In the past five trading days, telecom stocks initially rallied on optimism over a U.S. proposal to initiate talks with China in the near future to iron out the trade-related differences between the two countries. However, the uptrend fizzled out as President Trump imposed tariffs on additional $200 billion worth of imports from China starting next week, and the stocks dived sharply. Thereafter, the stocks followed a flat trajectory, only to rise at the end of the week as traders eventually shrugged off concerns regarding the burgeoning trade war.  

Despite the reported outreach by U.S. Treasury Secretary Steven Mnuchin to get the bilateral trade negotiations back on track, the Trump administration levied tariffs on 5,745 imported goods from China. The tariffs will be initially imposed at 10% and will be subsequently increased to 25% from 2019. About 297 items were removed from the initial list prepared by the government and the final list included a wide array of consumer goods, from minerals used in manufacturing to vegetable juices as well as leather handbags. In retaliation, China has announced tariffs on $60 billion worth of U.S. goods, which includes 10% levies on 3,571 items and 5% on another 1,636 products.

Amid such trade skirmishes, both the Republicans and Democrats have decided to keep China’s leading telecom manufacturer ZTE Corporation under continuous pressure by proposing regular compliance certificate in accordance with the sanction law or risk another ban. The bill, dubbed the ZTE Enforcement Review and Oversight (ZERO) Act, will likely strain the already punctured relationship of both the countries and could harm the telecom sector in general in the long run.