Senate to include measure blocking Trump's ZTE deal in defense bill

A woman stands outside a building of ZTE Beijing research and development center in Beijing China

A woman stands outside a building of ZTE Beijing research and development center in Beijing China

After it was exposed that ZTE violated US trade embargoes and directly lied to officials about the conduct, the Commerce Department banned USA exports to the company as punishment.

Commerce Secretary Wilbur Ross announced a deal last week to lift the ban, which had brought ZTE's factories to a standstill.

An amendment sponsored by Sens. That sanction was put in place after the Chinese company violated the terms of an earlier agreement to punish it for illegal sales to Iran and North Korea.

ZTE, which is based in Shenzhen, is China's second biggest telecoms maker.

The amendment will also ban government agencies from trading telecommunications equipment and services with Chinese telecom companies ZTE and Huawei, as well as from providing loans to or subsidizing either company, according to The Hill. The company had shut major operations last month after the United States activated a ban prohibiting it from buying American parts.

But today, via The Wall Street Journal, Senate leaders on both sides of the aisle introduced legislation into a popular defense bill that would reimpose the original punishments on ZTE, overruling Trump's deal.

However, in May the president tweeted that he was working with China to keep ZTE running and hoped a deal would prevent "too many jobs in China" from being lost.

But the ban on buying US parts, imposed by the department in April, will not be lifted until ZTE pays fines and places $400 million more in an escrow account in a USA -approved bank.

Jeffries said it expected ZTE to pay its penalty in a few days and resume operations next week.

The reaction to the move, as NPR's Dustin Dwyer reported, was "swift, negative and bipartisan".

"While the nightmare is now over, ZTE will likely have to deal with many changes", Jeffries said in a research report, adding that it expects significant near-term selling pressure on the company's shares.

Investors wiped about $3 billion off embattled Chinese telecommunications giant ZTE Corp's (0763.HK) (000063.SZ) market value as it resumed trade on Wednesday after agreeing to pay up to $1.4 billion in penalties to the US government. He said the threat posed by the mobile phone giant and its rival, Huawei, "is too great to ignore". Marco Rubio (R-Fla.), another chief backer of the amendment.

Senate Majority Leader Mitch McConnell (R., Ky.) said that passing the defense measure is at the top of his to-do list this week. "And we'll tackle it this week".

Visitors pass in front of the Chinese telecom giant ZTE booth February 26 at the Mobile World Congress in Barcelona.

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