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All About ZTE, the Chinese Sanctions Breaker That Trump Wants to Help

May 13, 2018

How Did the U.S. Hobble ZTE?

The Commerce Department wasn’t done with that hefty penalty.

Last month, officials said ZTE had violated its agreement with the United States because it didn’t punish senior management for having violated the sanctions. Instead, the Commerce Department said, ZTE paid them bonuses and lied about it. As punishment, the department forbade American technology companies from selling their products to ZTE for seven years.

That means no Qualcomm chips or Android software for its phones, and no American chips or other components for its cellular gear. Analysts estimate that four-fifths of ZTE’s products have American companies. ZTE went into a tailspin, saying last week that it had shut down major operations.

Why is Trump Intervening?

All About ZTE, the Chinese Sanctions Breaker That Trump Wants to HelpAll About ZTE, the Chinese Sanctions Breaker That Trump Wants to Help

The American president hasn’t explained his decision to try to help the company, other than to cite the potential for lots of Chinese workers to lose their jobs. But ZTE’s troubles come at a complicated moment.

In normal times, the company’s fate would be a legal matter for the Commerce Department. But the Trump administration is pressuring China to make trade concessions. It may also need Beijing’s help to strike a deal with North Korea as Washington and Pyongyang plan a high-profile meeting next month in Singapore.

By offering to intervene, Mr. Trump has effectively suggested that ZTE’s punishment could be a bargaining chip in negotiations with China, rather than a matter of law enforcement. It isn’t clear whether he will follow through on his offer to help the company or whether he will get something in return if he does.

A One-Off or Part of a Trend?

The fight over ZTE is emblematic of deeper issues in the relationship between China and the United States, the world’s two largest economies.

Neither country trusts the equipment made by the other, particularly after Edward Snowden disclosed how United States intelligence officials turned to American companies to snoop.

With a technological cold war already getting frosty, such squabbles over intertwined supply chains and diverging interests are likely to proliferate.

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