‘Be cool, it will all work out!’ Trump’s reversal on trade with China
President Trump tweeted on May 13 that he has asked the Commerce Department to help Chinese technology company ZTE Corp ‘get back into business, fast.’ (Reuters)
Just about everything is odd regarding President Trump’s recent tweet that he wants to help Chinese technology company ZTE Corp. “get back into business, fast” because its failure costs “too many jobs in China.”
It’s odd that Trump, who campaigned on saving millions of U.S. jobs, suddenly says he cares about a few thousand Chinese jobs.
It’s odd that Trump, who championed “America First,” is worried about a single Chinese firm.
It’s odd that Trump, who has spent months berating the Chinese for stealing U.S. intellectual property, is coming to the rescue of a Chinese telecom company that’s trying to compete with American companies like Apple.
It’s odd that Trump, who wants a strong U.S. military and business climate, is ignoring a House Intelligence Committee report from 2012 that concluded that ZTE “cannot be trusted to be free of foreign state influence and thus [poses] a security threat to the United States and to our systems.”
It is odd that Trump, who has put extensive sanctions on North Korea and Iran, seems to be willing to forgive ZTE, a company that admitted it illegally shipped telecom equipment to Iran and North Korea. Trump’s own Commerce Department punished ZTE in April for “egregious behavior,” including repeatedly lying to the U.S. government. (Commerce banned U.S. companies from selling critical microchips and other products to ZTE for seven years.)
And it’s especially odd that Trump, who loves to win, appears to be caving so easily. Relief for ZTE is one of China’s top demands in the ongoing U.S.-China trade skirmish.
“In the middle of a trade dispute, the president is publicly offering a major concession to China that could potentially harm national security,” said Scott Paul, president of the Alliance for American Manufacturing, a coalition of manufacturers and steelworkers.
Trump says he’s doing this because ZTE buys a lot of parts for its various phones from the United States, and “this is also reflective of the larger trade deal we are negotiating with China and my personal relationship with President Xi.”
But Trump’s tweet supporting ZTE stunned many of his top advisers, who were busy preparing for another round of intense negotiations with China. Going after China was an issue there was a lot of unity about — in Washington and beyond. While few wanted a harmful trade war, there was widespread agreement that China has been stealing U.S. intellectual property and not been playing fairly on trade, and Trump appeared to be getting further than past presidents at changing that.
“I don’t agree with President Trump on a whole lot, but today I want to give him a big pat on the back. He is doing the right thing when it comes to China,” Senate Minority Leader Charles E. Schumer said in March, when Trump launched an aggressive campaign against China, including with tariffs.
Now Trump has given Democrats an opening to accuse the president of helping Chinese companies and workers over Americans.
Trying to make sense of Trump’s ZTE move is tough. There are those who point to North Korea as the motivating factor. They argue that Trump wanted to give President Xi Jinping of China a gesture of goodwill as Trump prepares to meet North Korean leader Kim Jong Un and tries to negotiate a major foreign policy deal. North Korea threatened to cancel a key meeting with South Korea on Tuesday, a reminder that the situation is still delicate.
But it’s hard to buy that as the tipping factor. Trump and Xi are already friendly, and Trump already had the meeting scheduled to meet the North Korean dictator face-to-face in Singapore, a move that had South Korea’s president saying Trump should win the Nobel Peace Prize. China is also heavily incentivized to want a resolution in North Korea, regardless of what happens with U.S.-China trade.
Perhaps another explanation for Trump’s action on ZTE is that he wants quick relief for American farmers. Republican senators from agriculture states have been lobbying the president about every chance they get to make sure farmers don’t end up as the big losers in the U.S.-China trade spat.
The mere threat of Chinese tariffs on soybeans sent the price per bushel below $10 this spring, a move that starts to make it difficult for some farmers to make money. While prices have rebounded a bit to climb back above $10, they are still far below where they were in 2013 and 2014 when a bushel was regularly going for over $14.
Trump had told farmers at his April 28 rally in Michigan, “There may be a little pain for [a] little while,” but it would be worth it because he was going to win big against China. But that is a tough message to sell, especially as Chinese buyers started canceling orders for American soybeans.
Polling by the trade group Agri-Pulse found that 67 percent of farmers said they voted for Trump, but in early March of this year, only 45 percent said they would vote for him again (and that was before much of the rising U.S.-China trade tensions).
U.S. officials are now pushing China to back down on agricultural tariffs in exchange for Trump rolling back penalties on ZTE.
The situation looks a lot like Xi is “using barriers against American agriculture to blackmail the Trump administration into accepting ZTE’s behavior,” China expert Derek Scissors of the conservative American Enterprise Institute told the Associated Press.
Trump and his top deputies such as economic adviser Larry Kudlow attempted Tuesday to cast the ZTE move as just a small step, insisting the president had not given up on the bigger prize of going after China on IP and the trade deficit.
But in China, Trump’s ZTE comment was portrayed as a victory. State-run media outlet China Daily said Chinese leaders “praised” the move, saying it was the result of “close contact” between the nations. It’s a tactic Xi could easily try again.
Trump appears to have given away some leverage on an issue just about everyone in America was backing him on.
It remains a mystery why.