With the U.S. Senate’s passing the amended annual National Defense Authorization Act, ZTE Corp has once again been drawn into the center of a trade skirmish that is gradually snowballing into a trade war. For ZTE, this is a time of great uncertainty since its supply chain has been significantly affected.
On Tuesday, following the passing of a defense bill by the U.S. Senate, 85-10, ZTE Corp’s shares fell sharply. The White House and the Republican-controlled U.S. Senate will now have to iron out issues related to the resumption of ZTE’s trade ties with U.S. suppliers.
The Senate bill includes an amendment that could terminate the Trump administration’s agreement with ZTE which allows it to resume business ties with the U.S.
With the news reaching the market, ZTE’s Hong Kong-listed shares dropped by 24% HK$10.02 while its Shenzhen-listed shares fell by their daily limit of 10%. Ever since trading has been resumed in the stock, ZTE’s shares have lost 38% of their value, equivalent to $7 billion in market capitalization.
before the defense bill becomes law, it must reconcile with the one that has already been passed by the House of Representatives which incidentally does not include the amendment. In the event of a compromise, the new bill must be passed by both chambers before it is signed into law by Trump.
Following a U.S. investigation into’s ZTE’s erratic trade behavior, it was found that the Chinese company had evaded U.S. sanctions and was trading with North Korea and Iran. The United States has also labeled ZTE has a threat to U.S. national security.
On June 7, on Trump’s urging the U.S. Commerce Department reached a deal to lift the 7 year ban once ZTE pays a $1 billion fine and places $400 million in a U.S.-approved escrow account for the next decade.
Last Wednesday, ZTE proposed a $10.7 billion financing plan that places eight new members in its board as it seeks to rebuild its business.