U.S. Commerce Department may block cloud computing companies from doing business in certain foreign markets

An executive order aimed at excluding U.S. cloud computing companies from certain foreign markets is circulating within the Trump administration and among tech industry players, unsettling companies that could be affected, Axios reported.

The proposal is likely to represent another attempt by Trump to get tough on China before he leaves office. The draft order was initiated by the Commerce Department, which has repeatedly tried to prove that it will take action against countries it believes want to replace or infiltrate American technology.

It's unclear whether the proposal would stand. The Trump administration wouldn't have enough time to complete any rulemaking or other proceedings to implement such an order, and the incoming Biden administration could immediately repeal it.

Under the proposal, the Commerce Department would have the power to prohibit U.S. cloud service providers from doing business in certain countries and to prohibit U.S. customers from using cloud service providers from certain countries.

A draft EO summary seen by Axios states that IaaS companies, such as Google Cloud, Amazon Web Services or Oracle Cloud, would have to collect customer data from U.S. and foreign clients, including phone numbers, email addresses, financial information and IP addresses, in case of government requests.

Under the EO, the Secretary of Commerce can ban cloud services transactions from "certain foreign jurisdictions." If the order goes into effect, it would likely be used against countries like China, Russia, and Iran. The authority mentioned in the draft comes from a state of emergency declared in 2015, authorizing sanctions against any person or country that engages in malicious cyber activity against the United States.

An industry source told Axios that the Commerce Department has been reaching out to cloud computing companies for feedback and thoughts on the proposal, which the company feels is being rushed and could unfairly affect their relationships with other countries, the source said.

There are concerns that other countries could retaliate by making it harder for U.S. cloud computing companies to do business within their borders, creating yet another breach in an increasingly fragmented global internet.

The source added that there was no evidence that foreign network operators used cloud computing companies to launch attacks.