The United States has escalated its fight with China for tech dominance.

On Tuesday, the US Department of Justice unsealed indictments against Chinese tech giant Huawei for theft of trade secrets and violations of US sanctions on Iran.

The allegations by the US government comes at a sensitive time, as negotiations are underway to end the damaging trade war between the two countries.

The allegations

Together, the two indictments paint a company hungry to get ahead at any cost, including by stealing technology and telling lies for profit.

The first indictment outlines efforts by Huawei to steal robotics technology used by rival T-Mobile in testing mobile phones. Allegedly, in 2013 Huawei set up a bonus scheme to incentivise its employees to steal trade secrets from its competitors.

The second indictment outlines Huawei's attempt to circumvent US sanctions by lying to US-based banks and the US government about its dealings with Iran.

Huawei was quick to deny any wrongdoing.

Beyond the current allegations, Huawei has been under increasing scrutiny for its relationship with the Chinese government. There is a fear that Huawei could help Chinese intelligence services with cyber espionage.

The 2019 Worldwide Threat Assessment of the US Intelligence Community outlines the "potential for Chinese intelligence and security services to use Chinese information technology firms as routine and systemic espionage platforms against the United States and allies".

While there is no conclusive evidence in the public domain that Huawei has worked with the Chinese intelligence service, the possibility is worrying. This is especially so given the importance of 5G mobile networks for the advanced technologies our lives will depend on in a decade or two.

The US, Australia and New Zealand have already banned Huawei from building their 5G mobile network based on security concerns. Others including Canada and Germany are considering it.

Huawei CFO Meng Wanzhou was arrested in Canada over alleged violations of US sanctions on Iran. ( The Canadian Press via AP: Darryl Dyck )

Sandwiched between the US and China

US allies and partners are feeling the heat from both Washington and Beijing as they seek to maintain good relations with both.

Canada is a case in point. In December, Canada arrested Huawei's CFO, Meng Wanzhou; the US wants to prosecute her for bank fraud.

In an apparent retaliation against Canada, China has detained two Canadian citizens and sentenced another to death over drug smuggling. Beijing warns of "grave consequences" if Canada extradites Ms Meng to the US.

China's aggressive response is a clear message to others: you will pay a steep price for siding with the US in this fight.

The forthcoming extradition proceedings in the Canadian court will be a drama with high stakes.

Sorry, this video has expired Canadian PM condemns China

What next?

While US President Donald Trump and Chinese President Xi Jinping may reach a temporary truce in the trade war, underlying trends are pushing China and the US toward competition.

US efforts to thwart Huawei are part of a broader attempt to blunt China's rise as a technological superpower.

But Beijing will not sit still while its technological foundations are undermined through what it perceives to be "unreasonable suppression" of Chinese companies.

With the hardening of attitude in both Washington and Beijing, we are likely to see greater competition between the two across every domain.

China and the US are competing for tech dominance. ( Reuters: Kevin Lamarque )

Countries such as Australia that rely on good relations with both the US and China will find themselves with tough choices to make.

It will take luck, skill and conviction to navigate the treacherous waters of this geopolitical environment.

Adam Ni is a China researcher at Macquarie University in Sydney.