People I follow on social media are treating this as bluff and they are probably right because there are no plans to do so. Nevertheless, there is bipartisan support for it, specially as a way to rein in Chinese tech companies with ties to the People’s Liberation Army (PLA). For years, the U.S. has been trying to stop the transfer of technology to Chinese firms and this is one way to do it. But doing so could fractured U.S.-China relations for good and signal the start of a new Cold War. So it’s highly unlikely to happen.
As far as the current trade drama is concerned, the Chinese don’t have the retaliatory power to win a prolonged trade war with the United States. By reaching agreements with the European Union and Japan, Trump made sure China would not be able to count on their support. This made communist party hardliners furious, but I suspect this had more to do with hurt feelings than anything else. The truth is China is going to have to swallow its pride and move on. All the hype about surpassing the U.S. means nothing if they can’t continue to grow, and for that they need trade.