President Trump Pledges to Help Chinese Company ZTE

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President Donald Trump today announced his support for Chinese telecommunications giant ZTE. This is a striking turn of events as just a few months ago as US regulators announced a seven year ban on US component makers from selling to ZTE. The components, such as modems, memory chips, and processors, power many of ZTE's devices that it sells around the globe and are pivotal as they are not easily replaced by a non-US source of parts.

The US and China are embroiled in an escalating trade war which we've covered a bit here, here, here, here, and here.

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Today's move mark's a radical departure from what we've been observing over the last few months as it demonstrates that the Trump Administration is indeed willing to finally bargain instead of sending additional threats to the Chinese.

It appears President Trump wants to reverse the ban of components, which allow the manufacturer to continue to produce its highly popular mobile handsets. The news was broke via Presidential Tweet:

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The President has outlined the plan amid tense trade negotiations the world's two largest superpowers are currently working out. However, the original embargo on companies selling to ZTE was never about economic policy; it was about national security policy.

Lawmakers have turned an increasingly suspicious eye towards major Chinese electronics and telecom equipment manufacturers as fear has arisen over potential spying and infrastructure integrity concerns and the ban on any parts getting sold to ZTE was a direct result of this. Some congressmen were quick to point this out:

Remember, the pressure was so great that AT&T backed out of a massive deal it was on the brink of signing with another Chinese device maker, Huawei just a few months ago.

It remains to be seen which concessions the US may receive as a result of this sudden departure on the US stance towards ZTE. While there is surely a national security concern on the propogation of Chinese electronics; the Trump Administration must see an economic benefit that outweighs this risk.

The author has no position in any of the stocks mentioned. NewAgeAds LLC has a disclosure and ethics policy.
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