The news hit the White House with a deafening thud: the United Kingdom would allow Huawei, the Chinese tech giant, to build the backbone of its next-generation telecommunications network. Known as 5G, the network was expected to be up to a hundred times faster than its predecessor, ushering in a new era of connectivity that would enmesh everything from refrigerators to factory robots to autonomous weapons in a so-called Internet of Things. The Trump administration believed that if this new era were built on a foundation of Huawei technology, China would gain an enormous advantage in its deepening geopolitical standoff with the United States.

It was April 24, 2019. Springtime in Washington was in its full glory. Yet Matt Pottinger, the top China expert at the Trump National Security Council (NSC), was in a dark mood. Over the past two years, he had painstakingly engineered a major shift in U.S. policy toward China — a pivot that was slowly but surely taking hold in the national security bureaucracy. Washington had finally accepted that Beijing’s “peaceful rise” was not so peaceful after all. China was an adversary, and the U.S. was reorienting its foreign policy to confront the threat.

Britain’s decision to hitch its digital future to Huawei imperiled all that. Officially, Huawei was a private Chinese tech company, but it also served as a de facto arm of the Chinese government and as an executor of Beijing’s geopolitical agenda. Any sensitive data traversing Huawei’s 5G equipment — its base stations, antennas and switches — was well within the reach of China’s massive surveillance apparatus. Worse, U.S. officials feared that the global spread of Huawei equipment could one day enable Beijing to disrupt its enemies’ economies and military operations from afar. After much of the world became dependent on Huawei to run its cities, industrial plants and even militaries, the Chinese Communist Party (CCP) could paralyze whole societies to impose its will.

On March 7, 2019, Huawei announced that it had sued the U.S. government ‘for unconstitutional sales restrictions imposed by Congress’. Credit: Huawei

Britain was the United States’ closest ally, so its embrace of Huawei over strong objections from the White House was bad news. Other Western countries looking to build 5G infrastructure would now feel encouraged to follow suit, attracted by Huawei’s technological expertise and relative affordability. “If we couldn’t persuade the Brits,” recalled John Bolton, Donald Trump’s national security advisor, “we weren’t going to persuade anybody else in Europe.” And if Huawei equipment formed the spine of the world’s 5G networks, the CCP would obtain a geopolitical asset matched only by the U.S. dollar — an economic and political kill switch of global reach. 

Turning the tide against Huawei would take more than persuasion and vague threats. Much of the rest of the U.S. government even questioned whether anything could be done to prevent the company from owning the whole 5G market.

London’s decision, in other words, stacked the deck against the new, more confrontational China strategy that Pottinger had marshaled.

Overseeing the Trump administration’s China policy was not a job for the faint of heart. China had been a constant theme of Trump’s 2016 campaign, but now that he was in office, his cabinet was bitterly divided on what to do about the country. Longtime China hawks like Robert Lighthizer, the hard-nosed U.S. trade representative, and Peter Navarro, the White House’s resident gadfly on trade issues, pushed for a dramatic break in economic relations, eager to smash the narrative that cooperation with China was necessary or beneficial. On the other side were Wall Street mainstreamers like Treasury Secretary Steven Mnuchin and Gary Cohn, director of the National Economic Council. Both were Goldman Sachs veterans who still believed in free markets, unfettered global capital, and the limitless potential of the Chinese market for U.S. companies. Trump’s encouragement of a chaotic policy process ensured that, for much of his presidency, these camps remained at odds.

Pottinger, a former journalist and Marine with short blond hair, navigated this landscape with resourcefulness and discipline. Characterized by a colleague as a “Boy Scout,” the 46-year-old impressed people both in and out of government. As a Mandarin speaker with experience in China, he assumed the role of an interpreter who could help Trump and his inner circle understand what Beijing’s words and deeds really meant. So valuable was his perspective that when Trump toured the Forbidden City with Xi Jinping in 2017, Pottinger was denied entry at the gate: H.R. McMaster, then the national security advisor, suspected it was because Xi preferred to give Trump his version of history free from the scrutiny of a knowledgeable interpreter. 

Pottinger also tried to translate Trump’s views on China to key constituencies outside the White House. The president’s rhetoric on China vacillated between hostility and obsequiousness, which could leave even his closest advisors with whiplash. Pottinger, by contrast, impressed upon anyone who would listen that the U.S. was adopting a more competitive posture toward China and that the president stood firmly behind it.

