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Amid increasing optimism surrounding the phase-one trade deal between the United States (US) and China, the South China Morning Post (SCMP) recently released news that highlights the Trump administration’s moves to protect its telecommunications networks and their supply chains from national security threats. Even if the move doesn’t directly target Chinese firms like Huawei and ZTE, there seem to be indirect impacts, which in turn could dilute the presently upbeat trade environment between the world’s top two superpowers.

Key quotes

The Commerce Department said on Tuesday that Secretary Wilbur Ross had chosen to adopt a case-by-case, fact-specific approach to determine which transactions must be prohibited, or which can be mitigated.

The outlined approach, in a proposed rule, does not mention either Huawei or ZTE.

The US President Trump’s May order invoked the International Emergency Economic Powers Act, which gives the president authority to regulate commerce in response to a threat to the United States.

It directed the Commerce Department, working with other government agencies, to draw up an enforcement plan by October.

Huawei argued that the FCC decision was based on nothing more than irrational speculation and innuendo. China said on Monday that the United States should stop abusing the concept of national security and abusing Chinese companies.

FX implications

Although no major market reaction could immediately be witnessed due to the news, the recent risk-on sentiment, backed by increased odds of the US-China phase-one deal, could be negatively affected. That said, the USD/JPY pair takes rounds to 109.00 while S&P 500 Futures stays mostly unchanged from the previous day’s close while flashing 3,144 as a quote.