounded dramatically. That might happen this time, too. The only certainty is this: Whatever happens in China will be felt widely.

“Clearly China has become a much more dominant player in the world economy,” said Mr. May of Oxford Economics. “It’s just so much more involved in the global supply chain. Over the last decade, it has been the spender of last resort for the global economy.”

Reporting was contributed by Jack Nicas, Patricia Cohen, Emily Flitter, Ian Austen, Don Clark, Michael Corkery, Julie Creswell, Neal E. Boudette and Gregory Schmidt.

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Britain Defies Trump Plea to Ban Huawei From 5G Network

LONDON — Britain said on Tuesday that it would not ban equipment made by the Chinese technology giant Huawei from being used in its new high-speed 5G wireless network, the starkest sign yet that an American campaign against the telecommunications company is faltering.

Despite more than a year of intense lobbying by the Trump administration, which has accused Huawei of having ties to China’s Communist Party that pose a national security threat, the British government announced it would allow the company to provide equipment in some portions of a next-generation network to be built in the coming years.

The British decision was crucial in a broader fight for tech supremacy between the United States and China. Britain, a key American ally, is the most important country so far to reject White House warnings that Huawei is an instrument of Beijing. Britain’s membership in the “five eyes” intelligence-sharing group of countries, which also includes Canada, Australia and New Zealand, gave the outcome an added significance.

Many countries have been caught between the United States and China in their tech cold war. American officials have threatened to withhold intelligence if countries do not ban Huawei, while Chinese representatives have warned of economic retaliation if they do.

“This is a U.K.-specific solution for U.K.-specific reasons and the decision deals with the challenges we face right now,” said Nicky Morgan, the secretary for digital, culture, media and sport, the government agency that oversaw the decision.

“It not only paves the way for secure and resilient networks, with our sovereignty over data protected, but it also builds on our strategy to develop a diversity of suppliers,” she said.

The rules were announced on Tuesday after Prime Minister Boris Johnson met with his National Security Council. The decision did not mention Huawei by name, instead referring more broadly to “high-risk vendors” that “pose greater security and resilience risks to U.K. telecoms networks.” Such vendors will be limited to certain parts of the wireless infrastructure, such as antennas and base stations, that are not seen as posing a threat to the integrity of the system.

No single high-risk vendor will be allowed to exceed a 35 percent market share of the network, the rules said, an effort to encourage new competition that could benefit companies including Nokia and Ericsson.

A Trump administration official said the United States was “disappointed” by Mr. Johnson’s decision.

“We look forward to working with the U.K. on a way forward that results in the exclusion of untrusted vendor components from 5G networks,” the official said. “We continue to urge all countries to carefully assess the long-term national security and economic impacts of allowing untrusted vendors access to important 5G network infrastructure.”

Huawei has long denied that it is beholden to the Chinese government.

“Huawei is reassured by the U.K. government’s confirmation that we can continue working with our customers to keep the 5G rollout on track,” Victor Zhang, Huawei’s vice president, said in a statement. “This evidence-based decision will result in a more advanced, more secure and more cost-effective telecoms infrastructure that is fit for the future.”

The crown jewel of China’s tech sector, Huawei is the largest provider of equipment to build systems based on fifth-generation wireless technology, known as 5G. That technology is seen as essential infrastructure in an increasingly digitized global economy. The networks will provide dramatically faster download speeds, as well as new commercial applications in industries such as transportation, manufacturing and health care.

Huawei’s prominence has made it a target of the United States. Meng Wanzhou, Huawei’s chief financial officer and the daughter of the company’s founder, is fighting an extradition order in Canada stemming from an American indictment on fraud charges.

The Trump administration’s global effort against Huawei has had some success. In 2018, Australia imposed a ban on Huawei gear, and Japan put restrictions on purchasing Huawei equipment for government use.

But in Europe, the White House has had more trouble. While the European Union has warned of national security risks related to 5G, it has not called out China or Huawei by name or recommended an outright ban. In France, the government said it didn’t believe a ban was necessary. German Chancellor Angela Merkel has shared similar views, though a final decision has not been made and some in the government are calling for a harder line.

