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Trump defends intervention to help China telecom company ZTE

Reuters  |  WASHINGTON 

By and Karen Freifeld

(Reuters) - on Monday defended his decision to revisit penalties for Chinese company Corp for flouting U.S. sanctions on trade with Iran, saying the is a big buyer for U.S. suppliers.

Trump, known for his fiery rhetoric against Chinese trade practices he says hurt U.S. jobs, faced backlash from both Republican and Democratic lawmakers after he pledged to work with Chinese to help ZTE, saying too many jobs in had been lost.

The company shut its main operations after the Commerce Department banned U.S. companies from selling components to for seven years after it violated the terms of a settlement deal for illegally shipping goods made with U.S. parts to and

"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 and my personal relationship with Xi," Trump said on Monday.

paid more than $2.3 billion to 211 U.S. exporters in 2017, a senior ZTE said on Friday. U.S. companies are estimated to provide 25 percent to 30 percent of components used in ZTE's smartphones, network gear and other products.

The is exploring options besides a supplier ban to punish ZTE <000063.SZ> <0763.HK>, China's second-largest telecom maker, said.

"ZTE did do some inappropriate things ... the question is are there alternative remedies to the ones we had originally put forward and that's the area we will be exploring very, very promptly," Ross told journalists at the

ZTE declined comment on Monday. Ross did not provide details about options under consideration.

Doug Jacobson, who represents ZTE suppliers, said Trump's tweet "gives ZTE light at the end of the tunnel."

Shares of ZTE suppliers rose after Trump's pledge. ACIA.O, an optical component maker, jumped nearly 9 percent.

Since the ZTE ban went into effect last month, U.S. suppliers have sought guidance from the Commerce Department about inventory.

The companies would like to withdraw the inventory so they can sell the components elsewhere. But in a possible indication the government is considering easing the ban, suppliers are being told to wait a week or so before taking further action, a source familiar with the situation said.

WHAT HAPPENS NEXT

Trump's olive branch comes as his top trade and economic officials prepare to meet this week in Washington with Chinese for talks on trade concerns ranging from intellectual property protections to farm goods to

Trump has threatened $150 billion in tariffs on imports of Chinese goods, and has threatened to retaliate against U.S. exports, including soybeans and aircraft.

Ross said "the gap remains wide" on how to address the trade imbalance between the two nations.

Sources briefed on the matter said demanded the ZTE issue be resolved as a prerequisite for broader trade talks.

reported would back away from threats to slap tariffs on U.S. farm goods in exchange for easing the ban on selling components to ZTE, citing people in both countries briefed on the emerging deal.

Two sources, who declined to be identified, told on Sunday China was willing in principle to import more U.S. in return for Washington smoothing out penalties against ZTE.

A U.S. briefed on the matter said a possible deal involving ZTE and U.S. could include Chinese concessions to allow completion of Qualcomm Inc's $44 billion takeover of , which has been delayed by a lengthy antitrust review by Chinese regulators.

NXP shares surged up to 11.7 percent on Monday.

CAUGHT OFF GUARD

U.S. intelligence officials on Sunday evening and Monday said they were caught off by Trump's reversal and remained concerned about security threats they said the Chinese company poses to the and its allies.

Speaking on the condition of anonymity, three officials said the Chinese government, which has close ties to ZTE, could use its and other technology to spy on U.S. citizens, companies and government activities.

By handing the decision to the Commerce Department, Trump appeared to prioritize commercial issues over security concerns, and cut national security officials out of the process, they said.

Republican senators and have backed legislation that would prevent the from buying or leasing equipment from ZTE or Huawei, the largest Chinese

"I hope this isn't the beginning of backing down to China," Rubio said on "We are crazy to allow them to operate in U.S. without tighter restrictions."

The said Trump wanted Ross to look at the issue "consistent with applicable laws and regulations" after Chinese officials raised the matter in various talks.

"This is part of a very complex relationship between the and China that involves economic issues, national security issues, and the like," said on Monday.

(Reporting by Karen Freifeld, David Lawder, Doina Chiacu, Susan Heavey, Roberta Rampton, Steve Holland, John Walcott, David Shepardson; Writing by Roberta Rampton; Editing by Meredith Mazzilli)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Tue, May 15 2018. 02:40 IST
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