US President Donald Trump has said that complaints against Huawei Technologies might be resolved within the framework of a US-China trade deal.
But at the same time Mr Trump called the Chinese telecommunications giant "very dangerous."
Washington last week effectively banned US firms from doing business with Huawei, the world's largest telecoms network gear maker, citing national security concerns.
"You look at what they've done from a security standpoint, from a military standpoint, it's very dangerous," Trump said in remarks at the White House.
"If we made a deal, I could imagine Huawei being possibly included in some form or some part of it," he said.
Trump predicted a swift end to the trade war with China, although no high-level talks have been scheduled between the two countries since the last round of negotiations ended in Washington two weeks ago.
Shares of S&P technology and industrial companies, bellwethers of trade sentiment, fell more than 2% yesterday.
The US market slumped in a sign the conflict was being seen as a battle not just over trade but also about who controls global technology.
Earlier, US Secretary of State Mike Pompeo accused the chief executive of Huawei, Ren Zhengfei, of lying about his company's lack of ties to the Beijing government, which he said represented a security risk.
"The company is deeply tied not only to China but to the Chinese Communist Party. And that connectivity, the existence of those connections puts American information that crosses those networks at risk," he said.
Huawei has repeatedly denied it is controlled by the Chinese government, military or intelligence services.
Tech companies around the world have fallen in line with US curbs on the company.
Japanese conglomerate Panasonic said it had stopped shipments of some Huawei components, a day after British chip designer ARM did the same, potentially crippling the Chinese company's ability to make new chips for smartphones.
Asked if he believed more firms would stop working with Huawei, Pompeo told CNBC in an interview: "We do. We've been working at the State Department to make sure that everyone understands the risks."
US politicians moved on Wednesday to provide about $700m in grants to help US telecoms providers with the cost of removing Huawei equipment from their networks, and to block the use of equipment or services from Huawei and Chinese telecoms firm ZTE in next-generation 5G networks.
China's Commerce Ministry hit back yesterday.
"If the US wants to continue trade talks, they should show sincerity and correct their wrong actions. Negotiations can only continue on the basis of equality and mutual respect," spokesman Gao Feng told a weekly briefing.
"We will closely monitor relevant developments and prepare necessary responses," he said, without elaborating.
Trump hiked tariffs on $200 billion worth of Chinese goods on May 10 and threatened to slap tariffs of up to 25% on an additional list of Chinese imports worth about $300 billion, prompting China to respond with levies of its own.
Sources have said the trade talks stalled after China tried to delete commitments from a draft agreement that its laws would be changed to enact new policies on issues from intellectual property protection to forced technology transfers.
With no resolution in sight, US Agriculture Secretary Sonny Perdue announced a $16 billion aid programme to help US farmers hurt by the conflict, with some funds to be used to open markets outside China to US products.
Farmers have been among those hardest hit by the trade war.
Retailers, including Best Buy and Walmart, are also warning that the tariffs will raise prices for consumers.
The newest round will cost the typical American household $831 annually, according to research this week from the Federal Reserve Bank of New York.
Of a list of 20 companies compiled by Goldman Sachs that derive a substantial portion of their sales from China, the average stock price decline since Trump's tweet on May 5 signaling that tariff increases were coming is nearly 15% compared with a 4.5% drop for the wider S&P 500 index.