The big picture: Huawei has long been accused of having close ties to the Chinese government. Now the US government is threatening to limit access to vital intelligence if countries use Huawei and other Chinese companies' tech to deploy 5G. This not only hurts Huawei financially but could also hurt US relations with its allies.

The United States government has routinely advised allies against using networking equipment from Huawei because of potential cybersecurity issues. Now the US is threatening to withhold important intelligence reports if countries use Huawei's 5G technology, according to The Wall Street Journal.

US Ambassador to Germany, Richard Grenell, said that using Chinese networking manufacturers such as Huawei for 5G deployments would prevent the US from maintaining "the same level of cooperation with German security agencies." This means that the United States would limit intelligence sharing with Germany and potentially strain relations between the two countries.

Warnings about Huawei and other Chinese tech companies is nothing new. The US government has long maintained that companies like Huawei and ZTE have close ties with the Chinese government. Buying equipment from them could potentially open companies to having their data stolen by Chinese intelligence.

For its part, Germany says that its implementing strict security measures to ensure data integrity such as inspecting the source code and closely monitoring the contractors who will run the 5G networks. Germany also concluded through an internal investigation that Huawei would not be able to intercept data using the equipment.

While the US has yet to produce any tangible proof verifying Huawei as a threat, this could not only strain relationships with Germany but other allied countries, particularly the UK, who are considering using Chinese companies for their 5G networking. Huawei often charges much less for their equipment than their international competition which makes them quite attractive for smaller telecom companies.

Huawei is suing the US government for what it sees as an unfair ban and hurting competition, accusing the US for being "judge, jury, and executioner." The company believes that National Defense Authorization Act violates the US Constitution by "punishing" Chinese companies without trial or evidence.

"The US Congress has repeatedly failed to produce any evidence to support its restrictions on Huawei products," Huawei Deputy Chairman Guo Ping said. "We are compelled to take this legal action as a proper and last resort."

Restricting vital intelligence to a major ally could have ramifications for the United States. Some countries may not use Chinese technology for fear of losing access to US' intelligence while others may decide to move forward and put pressure in the relations with the States which is already low.