For months leading up to the UK’s announcement, Pottinger and other Trump officials had been urging their British counterparts to keep Huawei out of the country’s 5G network, even warning that the U.S. might stop sharing intelligence with them if they went forward. Nevertheless, on April 23, Prime Minister Theresa May greenlit Huawei’s involvement during a meeting with her national security council. The news leaked to the Daily Telegraph before anyone in London had given Washington the courtesy of a heads-up. This was not the way the “special relationship” was supposed to work.

Days later, Pottinger and two colleagues were on a flight to London to implore the British government once again not to use Chinese-made 5G infrastructure. 

The Americans saw the British as confident to the point of smugness that they could contain any potential security threats from Huawei. The British saw the Americans as stubborn and overbearing. An official from GCHQ, the UK’s signals intelligence agency, later leaked to the press that “Pottinger just shouted and was entirely uninterested in the UK’s analysis. The message was ‘We don’t want you to do this, you have no idea how evil China is.’”

Pottinger denied he ever raised his voice. But it was clear the gulf between the two allies was wide and the atmosphere tense. 

Pottinger’s meetings convinced him that the decision to welcome Huawei was based not on technical risk analysis but rather on a simple political calculation: post-Brexit, Britain needed new partners, and it had decided to cozy up to China. “The UK was in the frame of mind that if you can’t beat ’em, join ’em,” Pottinger recalled. He left London feeling deflated.

Turning the tide against Huawei would take more than persuasion and vague threats. Much of the rest of the U.S. government even questioned whether anything could be done to prevent the company from owning the whole 5G market. “Everybody, including the intelligence community, was like, ‘You’re a bunch of crazy people at the NSC, because this is a lost cause,” recalled Ivan Kanapathy, a former Marine fighter pilot who worked for Pottinger and who is currently the Senior Director for Asia in the second Trump administration’s NSC. “It was like, ‘You’ve lost. You can’t stop Huawei.’”

Pottinger set out to prove them wrong. 

THE IRAN PLAYBOOK

America kicked off the Age of Economic Warfare in a similar way more than a decade earlier: with Stuart Levey, then a little-known official at the Treasury Department, trying to prove the president wrong.

As Iran’s nuclear program raced forward in 2006, George W. Bush lamented that America had “sanctioned ourselves out of influence” with the country. Too many countries in Europe and Asia still relied on Iranian oil, giving the country an abundance of “petrodollars” and making any diplomatic effort to expand sanctions a nonstarter.

The only options left, it seemed, were to go to war or let Iran join the ranks of nuclear-armed states. Levey, who led the Office of Terrorism and Financial Intelligence, a brand-new division at Treasury, set out to show there was another way. 

He had reason to be optimistic. Just months before, Levey had earned the respect of America’s national security establishment when Treasury designated the Macau-based Banco Delta Asia a “primary money laundering concern” for North Korea and signaled its intent to cut the bank off from the U.S. financial system sometime in the future. 

On paper, the move was little more than a shot across the bow, but it was wildly effective: Authorities in Macau froze $25 million in North Korean assets at Banco Delta Asia and took control of the bank. Soon, banks across China and beyond began cutting ties with North Korea, fearing that they might come under scrutiny next. Michael Hayden, an Air Force general who led both the CIA and the National Security Agency (NSA) during the Bush administration, likened the action to a “twenty-first-century precision-guided munition.” 

Banco Delta Asia was small fry, but it was proof of concept for Levey: The U.S. government could use the financial sector’s risk aversion to its advantage. Iranian banks were already barred from doing business directly in the U.S. through an embargo in place since the mid-1990s, but there was an important loophole: When Iranian banks made payments to counterparts in Europe or Asia, their transactions often went through the U.S. financial system, making a brief pit stop at a correspondent account in New York before taking a “U-turn” to their final destination. Few bankers ever thought about this U-turn, a quirk of the invisible infrastructure of cross-border finance, but Treasury could turn it into a chokepoint.

Levey’s pitch was simple: U.S. officials had detailed evidence showing that Iran used deceptive financial practices to fund its nuclear program at home and terrorist groups abroad. In one such tactic, known as “stripping,” Iranian banks directed their counterparts to falsify financial transaction data so that all signs of Iranian involvement were removed. Because stripping is illegal in the U.S. — and virtually all global banks had some presence in the U.S. — any bank that did it risked violating American law and facing serious penalties. All Levey and his colleagues had to do was inform banking executives of the extent of Iranian misconduct and warn them not to violate U.S. law. 

Eighteen months into the campaign, nearly all the world’s largest banks had stopped servicing transactions with Iran, isolating the regime from the world economy. Crucially, the banks chose to reject all business with Iran not because their own governments or the UN required it, but because they deemed it the right risk-based business decision. 

