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President Trump is on the brink of a costly trade war with China in large part because he says China has stolen American jobs by cheating on trade rules.
But on Sunday, Trump announced his newest trade initiative: saving Chinese jobs.
“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,” Trump tweeted Sunday afternoon.
His tweet wasn’t just a case of strange optics for a man who painted China as the US economy’s most menacing threat on the campaign trail. It was also a head-spinning policy reversal: Just last month, his Commerce Department banned US companies from selling parts or providing services to ZTE, a telecoms giant, because it shipped equipment to Iran and North Korea in defiance of US sanctions.
ZTE, which makes inexpensive smartphones, relies so much on components shipped from the US that the company immediately looked like it might go out of business.
Now it appears Trump is trying to save it from that fate.
Experts say Trump is changing his administration’s position on ZTE as part of his bid to come to a sweeping trade agreement with China designed to balance the trade deficit between the two countries.
Earlier in May, several of Trump’s top economic officials met with their Chinese counterparts in Beijing for two days to try to come to a deal, but they agreed on little except to keep talking. Chinese officials are headed to Washington this week for the next round of talks, and the stakes are high.
If the US and China can’t come to an agreement soon, Trump has threatened to put tariffs on up to $150 billion worth of Chinese goods, and China has threatened to respond with sweeping tariffs of its own. A full-blown trade war between the two countries could cause the price of goods and unemployment to surge in both countries.
There’s nothing unusual about making a concession to another country to come to a deal. But experts say that Trump’s offer to save ZTE is worrying both as a total policy reversal and because it absolves ZTE for actions that undermined US national security interests.
“It’s a troubling precedent, because whatever you think about the [Commerce Department’s ban] against ZTE, it was done in response to clear and repeated violations of US law by the company,” Edward Alden, a trade expert at the Council on Foreign Relations, told me. “It means that essentially that every US action is now up for negotiation in some way or other in the future.”
Trump’s ZTE reversal is raising many questions
In April, the Commerce Department announced a seven-year ban on US companies selling goods and services to ZTE. That was in response to ZTE’s violation of an agreement that the US and ZTE had come to in March 2017, after the telecoms company was caught shipping materials to Iran and North Korea.
The Commerce Department said that ZTE had made false statements to the US and that instead of punishing employees involved in shipping materials to Iran and North Korea, ZTE had “paid full bonuses to employees that had engaged in illegal conduct.”
ZTE, which employs around 75,000 people worldwide, slammed the ban as a threat to its survival and announced that it was shuttering “major operating activities” in a public filing later in April.
Trump is now looking into saving it from collapse for leverage in trade talks. Experts are unclear on what exactly can be done because there’s little precedent for such a stark reversal on this kind of policy.
White House deputy press secretary Lindsay Walters said in a statement on Sunday that Trump expects Commerce Secretary Wilbur Ross to “to exercise his independent judgment, consistent with applicable laws and regulations, to resolve the regulatory action involving ZTE based on its facts.”
Speaking at the National Press Club on Monday, Ross said that his Commerce Department will look into whether there are “alternative remedies to the one that we originally put forward.”
Lawmakers from both parties have criticized Trump for the move. Sen. Marco Rubio (R-FL) tweeted on Monday that he hoped that “this isn’t the beginning of backing down to China.”
“Problem with ZTE isn’t jobs & trade, it’s national security & espionage,” he tweeted.
Rep. Adam Schiff, the top Democrat on the House Intelligence Committee, tweeted, “You should care more about national security than Chinese jobs.”
Lawmakers and and the intelligence community believe that in addition to its sale of equipment to US adversaries, ZTE could pose an espionage risk to the US by covertly using its cellphones for surveillance.
But Trump has created expectations among the Chinese. The Global Times, a hawkish Communist Party-backed Chinese publication, tweeted on Sunday that “the situation with ZTE is about credibility and nothing more.”
If Trump does in fact end up saving ZTE, Beijing will definitely see it as a win. It will also open up Trump to a once inconceivable point of criticism: being weak on China.
