Congress abandoned a bipartisan attempt to undo President Donald Trump’s deal with Beijing to save Chinese telecommunications giant ZTE Corp. , according to people familiar with the matter.

Senate and House negotiators removed from a must-pass defense bill, expected to become law as soon as this month, language that sought to reinstate a ban on U.S. companies selling components to the Chinese business, the people said. Because ZTE depends on U.S. suppliers, the ban, which Mr. Trump decided to lift, had effectively been a death knell.

Mr. Trump’s move to resuscitate the company, which he described as a joint effort with Chinese President Xi Jinping, was criticized by a large, bipartisan group of lawmakers, who wanted a severe penalty, even one that threatened the company’s viability. They cited U.S. officials’ assessments that the serial sanctions violator remains a threat to national security, which the company has denied.

Related Video President Trump’s mixed messages about a plan to help controversial Chinese telecom giant ZTE has baffled Washington. WSJ's Shelby Holliday breaks down three reasons why lawmakers see the company as a threat. Illustration: Adam Falk

The early willingness to confront Mr. Trump on the deal was seen as part of growing congressional restiveness with the president’s policies on a range of trade and national security issues. But backers of the challenge were unable to garner the support of the Republican leadership needed to overturn the president’s initiative.

“Despite bipartisan support to put American national security before jobs in China, the Republican leadership refused to take any real, substantive action on ZTE,” said Sen. Chris Van Hollen (D., Md.), one of the sponsors of the measure to ban sales to ZTE.


“Instead, they joined President Trump in bowing to Beijing. It’s weak and shameful,” Mr. Van Hollen said. Sens. Tom Cotton (R., Ark.), Marco Rubio (R., Fla.) and Chuck Schumer (D., N.Y.) were also co-sponsors of the measure.

ZTE didn’t respond to a request for comment.

The saga over the fate of the Chinese firm began in April, when the Commerce Department banned U.S. companies from selling to ZTE for failing to honor an earlier U.S. agreement to resolve its sanctions-busting sales to North Korea and Iran. But in a surprise tweet on May 13, Mr. Trump said that he and Chinese President Xi were “working together” to find a way to save ZTE.

As instructed by Mr. Trump, Commerce struck a new deal with ZTE on June 7 that required the Chinese firm to put $400 million into an escrow account, pay a $1 billion fine, replace its board of directors and senior leadership, and fund a team of U.S. compliance officers to monitor the company for 10 years in exchange for being allowed to resume business with U.S. suppliers. Commerce has said the settlement provided for the “strictest compliance measures ever imposed in such a case.”


Sen. David Perdue (R., Ga.) was one of the few lawmakers who publicly supported the president’s stance and the new Commerce deal. “There is no way the Commerce Department’s penalty on ZTE can be classified as weak,” a spokeswoman for Mr. Perdue said Friday.

Some proponents of Mr. Trump’s deal have also said that the biggest beneficiary of ZTE’s demise would have been Huawei Technologies Co., an even larger Chinese telecommunications firm that U.S. intelligence officials have also warned presents national security threats, which the company has denied.

Many lawmakers were dissatisfied with Mr. Trump’s deal, and the Senate struck back on June 18, voting to reinstate the ban on selling U.S. parts to ZTE by wrapping the measure into the defense bill. But in order for the provision to become law, the House, which had already passed its own version of the legislation without the sales ban, would have had to agree to the ZTE measure, and the reconciled text would have had to survive a potential veto by Mr. Trump.

Congressional negotiators have abandoned that effort, the people familiar with the matter said, but the defense bill will contain language to prohibit the U.S. government and any entity that contracts with it from buying or leasing telecommunications equipment or services from ZTE or Huawei.


Though the procurement ban will make it more difficult for ZTE to operate in the U.S., it isn’t an existential threat to the company.

Sen. Rubio blasted the outcome as a “cave” by congressional negotiators in a tweet, adding “chances that a #China controlled telecomm will not just stay in business, but do so here inside the U.S. sadly just went up.”

Write to Kate O’Keeffe at kathryn.okeeffe@wsj.com and Siobhan Hughes at siobhan.hughes@wsj.com