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Trade War

Trump hints at easing of ZTE sanctions

Concession on Chinese smartphone maker likely to play into trade negotiations

ZTE suspended its main operations after a U.S. ban on exports of American supplies to its business.   © Reuters

WASHINGTON -- U.S. President Donald Trump vowed Sunday that he and Chinese President Xi Jinping would cooperate to give Chinese smartphone maker ZTE "a way to get back into business, fast," suggesting a relaxation of U.S. sanctions on the company. ZTE has been forced to suspend its main business operations due to a seven-year halt on transactions with U.S. companies.

"Too many jobs in China lost," Trump wrote on Twitter. "The Commerce Department has been instructed to get it done!"

In trade talks with U.S. in early May, China demanded an easing of sanctions on ZTE, as the world's two largest economies sought to relieve simmering trade tensions. Trump may be looking to smooth the ongoing negotiations, as U.S. officials prepare for the next round of talks to be held in Washington this week with Chinese Vice-Premier Liu He.

ZTE's business has been crippled by the ban imposed by the U.S. Department of Commerce on April 16 as a penalty for the smartphone maker violating a $1.19 billion settlement with the government last year over illegal exports of technology to Iran and North Korea.

The resulting seven-year ban on transactions with U.S. companies has undermined the company's ability to source components, hampering the production and sale of goods, including its mainstay Android smartphone business. ZTE has halted trading of its shares in Hong Kong and Shenzhen.

The intervention follows the Trump administration's decision to pull back on sanctions against Russian aluminium producer Rusal in April, and its reinstatement of sanctions on Iran as it exits a nuclear deal with the country.

Reaction to Trump's announcement on ZTE has been mixed, with domestic concerns about security risks from "back doors" in Chinese technology adding to worries over ZTE's inclusion of sensitive U.S. components in its sales to Iran and North Korea.

U.S. officials have maintained that the April ban was not related to the broader trade spat with China, but the concession is expected to play into negotiations as the two countries attempt to resolve their differences.

"Whether or not ZTE had been punished as a card played by Washington in its trade war against China, President Trump's latest decision is a good decision," China's state-owned Global Times editor Hu Xijin wrote on Twitter.

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