Trump's ZTE deal in doubt as US Senate votes to reject the compromise

Trump vows to oppose amendment to National Defense Authorization Act that would block ZTE deal

President Trump's deal with ZTE is in doubt today after senators voted to reject it in a hastily inserted amendment to the National Defense Authorization Act.

It comes just two weeks after US Secretary of State for Commerce, Wilbur Ross, revealed that a new deal had been struck with the sanctions-busting networking equipment company, lifting the seven-year sales ban imposed in April.

The lifeline thrown by President Trump, which is believed to have helped facilitate his summit with North Korean leader Kim Jong-un earlier this month, sparked a backlash among senators who claim that it is also a national security issue, and that the sanctions against ZTE should not be used as a bargaining chip in Sino-US trade talks.

Monday's annual National Defense Authorization Act included an amendment effectively blocking Trump's deal. The legislation was passed by a thumping 85 votes to 10, marking one of a handful of times the Republican-controlled Senate has voted against the President.

After the vote, Virginia Senator Mark Warner described Trump's bargain with ZTE as a "bad deal". The Democratic Party vice chair of the Senate Intelligence Committee added: "If the President won't act on warnings from his own top intelligence officials about the dangers posed by ZTE, we will."

In a joint statement, senators Marco Rubio, Chuck Schumer, Chris Van Hollen, and Tom Cotton said: "We're heartened that both parties made it clear that protecting American jobs and national security must come first when making deals with countries like China, which has a history of having little regard for either.

"It is vital that our colleagues in the House keep this bipartisan provision in the bill as it heads towards a conference."

The amendment is not guaranteed to become law, though. The US House of Representatives has already passed its own defence spending bill, which does not include anything about the trade ban. The two bills will need to be reconciled and then signed into law by Trump - who has already vowed to fight the Senate's decision.

The US Department of Commerce imposed its sweeping sales embargo on ZTE in April after the company had been found to be in breach of a 2017 settlement over sanctions busting. ZTE had been supplying networking equipment to both Iran and North Korean in contravention of United Nations sanctions against the two nations.

The terms of the 2017 agreement contained the right of the US government to impose sanctions preventing any US company from supplying ZTE should it be found to be in breach. The US government claims that ZTE did not fire the executives responsible for the sanctions-busting sales, as it had claimed.

The embargo, imposed in April, caused an almost total shutdown of the company just a month later as ZTE is reliant on US companies for around 23 per cent of its components - components it can't source from anywhere else.

The new deal involved ZTE paying another $1 billion in fines, putting $400 million in escrow that would be confiscated by the US government should ZTE break any part of the new agreement, a complete overhaul of the company's senior management, and the implementation of a US-picked compliance board to oversee the company's major business deals.

In return, the US embargo against ZTE would be lifted, enabling the company to re-stock vital components from US companies for its smartphones and networking hardware. Without a deal, and quick, ZTE risks being shutdown entirely as it sources around 23 per cent of its most vital components from US-based companies.

When the deal was revealed by Ross two weeks ago, he said: "This is a pretty strict settlement - the strictest and largest fine that has ever been brought by the Commerce Department against any violator of export controls. It's been a long road getting here but I'm quite pleased with the end result."