Perhaps no country was lobbied by the United States and China as hard as Britain, delaying the country’s decision-making about building its new 5G network. President Trump, Secretary of State Mike Pompeo and Treasury Secretary Steven Mnuchin have all warned Britain in recent weeks. Earlier this month, an American delegation visited London to make a last-minute case against Huawei. Mr. Pompeo is scheduled to visit Britain this week.

Huawei first began working in Britain more than 15 years ago and now employs 1,600 people in the country, helping it gain acceptance and a foothold to expand to other parts of Europe. Combined with the Middle East and Africa, Europe is now Huawei’s largest market outside of China.

Steve Tsang, director of the China Institute at SOAS University of London, said the British announcement is “a big deal” that gives Huawei “a level of credibility that it craves.”

British officials have said the risk Huawei presents can be managed through oversight and by limiting its access to more critical areas of the network that handle sensitive data. Huawei would be limited to providing antennas and other equipment that send data directly to consumer devices, and kept out of areas considered the nerve center of the network, such as servers that route traffic within the system.

Britain has always kept Huawei out of those parts of its telecommunications networks that handle sensitive data to limit the vulnerability to espionage or eavesdropping. In 2010, British officials set up a lab where Huawei’s equipment could be reviewed for security flaws. The lab has identified security vulnerabilities in the equipment, but officials have said the problems weren’t a result of interference from the Chinese government and could be managed.

“High risk vendors have never been — and never will be — in our most sensitive networks,” said Ciaran Martin, the chief executive of the National Cyber Security Center that oversees the lab.

American officials disagree that the risks can be contained since software plays a bigger role in 5G networks, with constantly-updating code making it harder to maintain complete oversight.

“Digital technology is being upgraded regularly and a level of risk with present-day technology that is manageable today may or may not be so four or five years down the line,” Mr. Tsang said.

The decision over whether to use Huawei equipment in Britain’s 5G network would usually be a technical one made by agencies that oversee cybersecurity and the nation’s digital infrastructure. But it became a political dilemma that spanned two administrations — first Theresa May when she was British prime minister, and now Boris Johnson.

British officials and executives at wireless companies have said the United States did not share smoking-gun evidence that would justify a ban of the Chinese company. American officials emphasized the vulnerabilities it could create within a national communications network in the event of a future confrontation with China.

Under the rules announced on Tuesday, high-risk firms would be excluded from providing technology at sensitive geographic locations, such as nuclear sites and military bases.

“There is definitely a potential security risk,” said Alan Woodward, a cybersecurity expert and visiting professor at the University of Surrey. “Is it manageable? That is the big question out there.”

Britain is in a precarious position as it negotiates an exit from the European Union. The country must forge new stand-alone trade deals in the aftermath. So while maintaining close ties to Washington is vital for Britain’s security and economy, it also needs to foster ties with China, which is a significant investor in the country and a growing buyer of British goods.

“Post-Brexit Britain will increasingly have to rely on China even more than we already do,” said Anthony Glees, professor emeritus at the University of Buckingham, where he was head of the Centre for Security and Intelligence Studies.

Mr. Woodward said Huawei provides the best technology at the most affordable price for components essential for operating new networks. A ban, he said, would have left the country’s network overly dependent on Huawei’s biggest rivals — Ericsson and Nokia.

British telecommunications companies have warned that banning Huawei would be costly and cause delays because old equipment would have to be replaced.

David McCabe contributed reporting from Washington.

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In Huawei Battle, China Threatens Germany ‘Where it Hurts’: Automakers

BERLIN — Chancellor Angela Merkel and Premier Li Keqiang of China settled into the back seat of a driverless Volkswagen van, fastened their seatbelts and went for a spin around a disused airport landing strip in central Berlin.

“There is nothing like seeing in practice what’s possible,” Ms. Merkel beamed when they returned.

That was July 2018, when economic cooperation between the two countries looked limitless — combining Germany’s powerful auto industry and China’s technology giant, Huawei.

