While President Trump is now understood to be close to lifting ZTE's seven-year ban on purchasing American technologies imposed by the Commerce Department last month, the Chinese company's failure to comply with a settlement over its violations of U.S. trade sanctions imposed on Iran and North Korea won't see it go unpunished, White House economic adviser Larry Kudlow said on CNBC's "Squawk on the Street" yesterday. Mr. Kudlow acknowledged the Chinese company "broke the law on several occasions," even after being warned about its transgressions, concluding ZTE is "not going to get off scot-free" even though its supply ban is now likely to be lifted in the immediate future.
The comments are meant to downplay recent public backlash created in response to President Trump's announcement that Washington and Beijing are collaborating on finding a way to get ZTE "back into business" as quickly as possible so as to prevent further losses of Chinese jobs. In light of the President's previously touted "America first" policy, the reversal on ZTE prompted criticism from both his political opponents and supporters, including Republican Senator Marco Rubio. ZTE's case is part of much wider trade negotiations between the United States and China which are yet to be concluded, though some of the potential penalties for the company's latest transgression may include "very severe compliance measures," fines, management changes, and a major board restructuring, according to Mr. Kudlow.
ZTE already paid $892 million in fines as part of its 2017 settlement which it ended up violating in other ways, with the Commerce Department reportedly having an option to activate an extra $300 million penalty, not accounting for any additional fines the Chinese firm may now be prepared to agree to, facing bankruptcy over its inability to run day-to-day operations that heavily rely on American technologies. The firm already filed for an official reprieve of the sanctions until its appeal is heard, with its ban now being expected to be lifted in the coming weeks. While publicly traded, ZTE is majority-owned by the People's Republic of China and has previously claimed its inability to comply with last year's settlement wasn't intentional and was self-reported to the Commerce Department.