President Donald Trump is considering an executive order in the new year to declare a national emergency that would bar US 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 and ZTE Corp, two of China's biggest network equipment companies, out of the US market.
Huawei is the world's largest telecom equipment maker and the second largest smartphone seller.
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.
Earlier this year, Huawei came under international pressure after the United States and its allies, including Australia and New Zealand, started barring its equipment on concerns they could enable spying by China. Huawei has repeatedly insisted Beijing has no influence over it.
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 US 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 authorisation to limit the spread of equipment made by the two companies. The sources said the text for the order has not been finalised.
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 US wireless carriers look for partners as they prepare to adopt next generation 5G wireless networks.
In August, Mr Trump signed a bill that barred the US 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.
China's Foreign Ministry Spokeswoman Hua Chunying said that she did not want to comment on the order as it had not been officially confirmed.
"It's best to let facts speak for themselves when it comes to security problems," Ms Hua said.
"Some countries have, without any evidence, and making use of national security, tacitly assumed crimes to politicize, and even obstruct and restrict, normal technology exchange activities," she said.
"This in reality is undoubtedly shutting oneself off, rather than being the door to openness, progress and fairness."
In his new year's address to employees, Huawei's rotating chairman Guo Ping said the firm has secured 26 5G contracts and expects its smartphone shipments for 2018 to surpass 200 million units.
The company flagged earlier this month that annual revenue is expected to exceed $US100 billion for the first time and that it had secured more than 25 commercial 5G contracts, making it the largest 5G vendor in the world.
In August, Huawei forecast smartphone shipments exceeding 200 million for the year.
The company's chief financial officer Sabrina Meng, who is also the daughter of founder Ren Zhengfei, was arrested and released on bail in Canada earlier this month as the US alleged she defrauded banks with Iran-related transactions.