Eighteen months later, Germany is embroiled in a tortured debate over whether to allow Huawei to help build its 5G next generation mobile network. But with German automakers, including Audi and Daimler, already working closely with Huawei, it may be China who sits in the driver’s seat.

Whatever Germany decides will shape its relations with China for years and reverberate across the Continent. It will send a powerful political signal on how united, or fractured, Europe will be in the digital age of rivalry between Washington and Beijing.

Germany, like all of Europe, is under tremendous pressure to ostracize Huawei by the American government, which fears that it is a Trojan horse that would allow the Chinese to spy on or control European and American communication networks. The pressure remains even after President Trump signed an initial trade deal with China on Wednesday.

But for Germany that decision is especially fraught. Relations with the Trump administration are infused with threats of tariffs against German automakers and mounting distrust that Europeans have come to believe may permanently reshape, if not rupture, a once ironclad trans-Atlantic alliance.

China, on the other hand, is elbowing its way onto the European stage as a new strategic player and an increasingly indispensable economic partner. By far the largest market in the world, it has become the biggest source of growth for Germany’s main carmakers and the key to their dominance of the luxury car market.

It is a position that China has not been shy to weaponize.

“If Germany were to make a decision that led to Huawei’s exclusion from the German market, there will be consequences,” Wu Ken, China’s ambassador to Germany warned last month. “The Chinese government will not stand idly by.”

Konstantin von Notz, a lawmaker and member of the digital affairs committee in the German Parliament, put it this way: “The Chinese have made clear that they will retaliate where it hurts: The car industry.”

For months, German lawmakers have danced around the issue of whether effectively to exclude Huawei from the bidding process. The issue is expected to be debated in Parliament again in the coming weeks. As a decision approaches, Chancellor Merkel has found herself caught between worried German automakers, who accompanied her on a dozen junkets to Beijing, and her own wary intelligence community.

Ms. Merkel, steward of the pro-business Christian Democratic Party, is opposed to banning the Chinese company.

“It is not about individual companies, but rather security standards,” the chancellor said in November. “It is about the certification we will carry out. That should be our guiding benchmark.”

But a rebellion is brewing in Germany’s foreign policy and intelligence community — scared of American threats to limit intelligence sharing — and even among some of the chancellor’s own lawmakers, who want to submit a proposal to Parliament with tougher security criteria that would, in effect, keep Huawei out.

Ms. Merkel’s critics say the current certification process, which merely demands that companies sign a pledge not to spy, is inherently flawed because it relies on trust.

At her party’s annual conference in November, the chancellor’s Christian Democrats disinvited Huawei as a corporate sponsor and passed a motion demanding that only companies “which demonstrably fulfill a clearly defined catalog of safety requirements” should be allowed to bid. One key requirement would be to rule out state interference.

The motion did not name Huawei or China but the implication was clear.

“Under Chinese law companies are obliged to cooperate with the Chinese Secret Service,” said Norbert Röttgen, a conservative lawmaker who co-authored the motion against Ms. Merkel’s Huawei policy. “When you deal with Huawei you also have to accept that you might be dealing with the Chinese Communist Party.”

Cars that can steer themselves may make driving safer but they also open up opportunities for government surveillance and control.

Beyond fears of spying and sabotage, lawmakers warned that if Germany allowed Huawei to bid it would not just alienate Washington but risk undermining a badly needed united European front.

“Our only hope is to stick together as Europeans,” Mr. Röttgen said. That, he said, was also an argument for giving the 5G contract to European companies like Nokia or Ericsson.

Analysts say Nokia and Ericsson, which have won 5G contracts in Denmark and elsewhere, have the competence to build the 5G network, but it would take longer and cost more — not least because Huawei is already a huge part of the existing networks in Germany. Switching will be messy and costly.

Still, Mr. Röttgen said, given the scale of the new bid, if it went to Huawei, Europe risked permanently falling behind.

“If you let Huawei build a big chunk of the 5G network after a while you won’t understand your own system,” he said. “It would be a maximal loss of control and sovereignty.”

