Trump vows to aid Chinese firm after supply-ban punishment

President Donald Trump pledged on Sunday to help Chinese phone manufacturer ZTE return to business, days after the company said it would cease “major operating activities” because of the U.S. government’s recent trade restrictions, a dramatic shift in tone for a president who has long accused China of stealing U.S. 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,” Trump tweeted. “Too many jobs in China lost. Commerce Department has been instructed to get it done!”

What Trump didn’t reveal publicly is how much the company has become a bargaining chip as the White House tries to extract trade-related concessions from China while pushing for cooperation on sanctions against Iran and North Korea, two people briefed on the discussion said.

The White House and senior Chinese officials are discussing a targeted economic deal that would relax severe penalties on ZTE in exchange for unspecified demands from Trump, the people said.

In April, the Commerce Department penalized ZTE for violating a settlement with the U.S. government over illegal shipments to Iran and North Korea. As a result, the Trump administration barred U.S. firms for seven years from exporting critical microchips and other parts to ZTE, the world’s fourth-largest smartphone manufacturer.

ZTE then halted operations, stressing in a statement Wednesday that it is “actively communicating with the relevant U.S. government departments in order to facilitate the modification or reversal” of the Commerce Department’s order.

Trump’s comment marked a sharp shift in tone for a president who has long accused China of stealing U.S. jobs. The Treasury Department and the Commerce Department had been strongly aligned against ZTE as recently as several days ago.

With Trump’s tweet, some officials familiar with the ZTE issue believe a compromise is possible. “A mini-deal is in sight,” said a person familiar with the matter. “China gets relief for ZTE, and in exchange agrees to return to the status quo for U.S. agriculture,” easing tariffs and implementing other nontariff remedies.

But the talks have not been amicable. Chinese President Xi Jinping has been irate about the sanctions on ZTE, and his top economic adviser, Liu He, has told U.S. negotiators that there is no chance of a deal without the United States removing the seven-year ban on ZTE, said the person, who spoke on condition of anonymity to discuss a sensitive matter.

In a statement, White House spokesman Lindsay Walters said: “The President’s tweet underscores the importance of a free, fair, balanced, and mutually beneficial economic, trade and investment relationship between the United States and China. The administration is in contact with China on this issue, among others in the bilateral relationship. President Trump expects [Commerce] Secretary [Wilbur] Ross to exercise his independent judgment, consistent with applicable laws and regulations, to resolve the regulatory action involving ZTE based on its facts.”

ZTE’s business in the United States has long raised concerns among national security officials. Shortly after Trump’s tweet, Rep. Adam Schiff, D-Calif., responded: “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.”

A ZTE spokesman did not respond to an email seeking comment.

Trump’s tweet on Sunday came just days before U.S. officials are planning to meet with Liu to discuss the strained trade ties. That meeting is expected to be held in Washington this week or next.

Nevertheless, trade tensions between the United States and China remain high. Trump has proposed tariffs on as much as $60 billion in Chinese goods, and Beijing has responded in kind.

Recently, though, the Trump administration also has sought to limit the encroachment of Chinese telecommunications firms in the United States. The Defense Department in April ordered military exchanges to cease selling ZTE phones on U.S. bases. And the Federal Communications Commission recently moved toward prohibiting U.S. Internet providers that receive federal funds from spending them on equipment made by companies such as Huawei, another major Chinese telecom player.

The U.S. government initially penalized ZTE in 2017, requiring the Chinese telecom giant to pay $1.19 billion to settle allegations that it violated U.S. sanctions in selling equipment to Iran and North Korea. As part of the settlement, ZTE also was required to punish employees involved in the matter and tighten its internal monitoring.

But U.S. officials said this year that ZTE didn’t discipline all the employees involved in the violations.

It was not clear if Commerce officials were aware or consulted on the president’s tweet. A spokesman for the Commerce Department did not immediately respond to a request for comment Sunday.