According to a report recently published by the Wall Street Journal, it appears that representatives from the United States and China are close to getting an agreement that would effectively minimize the likelihood of a trade war between the two nations. And as part of this deal, the seven year long ban on sales of American components to ZTE (which is based in China) could be lifted.
It was more than a month ago when the United States Department of Commerce implemented a ban on sales of US made components to ZTE. Various industry watchers fully expect that this export ban would have unpleasant consequences (to say the least) for the Chinese tech giant’s business, and true enough, nearly a couple of weeks ago, the company had informed investors (by way of a filing with the Hong Kong Exchanges) that its major operations have ceased. Many also believe that the ban could affect the wireless market in America, considering that a number of mobile operators (like national carrier AT&T) sell ZTE handsets, and tech companies (like chip maker Qualcomm) generate big revenues from supplying components to the Chinese mobile brand, which happens to be a top five smartphone seller in America (the fourth biggest next to Samsung, Apple, and LG). And as indicated in a report published by Reuters, tech companies based in the US supply approximately 25 percent to 30 percent of components in ZTE’s products, which not only include mobile devices, but equipment used for setting up telecoms networks as well.
As reported by the Wall Street Journal, President Donald Trump’s administration has already reached a tentative agreement (handshake deal) regarding the ZTE ban. Of course, things are hardly that simple, and it is not just about lifting one company’s punishment. Looking at the bigger picture, the agreement could also involve having the Chinese government take away tariffs on imported agricultural goods from America.
Earlier this month, President Trump himself had tweeted that he has been working together with Chinese President Xi Jinping in giving a reprieve to ZTE (adding that the export ban would cost too many jobs in China). But as mentioned earlier, things are not that simple -- as a matter of fact, many in the US government and in the tech and wireless industries are not happy with Trump’s move. Some clearly do not like seeing a definite legal case against ZTE being employed as a bargaining tool in a bigger econo-political conflict.
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