Trump may use executive order to ban Huawei, ZTE purchases

U.S. President Donald Trump is taking another stab at Chinese technology firms Huawei Technology Co. Ltd. and ZTE Corp.

Trump is looking at issuing a new executive order that would ban U.S. wireless carriers from using equipment manufactured by the two firms, according to a report in Reuters. Such an order would come as a big blow to the Chinese companies and could also hurt the rollout of 5G networking infrastructure across the U.S.

The U.S. government has long accused the companies of working at the behest of the Chinese government, arguing that their equipment could be used to spy on Americans.

If issued, the executive order would force the U.S. Commerce Department to prohibit U.S. firms from buying equipment made by Chinese telecommunications suppliers on national security grounds. The action, which Reuters says has been under consideration for eight months, is expected to happen in January and would not need the approval of Congress.

Huawei and ZTE already face big problems in the U.S. market, as government agencies have been barred from buying their products under a new defense bill that came into law earlier in the year. Other Western governments have since followed suit. In the case of ZTE, it has also been singled out with heavy sanctions against it, though they were lifted following prolonged lobbying efforts.

Despite all that, the companies are still doing good business with smaller wireless carriers in the U.S. that focus on providing connectivity in rural areas, Reuters reported. That’s because Huawei and ZTE’s network switches and similar products tend to be less expensive than those sold by competitors.

Indeed, Huawei’s equipment is so popular that one of its executives reportedly sits on the board of directors of the Rural Wireless Association, an industry group that represents carriers with fewer than 100,000 subscribers. The RWA estimates that about 25 percent of its members rely on hardware made by the Chinese firms and worries that these members would be forced to remove this equipment and replace it without compensation, costing members about $800 million to $1 billion.

White House officials said a block on Chinese networking technologies would not delay the rollout of 5G services in the U.S., but Huawei’s rotating chairman, Guo Ping, this week said the move would have a negative impact.

Analyst Holger Mueller of Constellation Research Inc. said the situation was a delicate one in the absence of any concrete evidence against either of the Chinese companies, as any ban on purchases could easily backfire on the U.S. in terms of its infrastructure development.

“Barring any proof being made public, it comes back to the interpretation of the situation by elected officials,” Mueller said. “Getting this wrong can could have massive consequences for the proper working of any developed economy. What I’d like to see is engineering stepping up and proofing the chance of equipment being tampered with, or even better helping to design systems that actually tamper proof, not just by foreign actors, but anyone.”

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