For Trump, ZTE has become a bargaining chip in trade talks with China

China’s No 2 telecommunications equipment maker finds itself between a rock and a hard place as the world’s two largest economies try to work out their differences

PUBLISHED : Tuesday, 15 May, 2018, 5:43am
UPDATED : Tuesday, 15 May, 2018, 5:43am

Thanks to US President Donald Trump’s tweets, the tone of efforts to avoid a trade war with China can change faster than negotiators can fly between Beijing and Washington with their latest proposals. One of the latest tweets at the weekend revealed that the fate of Chinese electronics maker ZTE was in play ahead of a second round of trade talks expected this week.

The company has announced a halt to “major operating activities” after the US Department of Commerce announced crippling bans on the purchase of US technology for failing to comply with an agreement over the violation of sanctions against Iran.

During the first round of trade talks in Beijing earlier this month, China asked the United States to ease the sanctions on ZTE. Trump has now tweeted that he has asked the department to help ZTE get back into business because too many jobs have been lost.

His stance took many Washington insiders by surprise, which suggests it was not a widely debated policy position. Indeed, he did not use more conventional language, such as that the US would work with China to save a company that employs 75,000 people – or for that matter work with Chinese vice-premier and top economic adviser Liu He, expected in Washington this week.

Trump is saying he will work with President Xi Jinping. “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 lost, Commerce Department has been instructed to get it done,” he tweeted. That marks a change of tune from rhetoric about restoring American jobs stolen by China.

Trump ‘not breaking election vow’ by aiding China’s ZTE

The more conciliatory tone towards Beijing will do no harm ahead of next month’s historic summit between Trump and North Korean leader Kim Jong-un, given Beijing’s intermediary role behind the scenes as an ally of Pyongyang.

With Trump having earlier retweeted that he would meet Xi again in the not too distant future, some people wonder whether he is going to try to strike a grand bargain. They noted that some officials involved in the coming talks with Liu were taken by surprise by the presidential tweet.

Meanwhile ZTE, China’s No 2 telecommunications equipment maker, remains intent on resolving a seven-year blockade imposed by Washington that cuts off access to the American technology it needs to build most of its products, such as semiconductor chips. “The company is working hard to resolve this impasse,” it said.

There remain too many unknowns to predict an outcome. Trump’s style is to keep everyone on their toes, including his own people. It cannot be ruled out that he sees the ZTE issue as a chance to forge a bargain with Xi. He is, after all, a deal maker.