President Donald Trump is poised to issue an executive order as early as Wednesday that would effectively prohibit US companies from using any telecoms equipment manufactured by China's Huawei.
One person familiar with the situation said Trump planned to issue the order on Wednesday afternoon, just days after the US and China failed to reach a deal to end the trade war between the countries.
China hawks in the Trump administration have been pushing the president for months to sign the executive order, as the US security and intelligence establishment sounds the alarm about the Chinese company.
Trump previously resisted, partly because he did not want to jeopardise a potential trade deal with China.
The person familiar with the order said it would not mention any countries or companies by name. It would instead create a review process that would allow the US commerce secretary to review any transactions involving companies that are viewed as posing a security threat to the country, which would include Huawei.
Huawei executive David Wang said the company was not aware of the order but that the US was not big market for the group. "We are a company with global operations. So even with fluctuations in any country, we will still be able to have stable operations," he said at a product launch.
The news was first reported by Reuters.
In February, Trump suggested that he would not sign the executive order by tweeting that he wanted the US to win the 5G ultra-high speed mobile telecommunications race by competition and "not by blocking out currently more advanced technologies".
That reference was widely interpreted as referring to Huawei. "American companies must step up their efforts, or get left behind. There is no reason that we should be lagging behind," Trump tweeted at the time.
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The move against Huawei comes as Sino-US relations continue to deteriorate. Trump upped the ante on trade by announcing on Friday that he would increase tariffs to 25 per cent on US$200 billion ($304.4b) of Chinese products. Beijing retaliated this week by saying it would raise tariffs on US$60b of US imports.
At the same time, the US national security establishment has been pushing other countries to bar Huawei from 5G networks. Australia and Japan have joined with the US in barring Huawei from involvement in 5G, and New Zealand's intelligence services have also expressed concern.
But the UK and Germany have indicated they will allow Huawei to provide equipment for their 5G networks, in decisions that have sparked anger in Washington.
The Trump administration and career intelligence officials are particularly worried about the UK move since Britain is a member of the "Five Eyes" intelligence-sharing network that involves top-secret co-operation between the US, Canada, Australia and New Zealand.
Richard Grenell, US ambassador to Germany, earlier this year said the US would row back intelligence co-operation with Berlin unless Huawei was blocked.
In an interview last week, Gordon Sondland, the US ambassador to the EU, told the Financial Times that any country that "hands the keys to their country over to the Chinese . . . will regret having done so".
But he added that some previous sceptics were increasingly moving to the US view that Huawei posed an unacceptable threat.
Asked if the UK and Germany would suffer ramifications over their Huawei stance, Sondland suggested that London and Berlin would not take actions to jeopardise intelligence-sharing relations with the US.
"I don't think, at the end of the day, that the UK is going to put itself in a position where it can't fully co-operate with the US on defence and intelligence information sharing," Sondland said.
"The UK and the US have an invaluable relationship as does the US with Germany, and I don't think either of them are going to put themselves in that position."
Huawei equipment is not used by any of the major US carriers but is employed by about a quarter of smaller rural network companies, according to the Rural Wireless Association.
The group has not said how much it might cost to replace existing Huawei equipment, though Pine Belt, one of its members, says it could cost them up to US$14 million, while another, Sagebrush, says it could cost US$57m.
Rural broadband carriers argue that barring Huawei from 5G will mean it takes even longer to roll out high-speed internet in rural areas. The issue of access to broadband in rural areas is emerging as a theme in the 2020 presidential election as many Democrats talk about the need to take action.
Dennis Wilder, former head of China analysis at the CIA, said Trump may have decided to issue the order now because US officials had found themselves "in an uphill struggle" to ban Huawei from their emerging 5G networks.
But he said the move would also make it harder for China to agree to sign a trade deal with the US.
"Signing of the executive order will add yet another complication to the current trade tensions with Beijing and be used by those in Beijing's leadership warning against signing a deal with the US because the attitudes of the Trump administration toward China are hardening to a point where a viable trade deal may not be possible," he said.
Written by: Demetri Sevastopulo, Kiran Stacey and Nian Liu
© Financial Times