The Trump administration has told Congress that the Commerce Department struck a deal with Chinese phone maker ZTE to ease sanctions against the tech giant in exchange for changes at the company.
According to a source familiar with the deal, the Commerce Department informed members of Congress that the current sanctions — a practice called a denial order which prevents ZTE from buying parts from US companies — will be lifted in exchange for changes at the company.
“Under the deal, ZTE will pay a bigger fine, have to hire American compliance officers, and they have to get rid of the current ZTE management team,” the source told Business Insider. “Once they do all that, the denial order is lifted and they can start doing business with American companies again.”
President Donald Trump confirmed the change in a series of tweets on Friday:
“Senator Schumer and Obama Administration let phone company ZTE flourish with no security checks,” Trump said.
In contrast to Trump’s tweet, the Obama administration actually implemented the initial sanctions on ZTE in 2016.
Trump went on:
“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 but complain and obstruct. They made only bad deals (Iran) and their so-called Trade Deals are the laughing stock of the world!”
ZTE was crippled following sanctions from the US. The company said in a statement on May 10 that due to the crackdown, “the major operating activities of the company have ceased.”
The denial order was implemented after ZTE failed to respond to earlier sanctions that alleged the company sold goods containing US parts into Iran and North Korea, a violation of sanctions against those countries.
Members of Congress from both parties warned the Trump administration not to reverse sanctions on ZTE since the company both violated US law and posed a national security threat.
“Yes they have a deal in mind. It is a great deal… for #ZTE & China,” GOP Sen. Marco Rubio tweeted Friday. “#China crushes U.S. companies with no mercy & they use these telecomm companies to spy & steal from us. Many hoped this time would be different. Now congress will need to act.”
Senate Minority Leader Chuck Schumer, who Trump attacked in his tweet, also expressed frustration in a statement.
“If the administration goes through with this reported deal, President Trump would be helping make China great again,” Schumer said. “Simply a fine and changing board members would not protect America’s economic or national security, and would be a huge victory for President Xi, and a dramatic retreat by President Trump. Both parties in Congress should come together to stop this deal in its tracks.”
A group of 27 senators from both parties signed on to a letter earlier in the week that, in part, warned the Trump administration against going easy on ZTE. The lawmakers pointed to national security officials’ fear that ZTE could gain access to critical US technology and help bolster the Chinese government’s efforts to modernize their defense capabilities.
China worked to get the sanctions against ZTE lifted in trade negations with the Trump administration over the past two weeks. In exchange for lifting the sanctions, China is reportedly willing to lower tariffs on US agricultural products like pork and wine.