Workers make final preparations to the ZTE Corp. stand at the Mobile World Congress in Barcelona, Spain. (Photographer: Pau Barrena/Bloomberg)

U.S. Said to Be Finalizing Deal to Help Revive China's ZTE

(Bloomberg) -- The Trump administration is putting the finishing touches on a deal with ZTE Corp. that would allow the Chinese telecom-equipment maker to resume purchases from its American suppliers, according to two people familiar with the matter.

U.S. and Chinese officials are still finalizing the details and any deal could still fall apart, according to one of the people, who spoke on condition of anonymity to discuss internal deliberations. Reuters earlier on Tuesday reported that ZTE has signed an agreement in principle that would allow the crippled company to resume operations.

A U.S. Commerce Department spokesman said no definitive deal has been signed by the two parties.

The U.S. blocked ZTE’s access to U.S. suppliers in April, saying the company violated a 2017 sanctions settlement related to trading with Iran and North Korea and then lied about the violations. The company announced it was shutting down just weeks after the ban was announced.

President Donald Trump reversed course last month, saying as a personal favor to Chinese President Xi Jinping he was reconsidering penalties on ZTE. Trump later said his administration would allow the company to stay in business after paying a $1.3 billion fine, changing its management and board and providing “high-level security guarantees.”

Trump has said U.S. technology companies have been hurt by the sanctions. ZTE depends on U.S. components, including Qualcomm Inc. chips, to build its smartphones and networking equipment.

Congressional Anger

Trump’s softening drew immediate resistance from both Republican and Democratic members of Congress, who are pressing for stiffer restrictions on ZTE and even considering action to block Trump from reversing the sales ban. Republican Senator Marco Rubio was among the most vocal critics, calling the firm a security risk for the U.S.

The news on Tuesday that a deal was close sparked a renewed outcry from lawmakers.

If the reports are true, Trump “has put China, not the United States, first,” Senate Minority Leader Chuck Schumer said on Twitter. “By letting ZTE off the hook, the president who roared like a lion is governing like a lamb when it comes to China. Congress should move in a bipartisan fashion to block this deal right away.”

The U.S. is in the midst of trade talks with China to avoid a tariff dispute from escalating into a full-blown trade war. While the Trump administration has said the ZTE situation is a separate issue from the trade row, China made easing the ZTE sanctions a precondition to engaging on U.S. demands last month as the trade talks got started.

©2018 Bloomberg L.P.

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