President Trump tweeted about the recent deal, “Senator Schumer and Obama Administration let phone company ZTE flourish with no security checks. I closed it down then let it reopen with high level security guarantees, change of management and board, must purchase U.S. parts and pay a $1.3 Billion fine. Dems do nothing...” ZTE will be required to pay an additional fine, instate American compliance officers, and get rid of their current board members. If the company complies with these requirements, they will be able to do business with American companies. President Trump also added that there will be incredibly strict security rules.
President Trump announced his intentions to work with Chinese President Xi Jinping and ZTE earlier this month. In March 2017 the Trump administration fined ZTE $1.19 billion USD for allegedly importing American technology to Iran and North Korea. ZTE was still permitted to work with American companies as long as they reprimanded the employees who violated the sanctions. ZTE only fired four of the employees and gave bonuses to thirty-five employees involved in the debacle. In April 2018 the Department of Commerce banned American companies from providing exports to ZTE for seven years. United States Secretary of Commerce Wilbur Ross commented, “ZTE made false statements to the US government when they were originally caught and put on the Entity List, made false statements during the reprieve it was given, and made false statements again during its probation. ZTE misled the Department of Commerce. Instead of reprimanding ZTE staff and senior management, ZTE rewarded them. This egregious behavior cannot be ignored.”
ZTE smartphones often rely on Qualcomm, Intel, and Google products. It is estimated that up to 25% of the company's smartphone components are from the United States. ZTE insisted that it would need to shut down “major business operations” and let go of the majority of its 70,000 employees due to the ban.
It appears that the Trump administration felt that the ban dealt too much harm too quickly. President Trump tweeted, “President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!” Some believe that the current deal with ZTE is intended to promote further trade talks with China.
Senator Schumer and Obama Administration let phone company ZTE flourish with no security checks. I closed it down then let it reopen with high level security guarantees, change of management and board, must purchase U.S. parts and pay a $1.3 Billion fine. Dems do nothing....— Donald J. Trump (@realDonaldTrump) May 25, 2018
Various members of Congress insist that ZTE is a threat to the United States. Senate Minority Leader Chuck Schumer recently stated, “We all know that China is involved in stealing our intellectual property. There is no better way to do it than through ZTE, and we’re going to let them be here, and slap them on the wrist with a fine? That’s a dereliction of our duty here in the Congress, and it’s the president’s duty to protect us.” United States Secretary of the Treasury Steven Mnuchin attempted to assure Congress that administration has not forsaken American security. He remarked, “I can assure you that whatever the Commerce Department decides, the intel community has been part of the briefings and we will make sure that we will enforce national security issues.”
United States Secretary of Commerce Wilbur Ross is scheduled to travel to China on June 2nd. In the meantime, the House of Representatives has passed a defense authorization bill that would prohibit government agencies from buying ZTE products or contracting companies that do business with ZTE. The Trump administration’s deal with ZTE is certainly not set in stone yet.