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By David Shepardson and Diane Bartz
WASHINGTON (Reuters) - President Donald Trump is considering an executive order in the new year to declare a national emergency that would bar U.S. companies from using telecommunications equipment made by China's Huawei and ZTE, three sources familiar with the situation told Reuters.
It would be the latest step by the Trump administration to cut Huawei Technologies Cos Ltd [HWT.UL] and ZTE Corp, two of China's biggest network equipment companies, out of the U.S. market.
The United States says the companies work at the behest of the Chinese government and that their equipment could be used to spy on Americans.
Huawei and ZTE did not return requests for comment. Both in the past have denied that their products are used to spy.
Rural operators in the United States are among the biggest customers of Huawei and ZTE, and worry that they may also have to rip out existing Chinese-made equipment without compensation. Industry officials are divided on whether the administration could legally compel operators to do that.
The executive order, which has been under consideration for more than eight months, could be issued as early as January and would direct the Commerce Department to block U.S. companies from buying equipment from foreign telecommunications makers that pose significant national security risks, sources from the telecoms industry and the administration said.
While the order is unlikely to name Huawei or ZTE, a source said it is expected that Commerce officials would interpret it as authorization to limit the spread of equipment made by the two companies. The sources said the text for the order has not been finalized.
The United States and China are locked in a trade war that has disrupted the flow of hundreds of billions of dollars of goods.
The executive order would invoke the International Emergency Economic Powers Act, a law that gives the president the authority to regulate commerce in response to a national emergency that threatens the United States.
The issue has new urgency as U.S. wireless carriers look for partners as they prepare to adopt next generation 5G wireless networks.
In August, Trump signed a bill that barred the U.S. government itself from using Huawei and ZTE equipment.
A White House official said the United States was "working across government and with our allies and like-minded partners to mitigate risk in the deployment of 5G and other communications infrastructure," but stated that the White House had nothing further to announce.
The Wall Street Journal first reported in May that the order was under consideration, but it was never issued.