Concern Growing over Reignition of Trade War between US and China

There is a growing concern that the trade war between the United States and China will be reignited. The US Department of Commerce limited Chinese telecommunications equipment maker ZTE’s deals with US companies over the next seven years. In response, China immediately made an antidumping preliminary ruling against US millets. Analysis says that a war of nerves over advanced technology between the US and China will spark off a new trade war.

The US Department of Commerce took an action to disable ZTE which violated sanctions on North Korea and Iran, from making deals with US companies for the next seven years. The action came after the US Department of Commerce slapped a fine of US$1.9 billion on ZTE for a violation of a sanction on Iran imposed by the US. US authorities blamed the punishment for the fact that ZTE made false statements in past investigations by the Department of Commerce.

ZTE was investigated by the Department of Commerce for an allegation of supplying 32 million dollars worth of hardware and software purchased from US companies TIC, an Iranian telecommunication operator without proper US authorization from January 2012 to March 2016. Last year, ZTE agreed to plead guilty to the US’s allegation that ZTE violated the US sanction on Iran and to pay a fine of US$1.9 billion in the Texas federal court last year. The punishment was the largest fine ever for violating the sanction on Iran. The additional sanctions will prevent ZTE from importing semiconductor products and technologies from American companies over the next seven years.

The measure came into effect immediately after the Commerce Department announced it. "The action was taken to prevent ZTE from carrying out further illegal activities," a Department of Commerce official said. “There is no way to reverse the decision.”

In return, China's Ministry of Commerce decided to take preliminary anti-dumping measures in the form of deposits beginning on April 18, saying that the US’s dumping of millets was causing actual damage to related business in China. Accordingly, importers of US millets must pay a deposit of up to 178.6% depending on dumping margins. "We will continue to look into US millet imports and make the final decision on the dumping in the future," the Chinese Ministry of Commerce said.

Meanwhile, Britain also took an action against ZTE. A British Cyber security official warned UK mobile operators not to use ZTE equipment and devices, the Wall Street Journal reported. The official explained that Chinese authorities may infiltrate the UK’s communication infrastructure and destroy it.

ZTE, founded in Shenzhen, China, is the world's fourth largest telecom equipment maker. Chinese government agencies are the largest or major shareholders. ZTE is known to supply 25% to 30% of parts for smart phones and telecommunications equipment in the United States.

Earlieron March 26, AjitPai, chairman of the US Federal Communications Commission (FCC), proposed a measure to prohibit telcos and high-speed Internet service providers from buying equipment or services from companies which threaten US national security with the Universal Service Fund (USF), a US$8.5 billion subsidy program. The FCC will take the first vote on the proposal by chairman Pai on April 17 (local time). It is analyzed as the proposal targets Huawei and ZTE in China.

Also in February, the US Senate initiated a bill to prevent US businesses from purchasing or renting communications equipment manufactured by Huawei or ZTE for spyware concerns.