ZTE could reportedly receive reprieve in tentative U.S.-China trade deal

ZTE Axon 7 (ZTE)
ZTE is the fourth-largest smartphone vendor in the United States. Pictured: ZTE Axon 7 (ZTE)

The United States and China are reportedly nearing an agreement that would reduce the threat of a trade war between the two countries, and the ban against U.S. component sales to China’s ZTE could be lifted as part of that deal.

The Wall Street Journal reported this morning that the White House and the Chinese government have reached a tentative agreement to rescind the U.S. Commerce Department’s ban on sales of U.S. components to ZTE. That ban, enacted last month, reportedly shuttered ZTE’s manufacturing operations and threatened to put the company out of business. That could have had a major impact on the U.S. wireless market, considering companies like Qualcomm derive significant revenues from sales of chipsets and other components to ZTE, and carriers like AT&T sell the company’s phones in the prepaid market.

According to the WSJ—and bolstered by similar reports by Reuters—the Trump administration reached a tentative agreement over the ZTE situation; the Commerce Department had enacted the ban over what the agency said was a failure of ZTE to adhere to punishments stemming from the company’s business in Iran and North Korea.

As both publications noted, the ZTE agreement appears to coincide with a reduction in trade war rhetoric by both companies. For example, the deal could include China removing tariffs on imported U.S. agricultural products, as well as buying more American farm goods. And the Chinese government appears to be moving forward on an approval for Qualcomm’s proposal to purchase NXP.

President Trump initially signaled a U.S. willingness to ease restrictions on ZTE earlier this month when he tweeted that “President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!”

Looming over the issue, though, is the ongoing battle between the U.S. and China over 5G deployments. Both countries are hoping to gain an edge on the deployment of the technology in order to cash in on a worldwide move to the faster wireless standard.