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Trump's signal on ZTE helps make China great again

Donald Trump is helping make China great again.

[HONG KONG] Donald Trump is helping make China great again. The American president tweeted on Sunday that he would try to get Shenzhen-based telecom equipment maker ZTE "back into business, fast" after fresh US punishments over sanctions violations put the US$20 billion company on the ropes. The reversal undermines his trade team's efforts to talk tough. And it's too late now to stop the People's Republic from seeking technology independence.

Even among the many inexplicable Mr Trump statements, this one manages to stand out. It flustered some of his own officials. Jessica Rosenworcel, who Mr Trump nominated to serve a second term as a member of the US Federal Communications Commission, retweeted the president's brief remark with the comment: "This is going to require more explanation."

The rationale for the leniency was especially bizarre: "Too many jobs in China lost."

Mr Trump has blamed the same country of "destroying whole American industries" and "tens of thousands of jobs" using stolen technology.

What's more, the US Commerce Department's case against ZTE was based on its pleading guilty to violating US trade sanctions on Iran and North Korea. The administration just repudiated the treaty with Iran, and is preparing to reinstate sanctions. That makes it an odd time to let a violator accused of breaching a previous settlement on the matter off the hook.

For countries haggling with Mr Trump, there are a few takeaways. First, US Trade Representative Robert Lighthizer, who was just in Beijing with a list of hard demands, is in a weak position. It's pretty obvious where the buck stops on such matters. Get the president on the phone, and preferably catch him in a good mood.

Second, Mr Trump hasn't wrapped his head around the nature of Chinese competition. American chambers of commerce aren't bothered by the trade imbalance, but rather the way Beijing incubates industries using cheap debt and protectionism. President Xi Jinping has given no indication he will roll back his "Made in China 2025" initiative that explicitly aims at import substitution.

Having watched ZTE nearly pushed into bankruptcy thanks to overdependence on American chips, China is accelerating efforts to develop its own semiconductor industry. Mr Trump’s decision to back off is unlikely to alter those plans or similar ones in other industries.

Mr Trump wrote in a tweet on May 13 that he was working with Mr Xi to help sanctioned Chinese telecoms giant ZTE “get back into business, fast". He added: "Commerce Department has been instructed to get it done!"

The US Commerce Department said on April 16 it was banning US companies from selling to ZTE for seven years as punishment for allegedly violating the terms of a 2017 settlement over trade sanctions violations with Iran.


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