President Donald Trump today announced his support for Chinese telecommunications giant ZTE. This is a striking turn of events as just a few months ago as US regulators announced a seven year ban on US component makers from selling to ZTE. The components, such as modems, memory chips, and processors, power many of ZTE’s devices that it sells around the globe and are pivotal as they are not easily replaced by a non-US source of parts.
The US and China are embroiled in an escalating trade war which we’ve covered a bit here, here, here, here, and here.
Today’s move mark’s a radical departure from what we’ve been observing over the last few months as it demonstrates that the Trump Administration is indeed willing to finally bargain instead of sending additional threats to the Chinese.
It appears President Trump wants to reverse the ban of components, which allow the manufacturer to continue to produce its highly popular mobile handsets. The news was broke via Presidential Tweet:
President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast. Too many jobs in China lost. Commerce Department has been instructed to get it done!
— Donald J. Trump (@realDonaldTrump) May 13, 2018
ZTE, the large Chinese phone company, buys a big percentage of individual parts from U.S. companies. This is also reflective of the larger trade deal we are negotiating with China and my personal relationship with President Xi.
— Donald J. Trump (@realDonaldTrump) May 14, 2018
The President has outlined the plan amid tense trade negotiations the world’s two largest superpowers are currently working out. However, the original embargo on companies selling to ZTE was never about economic policy; it was about national security policy.
Lawmakers have turned an increasingly suspicious eye towards major Chinese electronics and telecom equipment manufacturers as fear has arisen over potential spying and infrastructure integrity concerns and the ban on any parts getting sold to ZTE was a direct result of this. Some congressmen were quick to point this out:
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. https://t.co/7Ygh7805jg
— Adam Schiff (@RepAdamSchiff) May 13, 2018
Problem with ZTE isn’t jobs & trade, it’s national security & espionage. Any telecomm firm in #China can be forced to act as tool of Chinese espionage without any court order or any other review process. We are crazy to allow them to operate in U.S. without tighter restrictions https://t.co/AXtTDgufc9
— Marco Rubio (@marcorubio) May 14, 2018
Remember, the pressure was so great that AT&T backed out of a massive deal it was on the brink of signing with another Chinese device maker, Huawei just a few months ago.
It remains to be seen which concessions the US may receive as a result of this sudden departure on the US stance towards ZTE. While there is surely a national security concern on the propogation of Chinese electronics; the Trump Administration must see an economic benefit that outweighs this risk.
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