President Trump, in a remarkable development, has thrown in an olive branch to the controversial Chinese Telecom, ZTE in less than a week after it has stopped its main business following the restrictions from the U.S. Government.
On Wednesday, ZTE, which develops telcom network equipment and sells consumer devices including smartphones, said that it would cease it’s main business operations after the U.S. Department of Commerce had announced a ban of seven years on export of U.S. components to ZTE
The company has been banned from selling equipment in the U.S., but shutting out supply chain partners like Intel, Qualcomm and Google is potentially catastrophic.
Reports suggested that the Chinese government was working on ZTE’s half to find a compromise, and it looks like Chinese Premier Xi Jinping himself got in touch with the U.S. President, who said today in a tweet that is he “working… to give… ZTE a way back into business, fast.”
Somewhat bizarrely, Trump cited a loss of jobs in China as a motivating factor.
Given that U.S. sanctions were imposed on ZTE due to threats to national security and its violation of trade sanctions with Iran.
Trump’s desire to give the company another chance in the U.S. is truly unexpected.
It also doesn’t align with recent events.
The Trump administration has used the premise of national security to block a number of business deals that would see Chinese companies buying up American firms — including Alibaba’s proposed acquisitions of MoneyGram and Broadcom’s effort to buy Qualcomm.
Then, of course, the President is involved in an aggressive trade dispute with China, which, on the U.S. side, included tariffs on about $60 billion of Chinese goods, the bulk of which were focused on the high tech industry.
Granting a reprieve to ZTE — a firm with over 70,000 employees, over $17 billion in annual revenue and close ties to the government — doesn’t fit with the strategy to hurt China, but then Trump’s administration is hardly by the book and often times seemingly pragmatic. Well, the President’s Twitter account, at least.
Potentially, there may be pressure behind the scenes from U.S. suppliers who fear a loss of business as companies like Taiwan’s MediaTek plan to step up in a bid to work with ZTE in the event that it is blocked from U.S. partners.
Even with Trump’s unexpected backing, ZTE is up against it to roll back the sanctions.