Top Five Things to Know About Chinese Company ZTE and Trump’s Tweets

File photo taken in November 2017 shows U.S. President Donald Trump (L) and Chinese President Xi Jinping at their joint press conference at the Great Hall of the People in Beijing. (Kyodo) ==Kyodo (Photo by Kyodo News via Getty Images)
Kyodo News via Getty Images

President Trump prompted confusion when he tweeted Sunday about saving a Chinese telecommunications company, ZTE, and Chinese jobs — which seemed to go against his promise to be tough on China amid a huge trade deficit with the United States, and to save American jobs.

However, his tweet and subsequent ones appear to be part of the second round of U.S.-China trade talks that will begin this week in Washington. The talks, which are scheduled to take place Thursday and Friday, are high-stakes and expected to involve some tough bargaining.

Here are the top five things you need to know about the ZTE dispute:

1. First, what is ZTE?

ZTE, which stands for Zhongxing Telecommunications Equipment, is a Chinese multinational telecommunications company that provides wireless networks in China and makes smartphones, tablets, computers, and other products that are sold all over the world — not unlike Verizon in the U.S.

ZTE is the fourth-largest seller of phones in the U.S. The company has around 75,000 employees.

2. Why is ZTE a problem for the U.S.?

In 2016, the U.S. Commerce Department found that ZTE broke U.S. sanctions by illegally selling products with American equipment and technology to embargoed countries including Iran and North Korea.

The Commerce Department in March 2017 fined China $1.19 billion — the largest civil and criminal fine ever in an export control case for breaking those sanctions. Specifically, ZTE sold prohibited American electronics to build Iran’s telecom networks, and made 283 shipments of microprocessors, servers and routers to North Korea.

The Commerce Department said ZTE company executives had developed an elaborate scheme to evade U.S. regulations and lied to investigators. Commerce Secretary Wilbur Ross issued a tough statement at the time.

“We are putting the world on notice: the games are over,” he said.

Those who flout our economic sanctions and export control laws will not go unpublished — they will suffer the harshest of consequences. Under President Trump’s leadership, we will be aggressively enforcing strong trade policies with the dual purpose of protecting American national security and protecting American workers.

ZTE promised to correct its behavior.

There were also growing security concerns about ZTE mobile devices. U.S. officials worry that they can be used as vehicles for the Chinese government to spy on Americans.

A 2012 House Intelligence Committee report found that ZTE and its competitor Huawei posed risks to American national security.

“The history and structure of ZTE, as admitted by the company in its submissions to the committee, reveal a company that has current and historical ties to the Chinese government and key military research institutes,” it said.

3. What happened recently with ZTE?

The Commerce Department last month banned ZTE from using American components for seven years.

U.S. officials said ZTE had violated its agreement with the U.S. since it did not punish senior management for violating those sanctions, and allowed them to receive bonuses, then lied about it.

The moves were a major blow to the company, since ZTE is heavily dependent on American microprocessors from Qualcomm, American glass made by Corning, and American sound technology made by Dolby.

“ZTE misled the Department of Commerce,” Ross said in a statement. “Instead of reprimanding ZTE staff and senior management, ZTE rewarded them. This egregious behavior cannot be ignored.”

In a separate move this month, the Pentagon announced it would no longer carry ZTE and Huawei phones in their military base stores due to security concerns.

The move sent ZTE into a tailspin. Earlier this month, the company announced it had shut down “major operating activities.”

4. What did President Trump tweet about ZTE?

President Trump on Sunday tweeted that he was working with Chinese President Xi Jinping to find a way to get ZTE “back into business, fast.”

“Too many jobs in China lost. Commerce Department has been instructed to get it done!” he added. He tweeted:

The tweet sparked confusion and questions as to why he cared about saving Chinese jobs, and cared about saving a Chinese company that violated U.S. sanctions and sold American technology to Iran and North Korea.

Two hours later, Trump tweeted again, indicating that his ZTE tweet related to ongoing U.S.-China trade talks:

The next day, Trump tweeted again about ZTE, explaining that ZTE purchases a lot of parts from American companies — indicating that saving ZTE would help American businesses:

Trump on Wednesday in a series of tweets acknowledged that ZTE was part of a “larger trade deal” with China:

5. Why would Trump want to help ZTE? 

There could be several reasons Trump wants to help ZTE. The issue is highly important to the Chinese, and could lead to Chinese concessions in other areas.

For instance, if U.S. eases restrictions on ZTE, China could allow U.S. company Qualcomm to acquire rival NXP Semiconductors. NXP is a Dutch company, but Qualcomm needs approval from nine global regulators, including China, to finalize the acquisition.

China could also relax tariffs on agricultural products — a move that would help American farmers who supported Trump. China’s threat to raise tariffs on American soybeans caused soybean prices per barrel to drop.

A concession on ZTE could have also been a “prerequisite” for the talks to go forward this week, according to the Washington Post. Hours after the president’s tweet, the Chinese delegation led by Vice Premier Liu He confirmed he would arrive in Washington on Tuesday.

Larry Kudlow, Trump’s Director of the National Economic Council, told Breitbart News Daily on Saturday that Liu is China’s “top economics guy.”

Liu was denied a meeting with Trump in March, and he would not have returned to Washington without that concession, Dennis Wilder, a former China specialist at the CIA, told the Post.

“Liu He represents, and is very close to, Xi Jinping,” Wilder said. “They’re not going to have him humiliated a second time.”

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