16 May, 2018
"Trump may have recognized that backing off on ZTE clears the path for him to claim at least a partial victory in the US-China trade dispute based on the concessions the Chinese seem prepared to offer".
Earlier this month, a USA delegation led by Treasury Secretary Steven Mnuchin presented China with a list of demands to tackle allegations of intellectual property theft and other trade policies Washington considers unfair.
China on Monday welcomed Trump's comments.
Senate Democrats also criticized the president for appearing to give in to Chinese pressure on the ZTE sanctions.
So, how do we understand what is going on?
Bill Evanina, the director of the National Security and Counterintelligence Center, a federal counterspy agency, said in a Senate hearing Tuesday he would not recommend that anyone in government or the private sector use ZTE phones over electronic spying concerns.
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"The U.S.is moving against ZTE because it wants to knock China out of its leading position in 5G mobile communication technology", fumed Hu Xijin, the editor of China's nationalist Global Times tabloid, in a post on the Weibo microblog platform. Speaking on behalf of US electrical and medical imaging manufacturers, NEMA Vice President of Government Relations Kyle Pitsor will present oral testimony to the USTR Section 301 Committee on May 16.
ZTE is the firm Donald Trump has suddenly taken a personal interest in, fretting over its job losses after his own U.S. Treasury Department slapped sanctions on it just weeks ago. ZTE has asked the department to suspend the seven-year ban on doing business with US exporters.
China objected to ZTE's punishment at trade talks in Beijing this month, and the American delegation agreed to report them to Trump. It did not follow through on that agreement and instead gave the managers bonuses. The import ban is not a step the Commerce Department took lightly-it was, in fact, the result of a probation violation following a 2017 deal whereby ZTE admitted to "a multi-year conspiracy" to deceive the USA government about its operations inside Iran. The firm consequently stopped operating this month. "Bargaining away law enforcement power over bad actors such as ZTE undermines the historically sharp distinction between sanctions and export control enforcement and routine trade decisions made by the U.S". The message now from the Trump administration is that legal/regulatory penalties can be negotiated down. Negotiations are continuing this week in Washington as China's vice premier, Liu He, is visiting with senior White House officials.
Trump has threatened $150 billion in tariffs on imports of Chinese goods, and China has threatened to retaliate against US exports, including soybeans and aircraft.
China is not willing to consider the maximalist demands, such as committing to reduce the trade imbalance or dropping their "Made in China 2025" industrial policy aimed at developing their high-tech sectors. Given that China is such an important trade partner, the bilateral deficit moved about the same: It increased 15.2 percent in the first quarter. The Trump-Kim summit is now set for June 12 in Singapore.
While it's unclear what link, if any, exists between the Chinese financing of a Trump-linked project and Trump's sudden desire to help a large Chinese company, the president's tweets are particularly odd given Trump's repeated attacks on China during his campaign, saying things like, "we can't continue to allow China to rape our country", and his repeated vows to put "America first."