ZTE: Trump meets opposition
• China and US edge closer to reprieve for telecoms company but some in government and business are unhappy
Washington is nearing a deal to lift its ban on US companies supplying Chinese telecoms equipment maker ZTE, sources say.
Washington neared a deal to lift its ban on US companies supplying Chinese telecoms equipment maker ZTE, sources said on Tuesday, and Beijing announced tariff cuts on car imports, further easing trade tensions between the two largest economies.
The reprieve for ZTE, which was hit by a seven-year ban in April that crippled its operations, could include China removing tariffs on imported US agricultural products, as well as buying more American farm goods, two people briefed on the matter told Reuters. Representatives for the US treasury and commerce departments did not reply to a request for comment. White House representatives also did not immediately reply. ZTE, based in the southern Chinese city of Shenzhen, also did not reply to requests for comment.
Washington and Beijing stepped back from the brink of full-blown trade war after talks last week, with the US appearing to set aside for now its demands that China revamp key planks of its industrial policy in exchange for buying more agricultural products.
US President Donald Trump has adopted a more conciliatory stance in the trade dispute with China as North Korea, whose chief ally is Beijing, has called into question a summit with Trump planned for June.
Many in the US government and in industry are dismayed that Trump appears to be backing off his tough stance on forcing China to open its markets more and tackle what they see as China’s unfair trade and market access practices. Some in the US government and business community are opposed to what they saw as a clear-cut legal case against ZTE being used as a bargaining chip in the broader trade conflict.
Republican Senator Marco Rubio, who has been critical of Trump’s moves towards ZTE, blasted the administration for having “surrendered” to Beijing and pledged that Congress, led by Trump’s fellow Republicans, would seek to block any deal with the company.
“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,” he tweeted on Tuesday.
The steep cut in import tariffs for vehicles and car parts follows China’s pledge in April to open its car market, the world’s largest. It included a timeline to remove long-standing caps on foreign ownership of car making ventures. Import tariffs will be cut to 15% for most vehicles from 25% from July 1, the ministry of finance said, a move that is likely to boost car makers that ship high-end cars to China, such as Tesla and German giants BMW and Mercedes-Benz.
Tariffs for car parts would be cut to 6% from about 10%.
White House advisers have previously said the ban against ZTE was being re-examined and the company would still face “harsh” punishment, including enforced changes of management and at board level.
One source told Reuters that there was a “handshake deal” on ZTE between US Treasury Secretary Steven Mnuchin and Chinese Vice-Premier Liu He during talks in Washington last week that would drop the ban in exchange for purchase of more US farm products.
The second person said China might also eliminate tariffs on US agriculture products it assessed in response to US steel duties and ZTE could still be forced to replace its leadership, among other penalties.
The ZTE deal was likely to be finalised before or during a planned trip by US Commerce Secretary Wilbur Ross to Beijing next week to help reach a broader pact to avert a trade war, both sources said.
ZTE, which is publicly traded but whose largest shareholder is a Chinese state-owned enterprise, was hit with penalties for breaking a 2017 agreement after it was caught illegally shipping US goods to Iran and North Korea, in an investigation dating to the Obama administration.
American companies provide about 25% to 30% of components in ZTE’s equipment, which includes smartphones and equipment to build telecommunications networks.
Earlier in May, Trump signalled a stunning reversal on ZTE when he said that he would help the company get “back into business, fast”, saying that the ban would cost too many jobs in China.
Chinese officials had made the issue a key focus of their demands during talks in Beijing in May, threatening to halt talks on broader two-way trade disputes unless Washington agreed to ease the sanctions, sources said at the time. Chinese officials had viewed the US punishment as an attack exposing their country’s dependence on imports of key technologies.
Washington and Beijing both claimed victory in trade talks on Monday as the world’s two largest economies agreed to hold further talks to boost US exports to China.