Why the US-China trade talks could hinge on ZTE

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In January, the lawmakers proposed a bill that would ban the U.S. government from using Huawei or ZTE phones, citing a threat to national security. "As competition becomes more intense in this sector, it could also help bring better services to ordinary consumers in China", he said.

The quickest way to combat the trade imbalance is with tariffs, but the danger of USA imposed tariffs is that China, among other countries, will react with their own tariffs, which will in turn spark an all-out trade war that threatens the health of the global economy.

The U.S. Commerce Department last month blocked ZTE Corp., a major supplier of telecom networks and smartphones based in southern China, from importing American components for seven years.

Global shares were mixed Tuesday amid continuing uncertainty over trade tensions between China and the U.S. Investors were watching for U.S. retail sales data, due later in the day, for further clues on the health of the world's biggest economy. This sometimes leads to glaring contradictions, like an announcement to end a suspension of economic sanctions on Iran on May 8th, while announcing five days later, with his comments on ZTE, that the US government would only enforce those sanctions selectively.

Derek Scissors, a resident scholar at the American Enterprise Institute, a right-leaning think tank, wrote in a blog post that proposing to lift sanctions on ZTE raises concerns that "President Trump will be guilty of what he correctly accused his predecessors of - letting China harm the United States".

ZTE had earlier this month requested that the United States lift the seven year ban on U.S. companies supplying it with software and components.

When President Trump tweeted a pledge on Sunday to help save China's second-largest telecommunications firm because penalties imposed by the U.S. Commerce Department had cost too many Chinese jobs, many were left slack-jawed to hear such words coming from the "America First" president. The two countries are involved in some kind of trade war, and president Donald Trump has provided an update on its progress on his Twitter account. "I call it a trade coalition of the willing".

Kudlow was critical of ZTE in an interview with the Politico news outlet, saying it was a "very poorly run company" with "many internal flaws".

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"I hope the administration does not move forward on this supposed deal I keep reading about", Republican Senator Marco Rubio said. "You should care more about our national security than Chinese jobs".

"I don't expect all core differences in the US-China trade relationship to be resolved", said UBS chief China economist Wang Tao. If ZTE is a U.S. company, Trump would be in big trouble and face a lot of legal issues about a USA president talking about a United States company that has been charged with similar violations.

"We're still very far apart", he said.

As of Monday, the USTR's Office has received over 2,700 filings of written comments regarding the administration's tariff approach, with major US business groups opposed to tariffs on Chinese products.

In return for rescuing ZTE, Mr. Trump may be hoping to persuade China to drop proposed tariffs on US agricultural and other products.

According to the National Review, China has just announced that it is lending a state-owned construction company, a half billion dollars.

But the case of ZTE highlights the importance of high tech in the U.S. This notion is behind Beijing's industrial policy, known as "Made in China 2025".