President Trump says he's working to give ZTE a reprieve

Sean Reid
May 14, 2018

President Trump says he is working with Chinese President Xi Jinping to reopen business with massive Chinese phone company ZTE, after it was blocked from doing business with the U.S.

FBN's Connell McShane and Susan Li on the Trump administration's efforts to reduce the US trade deficit with China and concerns of a potential recession by 2020.

The ban was the result of ZTE's failure to comply with an agreement with the United States government after it pleaded guilty previous year to conspiring to violate U.S. sanctions by illegally shipping USA goods and technology to Iran, the Commerce Department said.

The announcement seemed to directly contradict the policy of the Department of Commerce, which in April imposed a seven-year ban on sales of components to ZTE in connection with the company's violation of US sanctions on Iran.

The U.S. government accused ZTE of violating a March 2017 settlement in which the firm pleaded guilty and agreed to pay $1.19 billion for illegally shipping telecommunications equipment to Iran and North Korea.

A bit of background: ZTE is one of the largest smartphone makers in China, where the company employs 75,000, according to The New York Times.

Against that background, the Trump administration has barred military and government employees from using smartphones from ZTE and fellow Chinese maker Huawei.

Then, of course, the President is involved in an aggressive trade dispute with China, which, on the US side, included tariffs on about $60 billion of Chinese goods, the bulk of which were focused on the high-tech industry.

"But be cool, it will all work out!" he wrote.

ZTE depended on American chips and other components, and is unable to continue operating without key supplies. "This egregious behaviour can not be ignored". The firm said last Thursday that it had it's suspended all major operations.

Claire Reade, a Washington-based trade lawyer and former assistant U.S. Trade Representative for China affairs, said the ZTE ban was a shocking blow to China's leadership and may have caused more alarm in Beijing than Trump's threats to impose tariffs on $50 billion in Chinese goods.

ZTE's current struggles have made it the most visible effect thus far of a brewing trade war between the United States and China.

The president's comments come after the administration banned the sales of US -made parts to the phone maker ZTE.

A U.S. blockade has choked off the revenue of the No. 2 Chinese telecom company, which regards the next two weeks as crucial as it faces potential collapse.

Other experts said Trump's policy reversal was unprecedented.

ZTE denies it violated the deal and is appealing the export ban.

"This is entirely unprecedented", said Doug Jacobson, an export controls and sanctions attorney for Jacobson Burton Kelley who represents suppliers that do business with ZTE.

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