The US Senate passed the National Defense Authorization Act by a vote of 85 to 10 last night. The bill will go through reconciliation with the House version and then head to President Donald Trump’s desk, setting up a showdown over trade and cybersecurity concerns with China.
The Act, which provides the Defense Department its budget for the next year, has a provision that bans it from directly procuring products from or working with a contractor that sells to Chinese telecom firms Huawei and ZTE. The direct procurement ban would take place within 6 months of the budget’s enactment while the contractor clause would go into effect within 3 years. Both companies have been under scrutiny for violations of trade sanctions as well as acting as fronts for the authoritative Chinese government, which has extensive financial and personnel links with the companies.
AT&T and Verizon, who were close to agreements to carry one of Huawei’s flagship phones this year, reportedly were deterred from closing on them by political pressure. Meanwhile, the Commerce Department issued a 7-year imports ban against ZTE for breaking terms of settlement over sanction breaches.
Trump has advocated, to the disdain of congressional lawmakers, for Commerce to overturn its ban in favor of alternative punishments to which ZTE has agreed. White House trade adviser Peter Navarro characterized the move as a personal favor to Chinese President Xi Jinping.
White House officials have signaled that the president will put up a resistance against the defense bill to protect his initiative for ZTE. If Trump vetoes the bill, the House and Senate would need to have two-thirds votes in favor of overturning the decision.