U.S.-China Trade Talks End in an Impasse

“Chinese officials know these talks are precarious, but may underestimate the domestic political cost Trump now sees in lifting the ZTE ban without major concessions from China,” said Andrew Gilholm, the director of China analysis at Control Risks, a political and security consulting firm. “If the ban stays, Beijing’s retaliation will definitely go up a gear.”

Chinese state media have glossed over why the United States sales ban was imposed: ZTE’s ties to North Korea and Iran. The company’s links to North Korea in particular are politically inconvenient for China because Beijing has claimed that China’s enforcement of international sanctions against North Korea helped pave the way for the coming summit meeting in Singapore between Mr. Trump and North Korea’s leader, Kim Jong-un.

State news outlets have portrayed the ZTE decision as having been made by Mr. Ross’s Commerce Department, and they have suggested that it is merely a bargaining ploy as part of trade negotiations. But though the Bureau of Industry and Security, a law enforcement agency, is legally part of the Commerce Department, it has considerable autonomy.

Agents of the bureau carry badges and guns, and the agency has played a central role for decades in trying to prevent Iraq and Iran from obtaining nuclear weapons technology.

Further trade frictions between the United States and China could also create difficulties for Vice Premier Liu He, a close ally of President Xi Jinping. Mr. Liu, an economist, is seen as one of the few moderates in a Chinese government increasingly dominated by advocates of greater state control of the economy.

“Trump’s strategy does no favors for the moderates like trade negotiator Liu He who are eager to take China down a more manageable path of market and financial reforms, and such reforms would indeed be good for U.S. commercial interests,” said James Zimmerman, a partner in the Beijing office of the law firm Perkins Coie and a former chairman of the American Chamber of Commerce in China.

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