China warns US against trade 'harm' over Huawei ban

China warned the United States on Thursday against further harming trade ties after President Donald Trump effectively barred Chinese telecom giant Huawei from the US market, escalating tensions between the world's top economic powerhouses.

At the same time, Beijing's diplomatic relations with Ottawa further soured as China formally arrested two Canadians on suspicion of snatching state secrets in a case seen as retaliation over Canada's arrest of a Huawei executive on a US extradition request.

The spat over Huawei adds to the uncertainty over efforts to revive a deal that would end a bruising US-China trade war after the two sides exchanged fire with tariff hikes in recent days.

The Chinese commerce ministry said Thursday it had no information on a US plan to come to Beijing to continue talks, after US Treasury Secretary Steven Mnuchin said he would likely visit China in the near future.

"The US's bullying and maximum pressure tactics have caused the China-US economic and trade talks to suffer a serious setback," ministry spokesman Gao Feng told a weekly press briefing.

Trump stepped up the US battle against Huawei on Wednesday when he signed an executive order prohibiting the purchase or use of equipment from companies that pose "an unacceptable risk to the national security of the United States" or the safety of the American people.

While the White House insisted that no particular country or company was targeted, Huawei is likely to be hit by the move amid concerns that its equipment could be used by Chinese intelligence services.

The US Commerce Department followed up with a more direct hit on the tech giant, adding it to a blacklist that will make it much harder for the firm to use crucial US components in its array of phones, telecom gear, databases and other electronics.

"We urge the US to stop its incorrect actions... to avoid doing additional harm to China-US economic and trade relations," Gao said.

"China has said many times national security issues should not be abused."

- 'RIP' Huawei -

The US Department of Commerce's Bureau of Industry and Security (BIS) said it would add Huawei and its affiliates to its "entity list" over alleged Iran sanctions violations.

The listing requires US firms to get a license from BIS for the sale or transfer of American technology to a company or person on the list.

"A license may be denied if the sale or transfer would harm US national security or foreign policy interests," a Commerce Department statement said.

"This will prevent American technology from being used by foreign-owned entities in ways that potentially undermine US national security or foreign policy interests," Commerce Secretary Wilbur Ross said.

And US Senator Tom Cotton, from Trump's Republican Party, tweeted: "@Huawei 5G, RIP. Thanks for playing."

American officials have been trying to persuade allies not to allow China a role in building next-generation 5G mobile networks, warning that doing so would result in restrictions on sharing of information with the United States.

US government agencies are already banned from buying equipment from Huawei, a rapidly expanding leader in the 5G technology.

Huawei said "unreasonable restrictions" will infringe upon its rights and raise serious legal issues.

"Restricting Huawei from doing business in the US will not make the US more secure or stronger; instead, this will only serve to limit the US to inferior yet more expensive alternatives," the firm said in a statement.

- Detained Canadians -

Canada has also been dragged into the spat after arresting Huawei's chief financial officer Meng Wanzhou in December on a US extradition warrant related to Iran sanctions violations.

Shortly after, former Canadian diplomat Michael Kovrig and a businessman, Michael Spavor, were detained on national security grounds.

The Chinese foreign ministry said Thursday the two Canadians have now been formally arrested.

Kovrig is "suspected of collecting state secrets and intelligence" while Spavor is suspected of "stealing and illegally offering state secrets" abroad.

"Canada strongly condemns their arbitrary arrest as we condemned their arbitrary detention on Dec. 10," the Canadian foreign ministry said in a statement to Canadian newspaper The Globe and Mail.

The US portrayal of Huawei as a national security danger dovetails with Washington's wider complaint that Chinese companies are unfairly protected by Beijing, making fair trade impossible.

Gao, the Chinese commerce ministry spokesman, said that to reach a trade deal all tariffs must be scrapped, demands for Chinese purchases of US goods must be realistic and the pact must be "balanced".

"The escalation of China-US trade frictions will have a definite impact on the economies of the two countries and the world economy," he said.

"As far as the Chinese economy is concerned, the impact is completely controllable," Gao said, adding "China does not fear any pressure, and has the confidence, resolution and ability to respond to any risk and challenge".

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