Donald Trump has angered US security hawks by softening his stance on Chinese telecoms company Huawei — a concession even Beijing had not expected to win as part of a trade truce with President Xi Jinping at the G20.
As part of the trade compromise brokered on Saturday in Osaka, the US president agreed not to impose new tariffs on Chinese goods and China agreed to buy US agricultural produce. In a less expected twist, Mr Trump also agreed to reverse a decision that had in effect imposed a ban on American groups to sell software and equipment to Huawei.
Mr Trump first said he told Mr Xi he would only consider addressing Huawei issues at the “very end” of the trade talks. But on Sunday he revealed he reversed his position on the sale of gear to Huawei “at the request of our high tech companies and President Xi”.
“Trump gave the Chinese a clear sense that he is transactional on China rather than ideological — which they take as good news,” said Dennis Wilder, former head of China analysis at the CIA. “National security hawks are unhappy and will try to block his Huawei move in Congress.”
Senator Marco Rubio, who supports a hard line on China, said Congress would have to respond: “If President Trump has agreed to reverse recent sanctions against #Huawei he has made a catastrophic mistake,” he tweeted.
When Mr Trump earlier this year suggested he would consider including Huawei in any trade deal, it sparked criticism from those arguing the company posed a security threat. They feared the president would overlook their concerns to meet his campaign pledge about reducing the US trade deficit with China.
From China’s perspective, the meeting went better than expected, in line with Mr Xi’s other encounters with Mr Trump, whose appetite for fighting wanes when in the same room as his Chinese counterpart.
Before the gathering of world leaders, Beijing was confident that he would not impose new tariffs on Chinese exports and that he would agree to a resumption of trade talks in return for token purchases of US agricultural goods.
But Chinese officials and analysts did not expect any narrowing of the trade differences or a softening on Huawei and merely sought to halt the downward spiral in relations, people familiar with China’s preparations said. A resumption of trade talks is “probably the best outcome we can expect,” Shi Yinhong of Renmin University had said before the G20.
So Mr Trump’s offer to ease the pressure on Huawei and his comment that the nations could become “strategic partners” came as a surprise. Illustrating the general disbelief in China, Huawei tweeted “U-turn?” on Saturday.
Asked by the Financial Times if he planned to remove Huawei from the “entity list” — which dictates which US companies get licences to export to Chinese companies on the list — Mr Trump said it was under discussion. One official said the administration was also looking at other ways to enact the change.
Larry Kudlow, a senior White House economic adviser, said on Sunday the change in tack was not a “general amnesty” for Huawei.
“All that’s going to happen is the Commerce Department will grant some temporary additional licences where there’s a general availability,” he told Fox News. “For example, some of the chipmakers in the United States are selling products that are frankly widely available from other countries.”
However, Bonnie Glaser, a China expert at the Center for Strategic and International Studies, pointed out that Mr Trump had also shifted his stance on ZTE, another Chinese telecoms group, in 2017 after a request from Mr Xi.
“Trump saved ZTE when he had a stranglehold on it, so no one should be surprised,” Ms Glaser said of the latest presidential reversal on Huawei. “Trump obviously views Huawei has a bargaining chip. He has said repeatedly that Huawei could be part of a deal.”
Similarly upbeat meetings between the two leaders — in Mar a Lago and Beijing in 2017 and in Buenos Aires last year — were all followed by breakdowns in trade talks. The odds of a similar falling out later this summer are high given the remaining differences on trade and the likelihood Mr Trump will face a bipartisan backlash on Capitol Hill to any relief for Huawei.
China Daily, a Chinese government mouthpiece, pointed out in an editorial that “rekindling hopes of a deal” was similar to the outcome when the two leaders met at the G20 in Buenos Aires. It added that while the Osaka meeting produced “a greater likelihood of manoeuvring a deal” there was “no guarantee”.
“The US side is frustrated that China will not compromise on issues related to sovereignty and vital national interests,” said Zheng Yongnian, director of the East Asian Institute at the National University of Singapore. “And the Chinese side is frustrated by the US since it keeps raising more demands during the talks.”
Chad Bown, a trade expert at the Peterson Institute for International Economics, said there was “no evidence” that the sides were any closer to a trade deal after Osaka. “On trade, the only thing we know for certain is President Trump’s commitments to tariffs,” he said.
