May, 2018

Trump sows Beltway chaos with reversal on ZTE ban

Original article: The Washington Post

As usual, a single tweet from U.S. President Donald Trump was sufficient to foment pandemonium in Washington. This time, President Trump sent out a tweet that suggested the current seven-year ban on U.S. companies doing business with Chinese smartphone maker ZTE may not last. Citing the concerns of Chinese President Xi Jinping, Trump said in the tweet that he had instructed the Department of Commerce to review the matter.  


Donald Trump excels at pushing the U.S. media's buttons. Within hours of his tweet, stories about a possible overturn of the ZTE ban inundated the internet. Pundits dissected every syllable of his tweet, searching for answers. They found many: Trump changed his mind again; Trump has business interests that conflict with the ZTE ban; Trump wants more help from China on North Korea; Trump wants to keep his relationship with Xi Jinping on an even keel; Trump doesn't know what he's doing. 

With regards to North Korea, The Washington Post reported earlier this week that Trump indeed sought the assistance of Xi on North Korea, amidst concerns that the planned June 12 summit with Pyongyang's Supreme Leader Kim Jong-un is in jeopardy. Trump evidently sought he could work out a deal with Xi by lifting the sanctions on ZTE, the report said. 

We went over some of the possibilities for Trump's ZTE about-face in last week's newsletter. Now we'd like to offer another: Trump thinks out loud on Twitter, and enjoys the media attention it generates. And with a topic as hot as the ZTE ban, he can draw the press's attention away from the Mueller probe, Stormy Daniels, Michael Cohen and the Russians. That controversy is more vexing for Trump than the fallout from his shooting from the hip with ZTE.  

As for the ZTE ban, it remains in effect (for now), and has the backing of a wide swath of U.S. policymakers. U.S. intelligence officials worry that ZTE's close ties with Beijing could allow the Chinese government to spy on Americans with the company's mobile phones or other technology. Given the security concerns at hand, U.S. security experts also chafe at Trump's decision to allow the Commerce Department to take the lead on the ZTE issue.  

Taipei-based political risk consultant Ross Feingold has a different perspective. He says that extensive media coverage of the ZTE ban has highlighted the security risks of doing business with the company. As a result, ZTE won't be able to easily regain the trust of consumers or businesses. "Most likely, US companies would be reluctant to do business with ZTE in the near and even medium term," he says. Even if some U.S. firms are willing to work with ZTE in the future, potential customers will carefully scrutinize the security risks of ZTE products, slowing the purchasing cycle considerably. That "makes ZTE an unattractive supplier," he says.  

Meanwhile, a Congressional amendment designed to stop the Trump administration from easing sanctions on ZTE unanimously passed the House of Representatives Appropriations Committee. The full House will consider the amendment next month as part of the Fiscal Year 2019 Commerce, Justice and Science Appropriations Bill. 

Last week, Bennie G. Thompson, a Missouri Democrat who sits on the Committee on Homeland Security, introduced a resolution asking the Department of Homeland Security to provide any information it holds on ZTE's cybersecurity threats to the Committee. "The President’s cavalier approach to handling this serious national security matter should be concerning to all," he was quoted as saying by numerous American media outlets. 

On Tuesday, the Senate Banking Committee unanimously approved legislation that would give the Committee on Foreign Investment in the United States (CFIUS) greater authority to restrict Chinese investment in American technology firms for reasons of national security, tighten export controls on sensitive technology (especially that which has military applications) and prevent the White House from easing sanctions on ZTE.