Advertisement
Features

Trump’s baffling trade U-turn

Matthew Partridge looks at the US president's surprising reprieve for Chinese firm ZTE.

896_MW_P09_P&E_top
Trump: "way, way out on a limb"

The US president has granted a surprise reprieve for ZTE. Matthew Partridge reports.

Donald Trump's trade policies are not just "an economically illiterate brand of extreme mercantilism which trample casually over international law", says the Financial Times. They are also capricious. In his latest surprise twist, Trump "has signalled a reprieve" for ZTE, the Chinese company banned from sourcing vital components from US companies. The ban followed ZTE's alleged violation of a deal in which it agreed to pay $1.2bn for evading US sanctions on Iran and North Korea. The move is especially odd because it contradicts the advice of top US intelligence officials, who have repeatedly warned that ZTE's products are a "threat to national security".

Reasons to be merciful

ZTE is also exactly the kind of company Trump purports to loathe, says Daniel Drezner in The Washington Post: a "bad actor benefiting from national champion status in China but violating US laws and threatening US national security".

Advertisement - Article continues below
Advertisement
Advertisement - Article continues below

By issuing a pardon, Trump is going "way, way out on a limb". So why did he do it? Trump's decision may be surprising, but there is a case to be made that ZTE is too big to fail as "thousands of jobs in both countries depend on its survival further down the high-tech supply chain", says CNN's Stephen Collinson. Arguably, the US should also be using "every bargaining chip it has to secure a win in the deepening trade confrontation with Beijing" pardoning ZTE "could yield significant concessions". Trade talks between China and the US are ongoing in Washington this week.

There's also the fact that were ZTE to fail, thousands of China's top engineers would be "unemployed and ripe for the picking by China's vast technology sector, including network equipment makers, surveillance companies and the military", says Tim Culpan on Bloomberg. Alternatively, they could "seed dozens of start-ups", or ZTE could be "de-facto nationalised via a Team China strategy". Both would challenge American interests.

Advertisement - Article continues below

But maybe "none of this" was on Trump's mind, and he was instead thinking of his forthcoming meeting with Kim Jong-un in Singapore. If there's any chance of Pyongyang giving up nuclear weapons, "Kim will need reassurance from Beijing that both his person and his country will be safe". At such a time Trump can't afford to be seen to be "messing with Chinese strategic interests, including the pursuit of technology independence".

The deal won't help the US

But the ZTE deal cannot be viewed as a win for the US, says Nathaniel Taplin in The Wall Street Journal. In return for "clemency on ZTE", Beijing withdrew its agricultural tariff threats and gave the green light for Qualcomm's NXP acquisition. However, the US administration's jumpiness about agricultural tariffs ahead of the mid-term elections will validate Beijing's "strategy" of going after Trump's political base, "weakening the administration's hand in future negotiations". Extracting "meaningful concessions" that will benefit a wide array of businesses, rather than just a few, will now "become more difficult".

Advertisement
Advertisement

Recommended

How long can the good times roll?
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
Why Wall Street has got the US economy wrong again
Economy

Why Wall Street has got the US economy wrong again

The hiring slowdown does not signal recession for the US economy. Growth is just moving down a gear, says Brian Pellegrini.
25 Oct 2019
The charts that matter: gold finally sets a new record high 
Global Economy

The charts that matter: gold finally sets a new record high 

As gold surges past its previous high, John Stepek looks at how it's affected the charts that matter most to the global economy.
1 Aug 2020
Gold bugs' dreams are coming true – but we could still see a V-shaped recovery
Gold

Gold bugs' dreams are coming true – but we could still see a V-shaped recovery

John and Merryn talk about how it's perfectly reasonable to expect a V-shaped recovery and to continue holding gold as well. Plus, inflation, staycati…
30 Jul 2020

Most Popular

Can the recent rally in sterling continue?
Sponsored

Can the recent rally in sterling continue?

A "double top"  – a very recognisable pattern – is forming in in the US dollar. Dominic Frisby explains what it is, and what it could tell us about st…
3 Aug 2020
UK banks have had a shocking week – so it’s probably a good time to buy
UK stockmarkets

UK banks have had a shocking week – so it’s probably a good time to buy

Lloyds Bank reported a £676m loss this week. And, with all of the UK's high street banks having a terrible time of things, bank stocks are detested ri…
31 Jul 2020
Gold bugs' dreams are coming true – but we could still see a V-shaped recovery
Gold

Gold bugs' dreams are coming true – but we could still see a V-shaped recovery

John and Merryn talk about how it's perfectly reasonable to expect a V-shaped recovery and to continue holding gold as well. Plus, inflation, staycati…
30 Jul 2020