“Strategically it is a crystal clear case,” Mr. Röttgen said.

Others, however, say that giving the bid to Huawei may not be such a bad idea.

‘‘If we ban Huawei, the German car industry will be pushed out of the Chinese market — and this in a situation where the American president is also threatening to punish German carmakers,’’ said Sigmar Gabriel, a former German foreign minister and vice chancellor.

‘‘Just because we have an American president who doesn’t like alliances, we give all that up?’’ he said. ‘‘Why would we? Especially since he does exactly what the Chinese do and threatens the German car industry.’’

German automakers like Volkswagen, Daimler and BMW continued to record sales gains in China and to take share from rivals like Ford, even as the overall market has slumped.

“See, last year, 28 million cars were sold in China, 7 million of those were German,” Mr. Wu, China’s ambassador to Germany, added in his remarks in December, making what many in Germany interpreted as a veiled threat.

“Can we just declare German cars unsafe, because we make our own cars?’’ he said. ‘‘No, that would be protectionism.”

As Germany’s automakers have become more deeply dependent on China, they also have become more beholden to the Chinese government.

Chinese consumer preferences, and Chinese government policies, increasingly determine what models the carmakers build and what kind of technology they develop.

China also has become the stage where German carmakers develop and test new technology, often with Huawei.

Audi, the luxury car unit of Volkswagen, announced a “strategic cooperation” with Huawei on developing autonomous driving technology during Mr. Li’s visit to Berlin last year. Daimler, which is 9.9 percent owned by Chinese investor Li Shufu, uses Huawei high-performance computing. BMW and others partner with Huawei on research and development.

No car company is more closely entwined with China than Volkswagen. The company has been operating in China since the early 1980s, when the Communist government first began opening to the West.

Today Volkswagen earns almost half its sales revenue in China and has 14 percent of the Chinese car market.

“If we were to pull out” of China, Herbert Diess, the chief executive of Volkswagen, told the Wolfsburger Nachrichten newspaper in December, “a day later 10,000 of our 20,000 development engineers in Germany would be out of work.”

German carmakers deny that their dependence on Chinese sales has turned them into advocates for Chinese interests.

“We don’t want political developments to spill over into product development,” Bernhard Mattes, president of the German Association of the Automotive Industry, said in an interview in Berlin.

But Mr. Mattes conceded, “We are not operating in a politics-free space, that is clear.”

Huawei has understood as much. Its German headquarters are in Bavaria, alongside BMW and Audi and many other companies deeply embedded in China. The company has been a generous sponsor of all mainstream parties, including Bavaria’s governing conservatives.

Markus Söder, Bavaria’s conservative leader, has publicly defended Huawei’s right to bid, while also lashing out at the United States.

“To say up front that I rule it out because another partner in the world doesn’t like it,” he said, is “a bit of a problem.”

Stephan Weil, premier of Volkswagen’s home state of Lower Saxony and a member of the company’s supervisory board, took a similar line, urging Germany to protect its 5G network from all sides. “I wouldn’t necessarily put my hand into the fire for anyone else,” he said, without naming the United States.

When Peter Altmaier, Germany’s economy minister, recently pointed out that Germany had “not imposed a boycott” on American technology companies after it was revealed that the National Security Agency had tapped Chancellor Angela Merkel’s phone, he earned a sharp rebuke from the United States ambassador, Richard Grenell.

“There is no moral equivalency between China and the United States and anyone suggesting it ignores history — and is bound to repeat it,” Mr. Grenell said.

In July 2018, when Ms. Merkel and Mr. Li stepped out of the driverless van at Berlin Tempelhof, once the site of the Berlin airlift and a powerful symbol of Germany’s alliance with the United States, the symbolism was not lost on some.

“The truth is that, if the American security guarantee was what it used to be, we wouldn’t be having this debate,” said Mr. von Notz, the lawmaker. “But it isn’t. And now we need to find a way to defend our freedom and rule of law in this digital world.”

Christopher F. Schuetze contributed reporting.