Smartphone maker, Xiaomi, has sued the United States government over its inclusion in a military blacklist. It’s causing lots of discussion on the constitutionality of the situation, given the blacklist is in China. In the past few years, the Trump administration has been engaging in a US-China trade war. Whether the lawsuit by Xiaomi has merit, only the federal courts will be able to judge. The implications for the stock markets and investors is enormous. It has negative impacts on two major global economies.
It leaves the question, what would cause a government to blacklist a company?
What Does it Mean to Be Military Blacklisted?
Usually, the term “blacklisted” in the government indicates a country or organization can not be trusted. This can restrict travel, trade, political ties, or trade with another country. After Xiaomi was blacklisted, American investors were unable to buy shares for their portfolios. Any securities of any companies that have the Chinese military designation fell under this blacklist. Usually, blacklisting is due to conflict of interest or a penalty for unethical practices.
Why is Xiaomi Blacklisted?
Xiaomi was blacklisted under the Trump administration due to the National Defense Authorization Act of 1999. Xiaomi was blacklisted since it’s been considered a “Communist Chinese military companies” and, therefore, cannot do business with the U.S
Xiaomi’s decision to sue is since the blacklisted decision is “unconstitutional” since they believe it “deprives Xiaomi of its liberty and property rights without due process of law” and therefore violates the Fifth Amendment of the U.S Constitution. But will it hold in the U.S court since it’s a matter of another country? Only time will tell.
What Can Be Expected for the Verdict?
The situation with Xiaomi blacklisted from the US might sound similar to another case. Not too long ago, another major tech company, Huawei, proceeded with similar action after the Trump administration banned their equipment from being sold in the U.S due to a US/China war over trade. However, that case was overturned by a federal judge.
The likelihood that this case will also be overturned is highly likely. Mainly because it falls under the National Defense Authorization Act; however, since most US-China war issues fell under the previous administration, now the Biden administration has taken charge, and possible tensions with other countries, including China, can hopefully be elevated.