While the department historically opposed policies that could stifle business — “economic growth” was its official mission — Commerce gradually came to serve as one more command center for economic war.

Corporate self-interest turned into America’s most crucial ally, and Levey had demonstrated that the U.S. could wage hard-hitting economic war even when the rest of the world was reluctant to join in.

Prodded by Congress, Treasury tested the limits of its new economic weapons — even finding a way to freeze more than $100 billion of Iran’s oil money in overseas escrow accounts. Over time, this economic pressure triggered political change in Iran and opened a path to the 2015 nuclear deal. The U.S. had managed to put Iran’s nuclear aspirations on hold, and as Barack Obama boasted in a speech the following year, it did so “without firing a shot.” (Other than Robert Gates, the secretary of defense, Levey was the highest-ranking Bush administration official whom Obama kept on.)

Levey realized that to impose serious pressure on the Iranian economy, it was not enough for American companies to stop doing business with Iran — companies all over the world had to leave the market, and Washington could compel them to do it. 

To thwart Huawei, it turned out, the same logic would apply.

COMMERCE’S MOMENT

In the first Trump administration, Steven Mnuchin’s Treasury Department never got on board with Pottinger’s tougher policy toward Beijing. Instead, Pottinger leaned on the Commerce Department, whose secretary, Wilbur Ross, proved a willing partner. As a result, the administration’s economic war against China boosted Commerce’s profile just as the Iran campaign had boosted Treasury’s before. While the department historically opposed policies that could stifle business — “economic growth” was its official mission — Commerce gradually came to serve as one more command center for economic war.

Commerce added Huawei to its Entity List in May 2019, making it illegal for U.S. companies to export to Huawei without a special license. But the action hardly made a dent in Huawei’s business. What’s more, it seemed to backfire on U.S. companies: U.S. chipmakers that had invested in the U.S. could no longer sell to Huawei, whereas competitors that had moved manufacturing abroad thrived. 

Meanwhile, rivals in places like Japan, South Korea and Taiwan faced no restrictions whatsoever on selling to Huawei, enabling them to supply the Chinese giant with products no longer sourced from the United States. If the U.S. government wanted to avoid all the risks posed by Huawei’s dominance, it would not be enough for American companies to cut ties with Huawei; European and Asian companies would have to do so, too.

Donald Trump, however, was notoriously wary of cooperating with allies and seemed to take pleasure in taunting them. When French president Emmanuel Macron suggested working together on China during a 2018 meeting at the White House, Trump accused the EU of being “worse than China” and went on a tirade about German car exports. When Trump did place a call to Boris Johnson, the new British prime minister and a kindred spirit, on January 24, 2020, it was a last ditch attempt to get the UK to reverse its Huawei decision. But Johnson still wouldn’t budge. A seething Trump accused Johnson of “betrayal” and slammed down the phone.

With allied cooperation looking unlikely, Commerce officials and lobbyists from the U.S. semiconductor industry — who were eager to level the playing field with foreign competitors — began discussing a more aggressive approach: pressuring Huawei’s business partners around the world. 

After some false starts, they dusted off a little-known 1959 policy called the Foreign Direct Product Rule, or FDPR. The original FDPR stated that if foreign factories produced missile components or other sensitive items using U.S. technology, those items were subject to U.S. export controls. A new, Huawei-focused FDPR could ban chip sales to Huawei from anywhere in the world so long as the chips were made using U.S. technology, as opposed to containing some percentage of American-made content. 

Virtually all advanced semiconductors relied on intellectual property, design software, and machine tools produced by American firms. While chips were often fabricated overseas, U.S. industry contributed 39 percent of the total value across the semiconductor supply chain, compared with just 6 percent for Chinese firms. No other country came close to America’s share.

The new FDPR would function much like secondary sanctions. During the Obama administration, U.S. secondary sanctions presented companies around the world with a stark choice: you can do business with America or Iran, but not both. This cudgel had proven devastatingly effective, slashing Iran’s oil sales and severing Iranian banks from the global financial system. 

The practical implications of a new FDPR would be similar. The Taiwanese tech giant TSMC, the world’s largest semiconductor foundry, counted Huawei as its second-biggest customer, right after Apple. Huawei counted for upward of 15 percent of TSMC’s revenue. But TSMC also needed a variety of American software and machine tools to power its foundries. The new FDPR would present TSMC and other chip companies with a choice: you can sell to Huawei or you can buy U.S. technology, but you can’t do both.

