USA reaches new settlement with China's ZTE

The Trump administration is putting the finishing touches on a deal with ZTE. Bloomberg’s Jodi Schneider reports

The Trump administration is putting the finishing touches on a deal with ZTE. Bloomberg’s Jodi Schneider reports

However, last month, Trump tweeted that "too many jobs in China" were being lost because of the US action and that he had instructed the Commerce Department to find a solution. "The strictest and largest settlement fine that has ever been brought by the Commerce Department against any violator of export controls". "If they commit any further violations, we would again be able to deny them access to United States technology".

Ross, speaking on CNBC on Thursday, said that ZTE also must put $400 million in escrow, which will be forfeited if there are any violations of the agreement.

US Commerce Secretary Wilbur Ross defended the new agreement, saying in a statement: "We will closely monitor ZTE's behavior".

The immediate ramifications of this deal are that although ZTE is becoming cash-poorer, this will allow them to resume day-to-day business operations and get the business moving again.

In April, the US Commerce Department blocked American firms from selling parts or providing services to ZTE, which also makes telecommunications equipment. China has vowed to retaliate on everything from US soybeans to airplanes, and said it will abandon its commitments if the USA follows through on its tariff threat.

The fines agreed to on Thursday are in addition to $892 million in penalties which ZTE has already paid to the USA government under the previous settlement. But it seems ZTE is definitely in a better position now than it was just a few weeks ago. It appears that the Trump administration is pretty bothered by the fact that ZTE wanted to replace a top executive with one from another company that was also sanctioned by the USA government for being a national security threat.

"If the U.S. is truly going to make an example out of ZTE, the name itself is now toxic and can not be used going forward", Earl Lum, the President of EJL Wireless Research, a consultancy and research firm based in the USA, said when the ban came into force.

Regardless of those talks, the Trump administration is facing a deeply hostile reaction from Congress, where there is bipartisan opposition to the deal. Qualcomm and Intel count ZTE as a customer, as do smaller component makers Oclaro and Acacia, both of which saw their stock prices drop sharply when the ZTE export ban was announced.

U.S. President Donald Trump met with his trade advisers on Tuesday to discuss China's offer to import an extra $70 billion of American goods over a year in hopes of defusing a potential trade war between the world's two largest economies.

USA goods exported to China a year ago totaled US$130 billion while Chinese imports to the USA totaled US$506 billion.

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