14 DAY TRIAL // The United States is firing back at Chine in an ongoing trade war, and ZTE is the current victim. The Chinese company has been banned from buying parts from American firms, for a period of seven years.
It started on Twitter with a message from Donald Trump who was saying that The United States is being cheated in their commercial relations with China. It soon escalated to a trade war after steel tariffs were imposed on steel, specifically to hurt the raw materials coming from China.
As you would expect, China fought back with its own punitive measures, and now the US is retaliating once more. This time, ZTE Corp has been banned from purchasing American components (Intel, Qualcomm, and many others) for their business. You might think that’s not all that important, but you would be wrong. ZTE is a massive company that’s making a ton of stuff all over the world. China and ZTE are not the only ones to be affected by this measure.
Measuring the size of the retaliation actions
ZTE Corp is the second largest company telecommunications equipment and systems company in China, after Huawei, and they are making lots of equipment, all over the world. In fact, they are a multinational company, with a presence in numerous countries.
They do make some phones and other similar hardware, but the bulk of their business consists in building hardware for network operators, such as links and nodes, terminals, not to mention all the software that’s needed.
Following the ban, the ZTE Corp shares were suspended from transacting, which was not really a surprise. According to a report on Reuters, the company estimates that American hardware accounts for about 30 percents of their needs. This, in turn, would give a massive blow to ZTE, which is still trying to determine just how much they will be hit.
Of course, there is an official reason for the drastic measure. Last year, ZTE was fined $890 million after it admitted to having supplied products to Iran, which was under embargo. The Chinese company also had to let go four key employees and reprimand another 35. While ZTE did pay the fine and got rid of the four people, the other 35 employees remained safe.
We also have to mention that The United States is also trying to limit the impact and business of other Chinese companies as well, such as Huawei, which currently can’t sell its products in that country.