WASHINGTON/NEW YORK -- U.S. President Donald Trump on Wednesday signed an executive order that prohibits U.S. companies from using foreign information technology and services deemed a national security risk, paving the way for a total ban on doing business with Chinese telecom company Huawei Technologies.
The move significantly ratchets up American pressure on China on at least two fronts -- security and trade. Beijing earlier this month reneged on concessions it had made during five months of trade negotiations with the U.S.
Washington is also pushing Beijing to end a policy, propped up with export tariffs, aimed at achieving technological hegemony. Chinese President Xi Jinping in 2015 unveiled a vision of China becoming a major industrial power by 2025 and dominant in global markets by 2049 -- the 100th anniversary of the foundation of communist China.
The plan was updated in 2017: China's economy would overtake the U.S. by 2035, some 15 years or so earlier than previously planned.
Trump's latest salvo strikes at the heart of Chinese industrial policy. Although administration officials say the executive order does not single out any country, it targets Huawei, one of the world's primary suppliers of 5G infrastructure.
This became apparent later on Wednesday, when the Commerce Department said it would add Huawei and its affiliates to the Entity List. Companies on the list are required to obtain a license before they can buy or receive U.S. technology.
Secretary of Commerce Wilbur Ross said that President Trump backed the decision and the targeted export ban will "prevent American technology from being used by foreign-owned entities in ways that potentially undermine U.S. national security or foreign policy interests."
A similar export ban was deployed against ZTE, in April 2018, pushing the Chinese telecom company to the brink of bankruptcy. But moving against Huawei is far more significant -- its sales are five times those of ZTE and its imports of high-tech components from the U.S. reach an annual $10 billion.
Huawei issued a statement in Chinese.
"Huawei is the unparalleled leader in 5G," it says. "We are ready and willing to engage with the U.S. government and come up with effective measures to ensure product security. Restricting Huawei from doing business in the U.S. will not make the U.S. more secure or stronger; instead, this will only serve to limit the U.S. to inferior yet more expensive alternatives, leaving the U.S. lagging behind in 5G deployment, and eventually harming the interests of U.S. companies and consumers. In addition, unreasonable restrictions will infringe upon Huawei's rights and raise other serious legal issues."
In anticipation of Washington's move, Huawei has been diversifying its supply sources, away from the U.S. and to places like Japan and Europe. But Chinese telecom companies still heavily rely on U.S. chips and software. The loss of access to U.S. components could pressure Xi to reach a trade deal with Trump, who desires a quick outcome.
China, meanwhile, seems to be playing the long game. In a tweet posted on Wednesday, Hu Xijin, editor-in-chief of the Global Times, a mouthpiece of the Chinese Communist Party, said, "Protracted war is well known among Chinese as a strategy to exhaust opponent," citing Mao Zedong's 1938 book, "On Protracted War."
Trump's executive order directs relevant U.S. government agencies to provide annual assessments of security threats from information and communications technologies or services linked to a "foreign adversary," with an initial assessment to be completed within 40 days.
In addition, the commerce department has been given 150 days to draw up a detailed plan for enforcement.
Washington last year banned the use of equipment made by Huawei and ZTE in American government agencies and contracts, citing national security risks. The Federal Communications Commission also rejected market entry by state telecom China Mobile on the same grounds in the first instance of its kind.
Wednesday's executive order came as trade tensions between China and the U.S. reached another high point, with both sides announcing additional tariffs after Washington accused Beijing of reneging on commitments made in previous trade talks.
Huawei launched a lawsuit in March against the U.S. government declaring its exclusion of the company from government contracts is unlawful.
White House Press Secretary Sarah Sanders said the administration will do what it takes to "keep America safe and prosperous, and to protect America from foreign adversaries who are actively and increasingly creating and exploiting vulnerabilities in information and communications technology infrastructure and services" in the U.S.
Nikkei staff writer Mitsuru Obe in Tokyo contributed to this report.