US-China trade war: All stories

Donald Trump says US reconsiders ZTE penalties as favour to Xi Jinping

Congressional opposition grows even as Trump says he would ‘envision’ a revised penalty for the telecoms company

PUBLISHED : Wednesday, 23 May, 2018, 1:38am
UPDATED : Wednesday, 23 May, 2018, 11:37pm

US President Donald Trump said on Tuesday that he is doing Chinese President Xi Jinping a favour by reconsidering the penalties on Chinese telecommunications equipment maker ZTE Corp, but that no deal has been reached yet to alleviate the sanctions on the company. 

Trump told reporters at the White House that Xi had asked him to look into the ZTE issue and that he was.

“The media misreported stories about ZTE,” Trump said. Various deals are being discussed, he added. For now, "there is no deal. We will see what happens," Trump said. 

Opposition to Trump’s move to review the ZTE case was building on Capitol Hill. On Tuesday, a Senate panel overwhelmingly supported an amendment to block the removal of penalties on ZTE. 

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In a separate bipartisan letter Tuesday, 27 senators urged the White House “not to compromise lawful U.S. enforcement actions against serial and pre-meditated violators of US law, such as ZTE.” 

In April the US prohibited American companies from selling their components to ZTE, one of the largest telecom equipment makers in the world, for seven years. The ban was to punish ZTE for breaching terms of a settlement it had agreed to after being found to have violated US sanctions and sold telecom products to Iran and North Korea. 

The ban crippled the manufacturing operations at ZTE, which announced it was suspending major operations. 

China and US ‘agree broad framework’ for ZTE ban resolution

ZTE, based in Shenzhen, China, depends on US components, like silicon chips from Qualcomm Inc, to build its cellphones and equipment.

This month, though, Trump tweeted that he had asked the US Department of Commerce, which had announced the ban, to help ZTE “get back into business, fast”

“Too many jobs in China lost. Commerce Department has been instructed to get it done!” Trump tweeted then.

The sudden reversal has drawn strong objections from Congress.

Saying that ZTE had “repeatedly violated our laws” and posed “a serious and grave threat to our national security,” the Senate Banking Committee on Tuesday approved an amendment that would prevent Trump from easing any punitive measures without first certifying to Congress that ZTE was complying with US law. 

The amendment, offered by Senator Chris Van Hollen, Democrat of Maryland, passed overwhelmingly in a bipartisan 23-2 vote. 

Trump defends ZTE support as part of ‘larger trade deal’ with China

Separately, the 27 senators who signed the letter – including Republican John Cornyn of Texas and Marco Rubio of Florida, and Democrats Chuck Schumer of New York and Diane Feinstein of California – also said that China’s policies and practices are “designed to strengthen its own national security innovation base, and essential tools of efforts to spread China’s influence in other countries”. 

The lawmakers wrote in the letter, which was addressed to Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross and US Trade Representative Robert Lighthizer, that China poses “national security threats to the United States”.

“Fidelity to the rule of law is a key part of what distinguishes the US from a country like China that is ruled by a Communist dictatorship.”

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

On Tuesday, Trump noted that his administration had acted against ZTE in the first place. 

“You’re really hurting American companies also” by shutting down ZTE, Trump said.

Trump said the US had lost US$500 billion in trade with China for many years. "When you are losing US$500 billion a year, you can't lose in terms of a negotiation. It's really easy to win,” he said.

“I want this to be a great deal for the United States and I want it to be a good deal for China too,” he said. “It may not be possible." 

Trump said he would “envision” a revised penalty for the company including a requirement that it appoint a new board of directors and a “very large fine” of perhaps US$1.3 billion.

US Treasury Secretary Steven Mnuchin said earlier on Tuesday that the US did not mean to “put ZTE out of business”. 

The commerce department’s review of penalties against ZTE will bear in mind any threats to American security, Mnuchin said during a hearing before a Senate appropriations subcommittee in Washington, according to Bloomberg. 

“Anything that they consider will take into account the very important national security issues, and those will be addressed,” he said.

Trump defends intervention to help China’s ZTE

China and US temporarily dropped their tariff threats on Saturday after setting up a framework for addressing trade imbalances. 

The countries have also agreed on the “broad outline” over the weekend of a settlement to the bank on ZTE, hoping to end a punishment that threatened to put the company out of business. 

Trump ‘made ZTE offer to get Xi to help with North Korea summit’

US Commerce Secretary Wilbur Ross called ZTE’s behaviour “egregious” when he announced the action on April 16. Four amendments concerning ZTE have been proposed to a defence department bill in the House of Representatives and may be granted votes this week.

Senate Democratic Leader Chuck Schumer on Tuesday castigated the Trump administration’s plan to review penalties on ZTE, saying on the Senate floor that the action signals to China that “they can roll over us on issue after issue”. 

He added that on Friday he had spoken with Trump directly for half an hour about the matter, and also to other administration officials.

Trump’s ZTE deal could cost families of terror victims US$150m

“The president and Secretary Mnuchin, what they are doing sends a dangerous signal to businesses around the world that the United States is willing to forgive sanction violations or reduce penalties,” Schumer said. 

It emboldens foreign companies to play fast and loose with US sanctions when we should be putting the fear of God into these companies, especially one that was as brazen as ZTE
Senate Democratic Leader Chuck Schumer

“It emboldens foreign companies to play fast and loose with US sanctions when we should be putting the fear of God into these companies, especially one that was as brazen as ZTE.”

Larry Kudlow, Trump’s top economic adviser, said on Sunday that management changes at ZTE would be among remedies needed before the US would consider a reprieve.

The administration is not willing to loosen exports controls on sensitive technology, Mnuchin said on Tuesday.

China has frequently argued that the trade imbalance can be fixed by the US lifting strict export curbs on high-technology goods. One of China’s trade demands in talks with the US this month included removing a ban on selling it integrated circuits.

“Export control items are absolutely not on the table for discussions,” said Mnuchin. “We would in no way look to loosen that.”

ZTE mess shows need to change the ‘Chinese way of doing business’

To the contrary, the US is “aggressively” examining ways to protect US technology through an inter-agency panel that reviews foreign acquisitions in the US, known as CFIUS, Mnuchin said. The Trump administration proposed legislation to expand that panel’s powers. 

“I can assure you this president is very focused on protecting American technology,” said Mnuchin.

Additional reporting by Bloomberg