Overnight Finance: US reaches deal with ZTE | Lawmakers look to block it | Trump blasts Macron, Trudeau ahead of G-7 | Mexico files WTO complaint

Happy Thursday and welcome back to Overnight Finance, your Plan A for the midterm elections. I’m Sylvan Lane, and here’s your nightly guide to everything affecting your bills, bank account and bottom line.

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THE BIG DEAL: The Commerce Department on Thursday announced that it had reached a deal to lift penalties on ZTE, a stunning reversal of fortune for the Chinese telecommunications firm.

The deal to revive ZTE, which violated U.S sanctions and is considered a national security threat by U.S. officials, came after President Trump pledged to loosen restrictions that had effectively shut down the company.

Commerce Secretary Wilbur Ross called the new sanctions “the largest penalty [the department’s Bureau of Industry and Security] has ever levied” and said they impose “unprecedented compliance measures” on ZTE.

Ross first announced the deal in an early Thursday morning interview.

The Hill’s Jacqueline Thomsen and I have more on the agreement here.

How it works: The Commerce Department will impose a $1 billion penalty against the telecommunications giant and a U.S.-selected compliance team will be embedded in the firm. The team will stay at ZTE for 10 years and report to U.S. officials on the company’s conduct.

The deal will also require the company to change its board of directors and executive leadership within the next 30 days.

Reuters reported Wednesday that the Trump administration had reached a preliminary deal to lift a ban on American companies selling to ZTE. The deal announced Thursday allows the Commerce Department to reimpose that ban within 10 years if ZTE violates the terms of the agreement.

 

Bipartisan backlash: Trump’s push to loosen the ZTE penalties provoked bipartisan concern in Congress. Lawmakers in both chambers moved to restrict Trump’s ability to rescue the Chinese telecom giant.

The Senate’s annual defense spending bill would bar the Pentagon from buying or using telecommunications equipment or services made by ZTE Corp. or Huawei Technologies.

The bill also bans the president from lifting penalties on a Chinese telecom company that has violated export controls or sanctions until he certifies to Congress that the firm now complies with U.S. law.

 

New efforts to reverse deal: A bipartisan group of senators is trying to bolster the must-pass National Defense Authorization Act (NDAA) to target Chinese technology companies.

On Thursday, Sens. Tom Cotton (R-Ark.), Chris Van Hollen (D-Md.) and Senate Minority Leader Charles Schumer (D-N.Y.) introduced an amendment to the NDAA that would restore the Commerce Department’s penalties on ZTE for violating U.S. sanctions against Iran and North Korea.

The amendment would also ban government agencies from buying or leasing telecommunications equipment and services from Chinese telecom firms Huawei and ZTE and ban the government from providing loans to or subsidizing either company.

“Both parties in Congress must come together to bring the hammer down on these companies rather than offer them a second chance, and this new bipartisan amendment will do just that,” Schumer said. The Hill’s Ali Breland has more on the measure here.

Reactions:

• “This ‘deal’ with ZTE may keep them from selling to Iran and North Korea. But it will do nothing to keep us safe from corporate & national security espionage.” — Sen. Marco Rubio (R-Fla.)
• “It’s a big mistake and I think we’ve got strong bipartisan support to overturn it.” — Sen. Chris Van Hollen (D-Md.)
• “I assure you that the threat China poses is real and that the dangers we worry about are already taking affect.” — Sen. John Cornyn (R-Texas)
• “By turning a blind eye to ZTE’s blatant violations, the Administration is putting Chinese jobs ahead of American jobs, and Chinese interests over America’s national security.” — Sen. Sherrod Brown (D-Ohio)

 

What comes next: There’s wide bipartisan support for the changes to ZTE in the House and Senate defense bills, but both could take months to pass Congress and will be subject to broad negotiations that could alter the measures. Trump could also veto a bill that limits his options on ZTE daring lawmakers to override him.

LEADING THE DAY

Mexico initiates WTO dispute, following Canada, EU: The World Trade Organization (WTO) on Thursday said Mexico has filed a formal complaint against the United States over steel and aluminum tariffs, following similar steps taken by Canada and the European Union.

