NEW YORK — The United States announced a deal Thursday to lift tough US sanctions on the Chinese telecommunications giant ZTE, a company that has been at the center of a dispute between China and the United States.
The Commerce Department said that ZTE had agreed to pay a $1 billion fine and allow the United States to more closely inspect the company by effectively having a hand-picked compliance team embedded inside.
It is not clear what the United States received in return. ZTE had been a bargaining chip in negotiations between the two countries, which have been striving to reach a trade deal that would prevent tit-for-tat tariffs from going into effect.
But the company’s fate has gotten caught up in a bigger web, including an upcoming summit between President Trump and North Korea’s leader and the success of a US telecom company, Qualcomm, which sells a large amount of semiconductors to ZTE and is awaiting Chinese approval of a deal to acquire a Dutch telecom firm that will help it build the next generation of wireless technology, known as 5G.
Trump softened his approach to ZTE several weeks ago after Chinese President Xi Jinping asked Trump to consider easing penalties on the company, which was headed toward collapse after US sanctions barred it from buying any US-made goods. Trump, who is heading to Singapore next week to meet with North Korea’s leader, Kim Jung Un, has made Xi his partner on North Korea while condemning China’s trade practices.
Trump has said the ZTE move is part of “the larger trade deal we are negotiating with China and my personal relationship with President Xi.’’
The settlement with ZTE is likely to inflame lawmakers, including top Republicans, who have objected to helping a Chinese company that has been accused of posing a national security threat. Defense officials have long been concerned that the company’s products may be vulnerable to espionage or disruption. Major US wireless carriers have for years been effectively blocked from buying its network equipment.
The deal also puts the United States in an even more awkward position as it punishes allies like Canada, Mexico, and the European Union with tariffs on steel and aluminum.
“I assure you with 100% confidence that #ZTE is a much greater national security threat than steel from Argentina or Europe,’’ Senator Marco Rubio, a Florida Republican, wrote on Twitter on Thursday. “#VeryBadDeal.’’
“When it comes to China, despite his tough talk, this deal with ZTE proves the president just shoots blanks,’’ New York Senator Chuck Schumer, the Democratic leader, said in a statement. “There is absolutely no good reason that ZTE should get a second chance, and this decision marks a 180-degree turn away from the president’s promise to be tough on China. It’s up to Congress now to act to reverse the deal.’’
During trade talks in Beijing last weekend, the Chinese offered to make nearly $70 billion of purchases of US agricultural goods, natural gas, coal, and manufactured products, people familiar with the discussions said. But that offer was conditional on the Trump administration not proceeding with tariffs on $50 billion of Chinese goods. The Trump administration has not yet announced plans to suspend those tariffs, which the White House has said would go into effect shortly after June 15.
Administration officials have stressed that the penalties on ZTE are still tough and will not compromise US national security. But the administration’s sudden change of heart on the company has still left the White House vulnerable to criticism that it is walking back its tough stance on China.
On Wednesday, lawmakers from both political parties took their biggest step yet against the Trump administration’s trade agenda, introducing legislation that would require Congress to approve tariffs issued under a legal statute known as Section 232. The Trump administration has used the law to impose sweeping tariffs on metal imports from around the world and proposed similar measures on automobile imports.
Both houses of Congress have drafted legislation that would block the ZTE deal, though those efforts remain in initial stages. The House passed a bill last month that would prevent the administration from easing restrictions on the company, while the Senate Banking Committee approved an amendment that would prevent the president from modifying penalties on Chinese companies that had recently violated US law. Rubio has also introduced a provision into an appropriations bill that would restrict government funds from being used to purchase telecommunications equipment produced by Huawei and ZTE.
In April, the Department of Commerce banned US companies from selling components and other technology to ZTE, saying the company had failed to reprimand employees who were involved in violating trade controls in Iran and North Korea.
The export ban left ZTE unable to manufacture its smartphones and telecom equipment, which contain a variety of components from US suppliers, including the giant chipmaker Qualcomm.
Recently, Chinese regulators have moved closer to approving Qualcomm’s plan to acquire NXP Semiconductors, a Dutch firm. China is the last of several governments to sign off on the deal and the protracted antitrust review has been seen as a way for Beijing to maintain leverage over the negotiations.
The Trump administration has expressed concerns about China gaining a leading role in the development of 5G wireless technology and has singled out Qualcomm as key to helping the United States retain an edge.
