In a surprising departure from his “America First” agenda, President Trump says he will help a China-based cellphone manufacturer save jobs after the Commerce Department said it sold U.S. technology to Iran and North Korea and then failed to live up to the terms of a settlement.
It would be difficult to find a more quintessential example of the kind of troubling trade practices that the president has long highlighted, which makes his sudden pivot in the case of ZTE all the more stunning.
ZTE, the world’s fourth-largest maker of cellphones, was found in violation of U.S. rules against selling U.S.-originated technology to certain blacklisted countries. After reaching a more than $1 billion settlement with Commerce as reparation for its Iran and North Korea dealings, ZTE then violated the terms of the agreement by failing to fire some employees and reprimand others who were involved in the illicit technology transfers.
Among other things, Commerce imposed a seven-year ban on the company that prevented it from buying parts from U.S. manufacturers.
Commerce Secretary Wilbur Ross last month called ZTE’s behavior “egregious” and said it “cannot be ignored.”
That president’s tweet on Sunday appears to have undone all that. “President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast,” Trump tweeted on Sunday. “Too many jobs in China lost. Commerce Department has been instructed to get it done!”
A few hours later, he followed up with another tweet: “China and the United States are working well together on trade, but past negotiations have been so one sided in favor of China, for so many years, that it is hard for them to make a deal that benefits both countries. But be cool, it will all work out!”
Although the origins of the case against ZTE dates back years, as CNET reports, “ZTE disclosed earlier this year that while it had gotten rid of several employees, the company hadn’t properly reduced the bonuses of some workers, or issued letters of reprimand. The inaction wasn’t consistent with a progress report ZTE issued in July. It’s because of those false statements that the Commerce Department decided to act.”
Amid Trump’s tough talk on trade — with China a particular target of his anger and frustration — Commerce last month imposed a seven-year ban on ZTE from purchasing anything from U.S. companies – a move that cut it off from its suppliers that has been described as a “death sentence” for the company, which employs some 70,000 workers in China.
Following Trump’s about-face announced on Twitter, White House press secretary Lindsay Walters issued the following statement: “The President’s tweet underscores the importance of a free, fair, balanced, and mutually beneficial economic, trade and investment relationship between the United States and China. The administration is in contact with China on this issue, among others in the bilateral relationship. President Trump expects Secretary Ross to exercise his independent judgment, consistent with applicable laws and regulations, to resolve the regulatory action involving ZTE based on its facts.”
California Democratic Rep. Adam Schiff tweeted a response directed at the president: “Our intelligence agencies have warned that ZTE technology and phones pose a major cyber security threat. You should care more about our national security than Chinese jobs.”
“A reversal of the ZTE decision could temporarily tamp down trade tensions by allowing the Chinese to make concessions to the U.S. without losing face,” Eswar Prasad, a professor of trade policy at Cornell University, tells The Associated Press. “Trump may have recognized that backing off on ZTE clears the path for him to claim at least a partial victory in the U.S.-China trade dispute based on the concessions the Chinese seem prepared to offer.”
Speaking to NPR’s All Things Considered on Sunday, CNET Executive Editor Roger Cheng called the president’s move “absolutely a shocker.”
“ZTE makes smartphones that really utilize a lot of American technology, companies like Qualcomm, which makes processors or Intel, which makes chips — Corning, which makes display glasses. A lot of these U.S. companies supply major components and software technology to ZTE products,” Cheng tells NPR.
“So the argument that ZTE has been making quietly is that they actually invest a lot in the U.S. economy,” Cheng says. “Last year, they spent more than $2 billion purchasing technology from U.S. businesses. So, that’s probably an argument that helped sway President Trump.”