U.S. and China reportedly working on a deal to save ZTE

Casey Dawson
May 25, 2018

According to Reuters sources, a proposed trade deal with China would lift a seven-year ban that prevents U.S. chipmakers and other companies from selling components to ZTE.

The Commerce Department blacklisted ZTE, the second-largest manufacturer of cellphones in China, from doing business with the US because the firm failed to comply with a settlement reached after it violated sanctions against North Korea and Iran.

Of course the concern from the Chinese is that ZTE, a fairly major manufacturer and employer with approximately 75,000 employees is effectively being put out of business, likely leading to Chinese lobbying on behalf of the firms as part of its trade talks with the US. That could have had a major impact on the USA wireless market, considering companies like Qualcomm derive significant revenues from sales of chipsets and other components to ZTE, and carriers like AT&T sell the company's phones in the prepaid market.

The Trump administration also considered rolling back more severe penalties which have crippled ZTE, after it was caught shipping goods to Iran, in violation of sanctions.

Now, though, multiple reports claim that the United States is working to give ZTE a way out.

"The government has encouraged us to lift more USA crude", one of the sources said.

Maryland Senator Chris Van Hollen, who sponsored the measure, said it was "deeply troubling" that the president was "fighting to protect jobs in China" tied to a company that has been flagged as a security risk by USA defence officials.

While in London on Monday, China's ambassador to the United Kingdom praised the latest round of discussions, saying the agreement will promote healthier trade internationally. He said any potential deal could include "significant fines, very severe compliance measures, a new board of directors, a new management team".

But much of that trade originates from companies whose headquarters are outside the U.S. BMW and Mercedes-Benz, for example, build cars in the U.S.to be shipped to China.

That drew a quick response from Republicans and Democrats in Congress.

"When you do that, you're really hurting American companies, also".

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Mr Trump was in a "very positive mood about this", Mr Kudlow said.

China said Tuesday it will reduce auto import duties effective July 1 following pledges to buy more US goods and end restrictions on foreign ownership in the industry.

Passenger cars make up around 30 percent of Japan's total exports to the U.S. and Tokyo has already threatened Washington with retaliation at the World Trade Organization for the steel tariffs.

The Pentagon on Wednesday withdrew its invitation for China to join maritime exercises in the Pacific because of Beijing's "continued militarization" of the South China Sea.

Shenzhen, China-based ZTE depends on U.S. components, such as chips from Qualcomm Inc., to build its smartphones and networking gear.

Let's suppose that the only way to truly satisfy the Trump administration's protectionists, and hence to put a permanent end to the threat of a trade war, is for China to increase purchases of us goods by an annual $200 billion in order to zero out the trade deficit. "So well see what happens", he said.

I dont like to talk about deals until theyre done. Exports are straining US pipeline and port capacity, and may be reaching a limit until capacity expansion underway are completed, one of the sources said.

"Were discussing various deals", he said.

A couple of months ago, when the U.S. and China appeared to be on the brink of a trade war, Elon Musk took to Twitter to complain to U.S. President Donald Trump about the unfair trade rules on U.S. auto sales in China, which make Tesla's cars much more expensive in the world's fastest-growing EV market.

This week, the Pentagon pulled its invitation for China to participate in maritime exercises in the Pacific, then Trump on Thursday scrapped a summit with North Korea after suggesting Xi may have exacerbated a breakdown in communications.

To the contrary, the U.S.is "aggressively" examining ways to protect US technology through an inter-agency panel that reviews foreign acquisitions in the USA, known as Cfius, Mnuchin said.

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