Huawei would be the largest business ever subjected to the controls, a law enforcement measure that requires it to obtain US government approval on purchases of American technology, said Kevin Wolf, who had been the assistant secretary of commerce for export administration in the Obama administration.
“It’s going to have ripple effects through the entire global telecommunications network because Huawei affiliates all over the planet depend on US content to function and if they can’t get the widget or the part for the software update to keep functioning then those systems go down,” he said.
The executive order declares a national economic emergency that empowers the US government to ban the technology and services of “foreign adversaries” deemed to pose “unacceptable risks” to national security — including from cyberespionage and sabotage.
While it does not name specific countries or companies, it follows months of US pressure on Huawei. It gives the Commerce Department 150 days to come up with regulations.
Washington and Beijing are locked in a trade war that partly reflects a struggle for global economic and technological dominance.
The export restriction is “a grave escalation with China that at minimum plunges the prospect of continued trade negotiations into doubt,” said Eurasia Group analysts in a report.
“Unless handled carefully, this situation is likely to place US and Chinese companies at new risk,” the report said.
It appears the law invoked in Wednesday’s executive order, the 1977 International Emergency Economic Powers Act, has never before been declared in a way that impacts an entire commercial sector.
It has routinely been used to freeze the assets of designated terrorists and drug traffickers and impose embargoes on hostile former governments.
The order addresses US government concerns that equipment from Chinese suppliers could pose an espionage threat to US internet and telecommunications infrastructure.
US justice and intelligence officials have presented no evidence, however, of any Huawei equipment in the US or elsewhere being compromised by backdoors installed by the manufacturer to facilitate espionage by Beijing.
Huawei vehemently denies involvement in Chinese spying.
Huawei said blocking it from doing business in the United States would hamper the introduction of next-generation communications technology in which the company is a world leader.
“We are ready and willing to engage with the US government and come up with effective measures to ensure product security,” the company said in a statement.
The restrictions “will not make the US more secure or stronger,” the company said. It said the United States would be limited to “inferior yet more expensive alternatives”, which would hurt companies and consumers.
In a statement, Federal Communications Commission (FCC) chairman Ajit Pai called the executive order “a significant step toward securing America’s networks”.
“It signals to US friends and allies how far Washington is willing to go to block Huawei,” said Adam Segal, cybersecurity director at the Council on Foreign Relations.
Many in Europe have resisted a fierce US diplomatic campaign to institute a wholesale ban on the Chinese company’s equipment in their next-generation 5G wireless networks.
Huawei says it supplies 45 of the world’s top 50 phone companies. But only about 2% of telecom equipment purchased by North American carriers was Huawei-made in 2017.
The domestic economic impact will be restricted mostly to small rural carriers for whom Huawei equipment has been attractive because of its lower costs.
Roger Entner, founder of telecom research firm Recon Analytics, tweeted: “Banning Huawei in the US has the FCC in a conundrum: Low cost Huawei equipment helps to build out broadband in rural America faster. Is the FCC going to accept slower broadband build-out or is more USF money going towards small rural carriers?”
Early this year, the Justice Department unsealed criminal charges against Huawei, a top company executive and several subsidiaries, alleging the company stole trade secrets, misled banks about its business and violated US sanctions on Iran.
The sweeping indictments accused the company of using extreme efforts to steal trade secrets from American businesses — including trying to take a piece of a robot from a T-Mobile lab.
The executive charged is Huawei’s chief financial officer, Meng Wanzhou, who is also the daughter of the company’s founder.
She was arrested in Canada last December.
The US is seeking to extradite her.