WASHINGTON, June 8, 2018 (News Wires) -The United States and China have reached a deal to ease sanctions that brought Chinese smartphone manufacturer ZTE to the brink of collapse, the US said - a possible indication of progress in fraught trade talks between the world's two largest economies. US Commerce Secretary Wilbur Ross, who announced the deal, reiterated a denial that there was any connection between the two. But the ZTE settlement comes just days after Beijing reportedly offered to ramp up purchases of American goods to help cut the yawning trade imbalance with the United States -- moving part-way towards meeting a major demand of US President Donald Trump. The defusing of tensions with Beijing is good news for Trump, who is preparing to face outraged allies at this week's Group of Seven summit in Canada, where Europe and Canada will voice their strenuous objections to US steel and metal tariffs. Not all was rosy -- US lawmakers threatened legal action against the ZTE deal, saying the telecoms firm posed an "espionage risk" to the United States in addition to having violated its sanctions on Iran and North Korea. Ross told CNBC Thursday the deal was tough and would keep ZTE on a short leash. "This is a pretty strict settlement -- the strictest and largest settlement fine that has ever been brought by the Commerce Department against any violator of export controls," he said. In April, Washington banned the sale of crucial US components to the company after finding it had repeatedly lied and failed to take action against workers responsible for the sanctions violations. The company was fined $1.2 billion last year. But under the deal announced Thursday, ZTE will pay an additional $1 billion penalty and put another $400 million in escrow to cover possible future violations. ZTE will also be required to change its entire board of directors and hire outside legal compliance specialists who will report to the Commerce Department for 10 years. In return, Washington will strike the company from a sanctions list. Both Republican and Democratic lawmakers threatened to take congressional action that could block or alter the deal, calling ZTE a threat to US national security. "There is absolutely no good reason that ZTE should get a second chance and this decision marks a 180-degree turn away from the president's promise to be tough on China," Chuck Schumer, the Senate's top Democrat, said in a statement. "It's up to Congress now to act to reverse the deal." Republican Senator Marco Rubio said: "After today's decision to give #ZTE a pass, we have introduced a bipartisan amendment to restore penalties on ZTE." The clash raised the prospect that Trump's own Republican party could work to undermine key planks of his trade agenda. Despite the settlement, there was no sign Trump had veered from plans this month to impose as much as $50 billion in tariffs on Chinese imports to punish Beijing for its alleged theft of American technology and know-how.
