Updated at 4:21 p.m. ET
Commerce Secretary Wilbur Ross says he will explore other ways to punish a Chinese cellphone manufacturer, after a surprising tweet from President Trump that said the original penalty was too harsh.
Trump tweeted on Sunday that smartphone giant ZTE was losing "too many jobs in China" as a result of U.S. sanctions. He said he was working with Chinese President Xi Jinping to find a solution.
"Commerce Department has been instructed to get it done," Trump tweeted.
ZTE had originally been fined for illegal sales to Iran and North Korea, and the company agreed to take corrective action. When U.S. regulators found the company had not complied with that settlement, they went further and blocked U.S. suppliers from selling parts to ZTE. That was described as a "death sentence" for the company, which employs some 70,000 people.
"ZTE did do some inappropriate things," Ross told the National Press Club Monday. "They've admitted to that. The question is, are there alternative remedies to the one that we had originally put forward. And that's the area we will be exploring very, very rapidly."
The conciliatory gesture comes as U.S. officials are preparing to hold wide-ranging talks in Washington, D.C., later this week with China's top economic official, Liu He.
A White House spokesman said that ZTE is just one piece of a rapidly changing puzzle.
"It's part of the U.S. relationship with China, which is complex," said deputy press secretary Raj Shah. "It has economic factors. It has national security factors. This is just one of many factors."
Senate Minority Leader Chuck Schumer, D-N.Y, who has agreed in the past with the president's get-tough rhetoric on China, complained that the administration appears to be blinking.
"I'm now very worried," Schumer told reporters Monday. "My worry after this ZTE thing is China will offer us some small-term palliative. They'll say, 'OK, we'll buy some of your products,' and we won't be tough on them stealing intellectual property."
Sen. Marco Rubio, R-Fla., also took the president to task.
"Problem with ZTE isn't jobs & trade, it's national security & espionage," Rubio tweeted. "We are crazy to allow them to operate in U.S. without tighter restrictions."
Our intelligence agencies have warned that ZTE technology and phones pose a major cyber security threat. You should care more about our national security than Chinese jobs. https://t.co/7Ygh7805jg
— Adam Schiff (@RepAdamSchiff) May 13, 2018
It would be difficult to find a more quintessential example of the kind of troubling trade practices that the president has long highlighted, which makes his sudden turn in the case of ZTE all the more stunning.
ZTE, the world's fourth-largest maker of cellphones, was found in violation of U.S. rules against selling U.S.-originated technology to certain blacklisted countries. After reaching a more than $1 billion settlement with the Commerce Department as reparation for its Iran and North Korea dealings, ZTE then violated the terms of the agreement by failing to fire some employees and reprimand others who were involved in the illicit technology transfers.
Among other things, the Commerce Department imposed a seven-year ban on the company that prevented it from buying parts from U.S. manufacturers.
The president's tweet on Sunday appears to have undone all that. "President Xi of China, and I, are working together to give massive Chinese phone company, ZTE, a way to get back into business, fast," Trump tweeted on Sunday. "Too many jobs in China lost."
A few hours later, he followed up with another tweet: "China and the United States are working well together on trade, but past negotiations have been so one sided in favor of China, for so many years, that it is hard for them to make a deal that benefits both countries. But be cool, it will all work out!"
Although the origins of the case against ZTE dates back years, as CNET reports, "ZTE disclosed earlier this year that while it had gotten rid of several employees, the company hadn't properly reduced the bonuses of some workers, or issued letters of reprimand. The inaction wasn't consistent with a progress report ZTE issued in July. It's because of those false statements that the Commerce Department decided to act."
Speaking to NPR's All Things Considered on Sunday, CNET Executive Editor Roger Cheng called the president's move "absolutely a shocker," though he added there could be a domestic explanation for the decision.
"ZTE makes smartphones that really utilize a lot of American technology, companies like Qualcomm, which makes processors, or Intel, which makes chips — Corning, which makes display glasses. A lot of these U.S. companies supply major components and software technology to ZTE products," Cheng tells NPR.
"So the argument that ZTE has been making quietly is that they actually invest a lot in the U.S. economy," Cheng says. "Last year, they spent more than $2 billion purchasing technology from U.S. businesses. So, that's probably an argument that helped sway President Trump."
Trump's tweet Monday afternoon suggested that argument has gained favor with him.
"ZTE, the large Chinese phone company, 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 President Xi," Trump posted online.
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