President Trump fended off criticism Monday that he is going soft on China’s unfair trade practice after he moved to cancel sanctions against a cheating Chinese company out of concern for its workers, action that prompted Democrats to mock the president for trying to “make China great again.”
The president made the startling reversal on ZTE Corp., China’s second-largest manufacturer of telecommunications equipment, as U.S. and Chinese negotiators prepared to meet Tuesday in Washington for a second round of trade talks.
After Mr. Trump said he wants to help ZTE “get back into business, fast,” Commerce Secretary Wilbur Ross said he would explore quickly “alternative remedies” to a seven-year ban against the company for trade violations.
Sen. Marco Rubio, Florida Republican, said the problem with ZTE “isn’t jobs & trade, it’s national security & espionage.”
“Any telecomm firm in #China can be forced to act as tool of Chinese espionage without any court order or any other review process. We are crazy to allow them to operate in U.S. without tighter restrictions,” Mr. Rubio tweeted.
U.S. intelligence officials told Congress this year that Americans should avoid products by ZTE and its Chinese rival Huawei because of cybersecurity concerns. The Pentagon two weeks ago banned the sale of both companies’ phones on U.S. military bases, saying they “may pose an unacceptable risk to Department’s personnel, information and mission.”
Mr. Ross said the administration’s ban on U.S. firms selling their products to ZTE, which shipped goods illegally to Iran and North Korea, “essentially caused them to cease operations.”
“It also wouldn’t surprise me that they would bring up the ZTE [in trade talks], but our position has been that that’s an enforcement action separate from trade,” he said at the National Press Club.
Mr. Trump’s tweet that the U.S. ban on ZTE had caused “too many jobs in China lost” prompted a wave of criticism from lawmakers and U.S. business and labor groups accusing him of backing off a campaign promise to get tough with Beijing. Several lawmakers said Mr. Trump was sending the wrong signal on Chinese espionage.
“One of the few areas where the president and I agreed, and I was vocally supportive, was his approach towards China,” said Senate Minority Leader Charles E. Schumer, New York Democrat. “But even here he is backing off, and his policy is now designed to achieve one goal: make China great again.”
Scott Paul, president of the Alliance for American Manufacturing, called Mr. Trump’s comments about lost Chinese jobs “alarming” and “indefensible.”
“In the middle of a trade dispute, the president is publicly offering a major concession to China that could potentially harm national security,” Mr. Paul said. “This is a company that has broken trade embargoes with Iran and North Korea and generated legitimate security concerns. Meanwhile, Beijing has yet to agree to end any unfair trade practice or make any meaningful reform.”
Late Monday, the president appeared to address the criticism by tweeting that ZTE “buys a big percentage of individual parts from U.S. companies.”
“This is also reflective of the larger trade deal we are negotiating with China and my personal relationship with [Chinese] President Xi,” Mr. Trump said. ZTE reportedly purchased about $2 billion worth of parts last year from U.S. suppliers.
The White House said Chinese leaders have been pushing administration officials to ease up on the punishment for ZTE.
“This is part of a very complex relationship between the United States and China that involves economic issues, national security issues,” said White House deputy press secretary Raj Shah. “It’s an issue of high concern for China that’s been raised with the U.S. government and with our administration at various levels.”
He said Mr. Trump asked the commerce secretary “to look into it, consistent with applicable laws and regulations.”
When Mr. Ross announced the sanctions against ZTE last month, he called the company’s actions “egregious” and said officials had misled the U.S. about punishing employees responsible for the illegal sales to Iran and North Korea. ZTE earlier paid $1.19 billion in penalties for its actions.
During the 2016 campaign, Mr. Trump repeatedly vowed to get tough with China’s unfair trade practices and to label Beijing as a currency manipulator. Mr. Shah said the president isn’t backing away from his campaign promises and noted that Mr. Trump has ordered tariffs on Chinese steel and aluminum and moved to crack down on Beijing’s theft of intellectual property.
“I don’t think this has frankly any bearing on the president’s campaign promises,” Mr. Shah said. “He’s introduced and proposed … up to $150 billion of tariffs on China for intellectual property theft. So he’s been tough, and he’s confronted them.”
Beijing has responded to Mr. Trump’s actions with threatened tariffs worth billions of dollars on U.S. agricultural products, airplanes and other goods. After escalating threats of tariffs on both sides, U.S. and Chinese officials met in Beijing two weeks ago for two days of trade talks, although there were no breakthroughs.
During the trade talks in Beijing, Chinese Vice Premier Liu He told Treasury Secretary Steven T. Mnuchin that China would not continue talks on broader bilateral trade disputes unless Washington agreed to ease the crushing sanctions on ZTE, two people briefed on those meetings said.
Chinese Foreign Ministry spokesman Lu Kang told a regularly scheduled news briefing Monday that China “greatly appreciates the positive U.S. position on the ZTE issue.”
He said Mr. Liu would travel to Washington from Tuesday to Saturday to continue trade talks.
For U.S. chipmaker Qualcomm Inc., whose $44 billion takeover of NXP Semiconductors was delayed by a lengthy antitrust review by China’s Ministry of Commerce, said reconsideration of the ZTE penalty could smooth the way for the deal to move forward.
Bloomberg reported on Monday that the Chinese Commerce Ministry had been asked to speed up the review of the deal and Qualcomm’s proposed remedies to protect local companies after shelving the review process amid the trade tensions. It cited people familiar with the matter as its sources. Bloomberg did not say who had asked the ministry to speed up the review.
Mr. Schumer told reporters that he is worried about the next step.
“My worry after this ZTE thing is China will offer us some small-term palliative,” he said. “They’ll say, ‘OK, we’ll buy some of your products,’ and we won’t be tough on them stealing intellectual property.”
Mr. Ross said of the new round of trade talks, “It’s difficult to handicap the outcome. But my hope is that the strong personal relationship between President Trump and President Xi will facilitate an agreement, just as it seems possibly to be doing relative to North Korea.” He was referring to Beijing’s help in promoting denuclearization talks scheduled for June 12 in Singapore.
“One sure thing is that the president meticulously honors his campaign promises, and key among them is making our trade relations with China much more fair,” Mr. Ross said.