The last thing Beijing needs at this time is a trade war

The last thing Beijing needs at this time is a trade war

Those infractions, along with concerns that ZTE could use its devices to spy on Americans, led to a seven-year ban on ZTE being allowed to purchase USA parts in production, crippling its business.

According to the Wall Street Journal, the USA will lift its ban on American companies selling components and software to ZTE; in exchange, ZTE will be forced to make significant changes to its management teams, and possibly pay hefty fines.

The fate of ZTE has quickly become a key sticking point in negotiations with China, with lawmakers and others concerned that the administration would ease restrictions on the company after Trump's suggestion in a Twitter message on May 13 that he was working with China's president, Xi Jinping, to give ZTE "a way to get back into business, fast". That could have had a major impact on the USA 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.

FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., May 10, 2018.

"This affair is a screaming violation of the US Constitution's emoluments clause, which flatly prohibits the acceptance of gifts and benefits from governments in the absence of congressional consent", Robert Weissman, president of Public Citizen, a consumer advocacy organisation frequently sceptical of free trade agreements. The U.S. officials left for China with cautious optimism and headed home with the message that the trade relationship between the two nations required "immediate attention". But Larry Kudlow, Trump's top economic adviser, said the company's path to revival existed, although it ran through "very, very tough" punitive measures, including fines, compliance measures, and changes in management and board membership.

In agriculture, China's state grain stockpiler Sinograin returned this week to the USA soybean market for the first time since early April, two sources said.

The president is coming under fire from both Republican and Democratic lawmakers for considering softer sanctions on ZTE Corp, which have crippled the Chinese telecommunications company. After pretty clearly violating U.S. trade restrictions with Iran, ZTE was heavily sanctioned earlier this year, which didn't make China happy, either. It has also been reported that ZTE may be required to increase the quantity of hardware it buys from American companies.

You have to wonder whether the President actually cares whether ZTE is breaking the law or not; as long as the Chinese trade deficit is brought down, it doesn't really matter.

To the contrary, the U.S.is "aggressively" examining ways to protect US technology through an inter-agency panel that reviews foreign acquisitions in the USA, known as Cfius, Mnuchin said.

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Trump also said he was "not satisfied" with the trade talks, and called China is the worst offender "the big one - to take advantage of us on trade". "Export control and sanctions laws should not be negotiable, because fidelity to the rule of law is a key part of what distinguishes the United States from a country like China that is ruled by a Communist dictatorship".

This is still not the end of things, trade deals like this are often of the "nothing is agreed until everything is agreed" type.

China will reduce auto import tariffs from 25% to 15% for most vehicles starting July 1st.

"If the president and his team won't follow through on tough sanctions against ZTE, it's up to Congress to ensure that it happens", said Minority Leader Senator Charles Schumer.

China knows what it wants out of these bilateral negotiations; the White House plainly does not. This spring, regulators said they would relax rules for auto and aircraft makers as well.

Following a Chinese delegation's visit to Washington last week, both nations said they reached an agreement on trade-related issues and agreed to expand exports of United States products to China.

U.S. Commerce Secretary Wilbur Ross is due to visit Beijing in early June for a further round of meetings aimed at fleshing out that deal.

And it's not just China that will suffer - if the sanctions remain it will affect the USA companies who work with ZTE, too.

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