Published: Mon, May 14, 2018
Money | By Hannah Jacobs

Trump Makes 'Extraordinary' Move to Save Chinese Firm

Trump Makes 'Extraordinary' Move to Save Chinese Firm

In a tweet, Mr Trump said he is working with Chinese President Xi Jinping to get jobs back into China.

Trump's reversal could have a significant impact on shares of American optical components makers such as Acacia Communications and Oclaro which saw their stock prices fall when US companies were banned from exporting goods to ZTE.

It's not exactly clear how Trump plans to help ZTE or what he's instructed the Commerce Department to do.

Analysts are watching to see if Trump's conciliatory stance will help ease the tensions over trade between the United States and China. ZTE had been working to get the denial order overturned, and had pegged its hopes on broader bilateral trade talks between the U.S. and China. It was just last month that Commerce Secretary Wilbur Ross called ZTE's illegally sending equipment to North Korea and Iran "egregious behavior".

Beijing has closely followed the developments around ZTE, a company with 80,000 employees headquartered in southern China.

"But be cool, it will all work out!" he added.

Mr Trump's reversal will likely have a significant impact on ZTE's USA suppliers, such as Qualcomm and Intel. American companies are said to supply 25% to 30% of components used by ZTE, which makes smartphones and gear for telecom networks. He has often cast the country's business practices as a threat to the American workforce, and announced in March his administration would impose $50 billion worth of tariffs on imported Chinese goods to combat what he described as "unfair" trade practices by China.

United States military exchanges also have stopped selling smartphones made by ZTE and Huawei Technologies after the Pentagon warned that the devices pose a security risk to military personnel and operations, the defence department said earlier this month.

Experts said Trump's policy reversal was unprecedented. The company has already been pushing for a solution that could limit or reverse the export ban, but this doesn't guarantee that officials can give ZTE the reprieve it wants. The firm said 10 May it's suspended all major operations.

California Representative Adam Schiff said: "Our intelligence agencies have warned that ZTE technology and phones pose a major cyber security threat". Oclaro, which earned 18 percent of its fiscal 2017 revenue from ZTE, fell 17 percent.

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