US Lifts ZTE Ban Amid Rising Trade War Tensions

July 16, 2018

 

The United States said last Wednesday (July 11th) that it signed an agreement with ZTE Corp that paves the way for the Chinese tech company to resume operations after a nearly three-month ban on doing business with American suppliers. The ban on China’s No. 2 telecommunications equipment maker will be removed once the company deposits $400 million (RMB 2.67 billion) in an escrow account, the U.S. Commerce Department said in a statement announcing that an escrow agreement had been signed.

 

The escrow agreement is part of a $1.4 billion (RMB 9.33 billion) settlement ZTE reached with the Commerce Department last month to regain access to U.S. suppliers, whose components it relies on for its smartphones and networking gear. The new settlement includes a $1 billion (RMB 6.66 billion) penalty that ZTE paid to the U.S. Treasury last month and the $400 million (2.67 billion RMB) in the escrow account that the United States could seize if ZTE violates the latest settlement.

 

The ban, which was imposed in April and caused ZTE to cease major operations, has been a source of friction between Washington and Beijing, which are engaged in an escalating trade dispute. Once the ban is lifted, ZTE, which employs around 80,000 people, is expected to restart major operations. The reprieve for ZTE coincides with a new Trump administration threat of 10 percent tariffs on $200 billion (RMB 1.3 billion) of Chinese goods.

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