Chinese tech giants Huawei and ZTE both present national security risks to the United States but for different reasons, Commerce Secretary Wilbur Ross told CNBC on Tuesday.
“Both are doing practices that we think are potentially injurious to our national security,” Ross said in a “Squawk Box” interview, defending the actions that the Trump administration took against each company.
Shortly after President Donald Trump on May 15 declared a national emergency over threats against American technology, the Commerce Department, effectively, blacklisted Huawei from conducting business with U.S. companies. Nearly a week later, the department put a 90-day hold on the move.
The U.S. claims that Huawei has close ties to China’s communist government, and that the company’s smartphones and online networking gear could facilitate Beijing spying. Huawei denies these allegations.
“What we actually did with Huawei is a different situation from what we did with ZTE,” said Ross. “The ZTE situation was the result of their violating an agreed upon, a court agreed upon, settlement.”
Huawei’s smaller Chinese rival, ZTE, was forced to temporarily cease major operations last year after the Commerce Department banned ZTE in April 2018 from buying goods from the U.S.
The restrictions were imposed after ZTE allegedly violated terms of a settlement over its business dealings Iran and North Korea, which were breaches of U.S. trade sanctions against those nations.
In June 2018, the U.S. announced a deal with ZTE to end those crippling restrictions, which included a $1 billion penalty and a requirement that a U.S.-picked compliance team be embedded in the company.
While the situation with Huawei remains influx, there’s speculation a resolution could get wrapped up in any broader deal between the U.S. and China to address their trade and economic disputes.
On the trade issue, Ross predicted Washington and Beijing would eventually cut a deal, but it would have to address all the concerns of the Trump administration or it would not make sense.
Before joining the Trump administration, Ross built his wealth buying stakes in distressed assets through his W.L. Ross & Co.
ZTE did not respond to a request for comment from CNBC on Ross’ remarks.