Jul 13, 2018 - Economy

The U.S. ban on China's ZTE has been lifted

Figures silhouetted in front of the ZTE logo

A ZTE presentation at a conference in Barcelona. Photo: Miquel Benitez/Getty Images

After three months and the effective shutdown of phone maker ZTE, the Commerce Department has officially lifted a ban on American suppliers selling to the Chinese company, reports Reuters, and ZTE shares are soaring.

Why it matters: The fact that a ban on American parts prompted ZTE to shut down operations is a clear example of the significant leverage U.S. tech companies have over China. But Chinese President Xi Jinping was able to successfully lobby President Trump and save ZTE. That sets a dangerous precedent for U.S.–China negotiations on trade and intellectual property theft.

The backdrop: ZTE is a repeat violator of U.S. sanctions — it sold equipment with American parts to North Korea and Iran, and has been labeled a national security threat by the Pentagon. As a result, ZTE phones have been banned from military bases due to concerns about Chinese espionage.

  • The details: The Chinese phone maker held up its end of the Commerce Department's deal, paying a $1 billion fine for violating U.S. sanctions and placing $400 million in a U.S. bank escrow account. The company has also made changes to its top leadership. As a result, Commerce lifted what would have been a seven-year ban on American companies doing business with ZTE.
  • What to watch: U.S. lawmakers are refuting the Trump administration's move and working to reinstate the ban by including it in defense legislation.

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