White House's Navarro says 'three strikes you're out' for ZTE

By Michelle Price

WASHINGTON (Reuters) - Chinese technology company ZTE Corp will be "shut down" in the United States if it engages in one more bad activity, White House trade adviser Peter Navarro warned on Sunday.

ZTE last week agreed to pay a $1 billion fine to the United States and to overhaul its leadership in order to end a crippling ban on the Shenzhen-headquartered firm from buying parts from U.S. suppliers and allowing it to get back into business.

The ban, which traces back to a breach of the U.S. embargo on trade with Iran, had prevented China's second largest telecoms equipment maker by revenue from buying the U.S. components it relies on to make phones and other devices.

"It's going to be three strikes you're out on ZTE. If they do one more additional thing, they will be shut down," Navarro told Fox, adding that everyone within the administration understood this was the policy.

Navarro was speaking as President Donald Trump arrived in Singapore for a historic summit with North Korean leader Kim Jong Un, whose regime is heavily dependent upon neighbouring communist ally China.

The United States introduced the ban in April because ZTE broke the terms of an agreement it had entered into with the U.S. government after pleading guilty last year to conspiring to violate U.S. sanctions by shipping U.S. goods to Iran.

The ZTE sanctions became a key focus in trade talks between Washington and Beijing, and a deal to lift the ban was struck as Trump sought concessions from China in order to avoid a trade war between the world's two largest economies.

Prominent U.S. Democratic and Republican lawmakers last week introduced legislation to try to overturn the deal, saying ZTE posed a threat to America's national security.

On Sunday, Navarro said Trump's decision to allow ZTE to continue operating in the United States was a gesture to help build goodwill with China.

"The President did this as a personal favour to the president of China as a way of showing some good will for bigger efforts such as the one here in Singapore," said Navarro, referring to the summit between Trump and Kim.

He added that ZTE was a "bad actor" but that the deal included safeguards, such as requiring the company to retain a compliance team selected by the Commerce Department for 10 years. The company already has a U.S. court-appointed monitor.

(Reporting by Michelle Price; Editing by Lisa Shumaker and Chris Reese)