The Trump administration is closing a loophole that allows Huawei to get around U.S. trade restrictions and get its hands on advanced U.S. technology.

The Chinese Communist Party (CCP) is threatening retaliation after Washington closed a loophole—one that allowed Huawei to sidestep U.S. export controls and buy semiconductors from global chipmakers.

Last year, the Trump administration placed restrictions on U.S. companies selling to Huawei. The president didn’t want sensitive and advanced U.S. technology powering the Chinese military, which Huawei is linked to. But the telecom giant found a way around the rule.

Instead of buying directly from U.S. companies, it would buy from overseas manufacturers licensed to use U.S. technology in their chips. That won’t be so easy anymore. All global chipmakers will need to obtain a U.S. license before selling to Huawei and most manufacturers rely on equipment produced by U.S. companies.

The CCP is not happy about this. It’s threatening to cause trouble for U.S. companies like Apple, Cisco, and Boeing. Huawei needs semiconductors for its smartphones—it’s now the second largest manufacturer in the world. It also needs the chips to power its 5G ambitions.

President Trump has been telling allies to exclude Huawei gear from their 5G networks because its equipment could be used by China for spying. The new restrictions come amid heightened tensions between Washington and Beijing, triggered by what the United States calls the regime’s mishandling of the pandemic.

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