In its claim, Mexico accused the U.S. of using national security as an excuse to impose 25 percent tariffs on steel and 10 percent tariffs on aluminum, saying the true motivation is economic.

“Clearly, the establishment of an additional import tax is intended to protect the United States industry from the economic effects of import,” the claim said.

Trade rules give nations flexibility in imposing trade restrictions for national security reasons but not for economic protectionism. 

The WTO announced that it had circulated formal complaints from the EU and Canada on Wednesday. The Hill’s Niv Elis tells us more about the disputes here.

 

Macron on Trump’s clash with Europe: No leader is forever: French President Emmanuel Macron on Thursday delivered a stark message to President Trump, promising to resist “hegemony” and warning that no leader lasts forever.

Asked whether Trump did not care about “being isolated” from other world leaders, Macron responded, “Maybe, but nobody is forever.”

Macron’s statement comes as leaders from the Group of Seven prepare to meet at the G-7 summit in Canada on Friday — a meeting where Trump’s trade policies are expected to take center stage. 

“The six countries of the G-7 without the United States, are a bigger market taken together than the American market,” Macron said during a joint press conference with Canadian Prime Minister Justin Trudeau in Ottawa. “There will be no world hegemony if we know how to organize ourselves. And we don’t want there to be one.”

Macron added that other nations don’t mind if the U.S. goes its own way.

“Maybe the American president doesn’t care about being isolated today, but we don’t mind being six, if needs be,” Macron said.

 

Trump fires back: President Trump on Thursday lashed out at the leaders of France and Canada over roiling trade disputes, setting the stage for a confrontational Group of Seven summit of major economic powers, The Hill’s Jordan Fabian reports.

A day before leaving for the meeting in Canada, Trump singled out French President Emmanuel Macron and Canadian Prime Minister Justin Trudeau on Twitter for criticizing his decision to impose tariffs on good from their countries.

“Please tell Prime Minister Trudeau and President Macron that they are charging the U.S. massive tariffs and create non-monetary barriers,” Trump wrote. “The EU trade surplus with the U.S. is $151 Billion, and Canada keeps our farmers and others out.”

The president added: “Look forward to seeing them tomorrow.”

 

GOOD TO KNOW 

• President Trump’s updated request to claw back federal spending, which is headed for a vote in the House on Thursday night, would only stop $1.1 billion from being spent over a decade, according to the Congressional Budget Office (CBO).
• Check back at The Hill tonight for the latest on the vote.
• Three manufacturing companies in Arkansas say they need an exemption from the Commerce Department from President Trump’s new tariffs on steel and aluminum imports or they will be forced to close.
• Renewable energy companies have decided to cancel or freeze $2.5 billion in investments on large solar panel projects following President Trump’s decision to impose tariffs on imported panels, Reuters reported Thursday.
• Former Treasury Secretary Jack Lew said on Thursday that passage of the GOP tax law will make it more difficult for Republicans and Democrats to discuss developing a bipartisan deficit-reduction plan.
• Op-ed: Jonathan Bydlak, founder and president of the Coalition to Reduce Spending, writes for The Hill on what he says is a looming entitlement crisis.
• Federal Reserve Chairman Ben Bernanke said U.S. economic growth could face a slowdown as fiscal stimulus fades after two years.
• Lobbyists for Walmart Inc. and other retailers are joining forces with companies that process payments in the latest battle over the $90 billion that U.S. merchants pay banks annually to process credit and debit-card charges, according to Bloomberg News.
• Trump’s tough trade tactics and rhetoric have caused the destruction of more than $1 trillion in market value, according to J.P. Morgan’s top quantitative strategist.
• The New York Times reports that White House economic analysis of President Trump’s trade agenda has concluded that Mr. Trump’s tariffs will hurt economic growth in the United States, according to several people familiar with the research.
• The House Financial Services Committee approved six bills in a markup Wednesday, spanning from bills to bolster capital markets access for emerging companies to disaster relief.

ODDS AND ENDS

• Russian President Vladimir Putin said that his country should explore blockchain as a way to “avoid various limitations in global finance trade.”