Deploying this new weapon carried significant risk. When the choice was between the U.S. and a much smaller adversary like Iran, the answer for most firms was a no-brainer. But the same might not be true when it came to cutting ties with a global heavyweight like Huawei. Another issue was that the FDPR would pose this choice not to financial institutions but to industrial juggernauts such as TSMC and Samsung. These powerful corporations were less habituated to complying with U.S. sanctions and held more political clout in their home countries than the big banks. Even if the FDPR successfully cajoled these industrial giants to ditch Huawei, Beijing could retaliate viciously. 

In May 2020, Trump chaired a meeting of the National Security Council in the Situation Room to debate the FDPR.

The most forceful advocate for it was Bill Barr, the attorney general. The FBI, which Barr oversaw, had recently briefed the White House on the findings of a secret investigation into Huawei. Among its conclusions was that Huawei equipment in cell towers in the American Midwest, located near sensitive military installations, could intercept and even disrupt communications related to U.S. nuclear weapons. It was possible that in a crisis, Beijing would be able to use this Huawei equipment as a kill switch to stifle U.S. command and control over its nuclear arsenal. If Huawei succeeded in becoming the backbone of the next generation of the internet, Barr concluded, “the power the United States has today to use economic sanctions would pale by comparison to the unprecedented economic leverage we would be surrendering into the hands of China.”

Barr’s argument carried the day. On May 15, the Commerce Department unleashed the FDPR, an upgraded yet untested economic weapon. 

Up to this point, London had persevered through intense pressure from Washington to ban Huawei. Boris Johnson had rebuffed a personal entreaty from Trump, a man he admired and often praised. But within days of a press release and some regulatory jargon posted on the Commerce Department’s website, the UK government launched an emergency review of Huawei’s role in Britain’s 5G network. 

It didn’t take long for UK telecom operators to grudgingly acknowledge that the lure of Huawei’s low prices might no longer be enough. Without access to high-end chips, there was no telling how well Huawei’s products would function or whether the company could maintain its equipment over time. Before the UK even finished its emergency review, Telefónica, the parent company of Britain’s largest mobile carrier, agreed to shun Huawei.

The British government wavered for a little while longer. But after Xi Jinping rammed through a new national security law for Hong Kong on June 30, London saw no other viable course of action. For the UK, the destruction of Hong Kong’s freedoms hit close to home, and two weeks later, Boris Johnson rendered his judgment: Huawei would be barred completely from Britain’s 5G network. Telecom operators would have until the end of the year to stop buying equipment from Huawei and until 2027 to remove Huawei gear from their older systems. The move would cost the UK some £2 billion and set back its rollout of 5G by up to three years. 

A PERMANENT EFFORT

The first Trump administration brought about a sea change in U.S. policy toward China. It did the same for American economic warfare more broadly.

“Everyone said the sky was going to fall,” Pottinger reflected, referring to the danger of taking aim at the world’s second largest economy. “But it didn’t. We had psyched ourselves out.” 

Indeed, the blowback from the economic war against China was surprisingly limited. The U.S. economy hummed along during the Trump years until COVID struck. Xi’s threats proved more bark than bite. 

“We’ve actually got massive leverage,” Pottinger said. “And we need to use the leverage while we’ve still got it.”

The penalties were not designed to change behavior but to downsize China’s role in the world economy. Over time, inflicting economic damage on China became an end in and of itself.

The Trump administration also redefined the aims America considered appropriate for an economic war. For the Obama administration, economic pressure was always a means to an end — curbing the Iranian nuclear program or getting Russian troops to pull out of Ukrainian territory. Economic damage was meant to change an adversary’s behavior. Sanctions would be lifted as soon as Tehran and Moscow revised their policies.

There was no such behaviorist calculus in the minds of Trump officials. Xi Jinping would not reverse course and abandon his imperial ambitions in the face of American resistance. He believed that supplanting the U.S. as the world’s preeminent superpower was China’s destiny. The Trump administration thus made little effort to build off-ramps. Washington had declared Chinese domination of global 5G networks as a threat, and it would seek to weaken the companies at the forefront of that threat. 

The expectation was for this to be a permanent effort, even if no one said so out loud. The penalties were not designed to change behavior but to downsize China’s role in the world economy. Over time, inflicting economic damage on China became an end in and of itself.

From CHOKEPOINTS: American Power in the Age of Economic Warfare by Edward Fishman, published by Portfolio, an imprint of Penguin Publishing Group, a division of Penguin Random House, LLC. Copyright (c) 2025 by Edward B. Fishman.

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