Trump in unexpected move to save ZTE from his own Department of Commerce

14 May 2018 | Alan Burkitt-Gray

President Donald Trump appears to have stepped in to the trade war between Chinese telecoms vendor ZTE and the US Department of Commerce – on the side of ZTE.

In an unexpected development, Trump tweeted on Sunday that he was working with China’s president Xi Jinping to save the company, four weeks after the Department of Commerce (DoC) banned ZTE from using US-made hardware and software for seven years.

ZTE has still not responded to Trump’s statement, but Reuters reported on Monday that employees of the Shenzhen-based company were cheering.

The DoC imposed the seven-year ban in April after it said ZTE had broken last year’s agreement to reprimand those executives who had been complicit in smuggling US hardware and software – as part of ZTE telecoms kit – to Iran in violation of an embargo.

Last Wednesday ZTE said that it had "shut down major operating activities" as a result of the ban, threatening the future of 80,000 employees.

Trump tweeted: "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!"

He followed that up four hours later by tweeting: "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!"

Though ZTE and its Chinese rival, Huawei, are banned from selling equipment to major US carriers, both have customers among smaller regional operators. And ZTE customers outside the US include Bell Canada, BT, Forthnet, Orange, Rogers, SoftBank, Telefónica, Telekom Austria, Telus and True. Huawei’s customers include AT&T Mexico.

In addition Qualcomm and other US makers of hardware and software will lose trade if they cannot supply ZTE – which is fourth in terms of market share for telecoms network equipment and is a growing supplier of handsets.

Meanwhile Apple and other US companies rely heavily on Chinese factories for production of smartphones, tablets and other equipment.

Trump’s announcements came as trade negotiations were due to begin between the US and China, at which many of these issues will be examined.

China responded to April’s ban and ZTE’s announcement last week by indicating that the country would step up its investment in semiconductor technology, so that it would eventually no longer be reliant on US companies such as Qualcomm and Intel.

Others have pointed out that if ZTE closed down that would release thousands of Chinese engineers on to the market to start up rival technology companies.

With Trump’s tweets, he appears to be recognising the disruption an outright ban on ZTE would cause to the worldwide technology industry.

However, he may face opposition from Congress. Adam Schiff, the top Democrat on the House of Representatives’ intelligence committee, warned: "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."




Topics: ZTE, Huawei, China, Iran, embargo, Trump, DoC, Department of Commerce