US, China Near Rescue Deal for Chinese Telecom Firm ZTE

The United States and China are nearing a deal to lift the seven-year ban on the sale of American-made components to the giant Chinese telecommunications company ZTE, part of ongoing trade talks between the world’s two biggest economies.

Details of the pact are still being worked out, but U.S. news accounts Tuesday said that as part of the accord, ZTE would make major changes in its management and possibly pay additional penalties beyond the $1.2 billion fine the U.S. imposed on it last year for violating U.S. bans on trade with Iran and North Korea.

U.S. President Donald Trump last week said he was working with Chinese President Xi Jinping to rescue ZTE “to get back into business, fast.” Trump said “too many jobs in China” were being lost after the U.S. banned the sale of parts from American companies that ZTE needed to make its consumer products, shutting ZTE manufacturing operations. The U.S. leader said, “Commerce Department has been instructed to get it done!”

While some U.S. officials said the penalties against ZTE — the fine and the ban on sale of U.S. components until 2025 — were a law enforcement action, Trump linked the issue to ongoing trade and tariff disputes with China. The two countries over the weekend called off the threat of imposing higher tariffs on billions of dollars of each other’s exports, and China has agreed to “substantially reduce” the $375 billion annual trade surplus it has over the U.S. by buying more American goods.

The size of any possible new fine on ZTE has not been disclosed.

On Sunday, White House economic adviser Larry Kudlow said, “Do not expect ZTE to get off scot-free. Ain’t going to happen.”

U.S. Senator Marco Rubio, who lost the 2016 Republican presidential nomination to Trump, voiced opposition to the pending settlement of the ZTE dispute, saying Washington had “surrendered” to Beijing. The Florida lawmaker said he would try to block it.

“Making changes to their board and a fine won’t stop them from spying and stealing from us. But this is too important to be over. We will begin working on veto-proof congressional action,” Rubio said on Twitter.

Meanwhile, China announced that on July 1 it will cut tariffs on most imported cars from 25 percent to 15 percent, still well above the 2.5 percent levy the U.S. imposes on cars imported from overseas.

The announcement by China’s finance ministry follows a pledge by Xi last month to lower the import duties and to ease foreign ownership restrictions for the Chinese auto industry.

Trump repeatedly mentioned the 25 percent automobile tariff as a key trade barrier between the two countries.

On Monday, Trump said new trade between China and the U.S. will especially benefit U.S. farmers.

“Under our potential deal with China, they will purchase from our Great American Farmers practically as much as our Farmers can produce,” he said on Twitter.

In another comment, he said China “has agreed to buy massive amounts of ADDITIONAL Farm/Agricultural Products – would be one of the best things to happen to our farmers in many years!”

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