Donald Trump might rescue one of China’s largest telecommunication companies from dying if he can secure a deal.
ZTE is at the center of a controversy that involves both technology and politics. The U.S. Department of Commerce issued a seven-year ban that prevents any engagement with domestic suppliers. It’s a decision that was made after the Chinese company didn’t adhere to the terms of sanctions from 2017. Aside from paying a massive fine, ZTE was in agreement to fire key employees and discipline others.
While the company did make payments for illegally shipping products to Iran, ZTE didn’t make proper concessions regarding its staff.
The failure to follow the U.S. government’s guidelines means ZTE cannot purchase components from any American company, thus dropping Qualcomm from its supply chain. Even the use of Android is in limbo. With so much reliance on domestic suppliers, ZTE’s business is essentially doomed.
President Trump, however, believes he can cut a deal that will give a second chance to ZTE.
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. Commerce Department has been instructed to get it done!
— Donald J. Trump (@realDonaldTrump) May 13, 2018
China and the United States are working well together on trade, but past negotiations have been so one sided in favor of China, for so many years, that it is hard for them to make a deal that benefits both countries. But be cool, it will all work out!
— Donald J. Trump (@realDonaldTrump) May 13, 2018
Over the weekend, the President announced that he’s working with President Xi Jinping of China to create a path for ZTE to return to normalcy. Trump admits the punishment severely cripples the Chinese company, and jobs in its native country are being lost. He claims to have instructed the Department of Commerce to figure out a resolution.
The next tweet, which came hours later, talked about how “together on trade” the U.S. and China are making progress in their negotiations. While he’s quick to point out the one-sided nature of the past, Trump feels the two countries can benefit moving forward.
Some members of Congress responded to Trump, including Marco Rubio (R-FL) and Adam Schiff (D-CA) who tweeted this:
Problem with ZTE isn’t jobs & trade, it’s national security & espionage. Any telecomm firm in #China can be forced to act as tool of Chinese espionage without any court order or any other review process. We are crazy to allow them to operate in U.S. without tighter restrictions https://t.co/AXtTDgufc9
— Marco Rubio (@marcorubio) May 14, 2018
Our intelligence agencies have warned that ZTE technology and phones pose a major cyber security threat. You should care more about our national security than Chinese jobs. https://t.co/7Ygh7805jg
— Adam Schiff (@RepAdamSchiff) May 13, 2018
It’s a valid concern given that, along with ZTE, companies like Huawei have been accused of spying on behalf of the Chinese government before. Trump thinks the issue is on trade, but almost everyone else from lawmakers to national security experts views ZTE and Huawei as potential vehicles for espionage.
ZTE released a statement upon the supply ban taking effect. As well as feeling the penalty is unfair, the company doesn’t rule out legal action.
Now there’s some belief that the U.S. and China will reach an agreement of their own to ease up on ZTE. The company might not be popular for high-end hardware, but it’s one of the top brands in the U.S. overall. ZTE sells a large number of budget-friendly devices, and it’s actively investing in the deployment of 5G networks around the world.
