Trump and the Senate's cold war over ZTE is about to turn hot

At this point, the battle lines over President Trump's trade policies are pretty hardened: Trump and his White House team are the bomb-throwing nationalists, provoking conflicts with China as well as Western allies. Meanwhile, the old hands of the Washington establishment — often represented by the Senate — have emphasized global cooperation and trade.

But on at least one issue, that script is about to get flipped.

The question at hand is what to do about ZTE, a major Chinese telecommunication company and the fourth largest supplier of mobile phones here in America.

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You might remember when ZTE got itself in the news back in May: A White House investigation, which began all the way back in 2012, concluded that ZTE had violated various economic sanctions against selling parts to Iran or North Korea. The company also violated the terms of an initial settlement that fined it $1.19 billion in 2017 for this same behavior. So the Commerce Department reimposed a seven-year ban on ZTE doing any business with American companies.

This essentially amounted to a death sentence for the company. Since ZTE employs around 70,000 people and had $17 billion in sales in 2017, the Chinese government did not take this lying down. Their officials reportedly threatened there would be no trade deal with the U.S. if ZTE wasn't spared. And in mid-May, the normally anti-China, America-first Trump tweeted that he had told Commerce to find a fix and get ZTE back in business. (Plenty of observers are also suspicious about a $500 million loan that Chinese banks made to a Trump real estate project in Indonesia just before the president's reversal.)

Earlier this month, Commerce Secretary Wilbur Ross said an agreement had been reached with ZTE: In exchange for allowing the company to trade with America again, ZTE would pay a $1 billion fine, replace its management, and allow U.S. officials to conduct oversight of its operations.

This is where things get interesting.

Reaction to the deal from politicians on both sides of the aisle was angry and immediate. And it was the Senate, normally a staid and sober institution, that reacted the most forcefully: Sens. Chris Van Hollen (D-Md.) and Tom Cotton (R-Ark.), along with Senate Minority Leader Chuck Schumer (D-N.Y.), got an amendment added to the National Defense Authorization Act (NDAA) that would scuttle Commerce's deal and resurrect the ban on doing business with ZTE. It would require Trump to certify that ZTE is in compliance for a full year before lifting the bans. Cotton's involvement is especially noteworthy since he's been a long-time Trump ally. The senators also have support from other conservative stalwarts, like Sen. Marco Rubio (R-Fla.) and Sen. John Cornyn (R-Texas), the Republicans' second-in-command in the chamber.

In fact, they went further. The amendment not only went after ZTE, it also banned the U.S. government from doing any business with or giving loans to an even bigger Chinese telecommunications firm called Huawei. The latter is the world's third-largest supplier of smartphones, it brought in over $90 billion in 2017, and it employs 180,000 people. For years, suspicions have swirled that heavy American reliance on Huawei's products could allow the Chinese to spy on U.S. communications. The government hasn't nailed down evidence of misbehavior by the company the same way it has with ZTE, but previous reports at least raised concerns from industry experts and former Huawei employees that it's falling afoul of various U.S. laws.

The Senate passed the NDAA with the amendment Monday night.

Of course, support for the amendment is not universal in the Senate or the House, so it's conceivable the language could get watered down or eliminated in conference before it reaches Trump's desk. But the NDAA bill is considered must-pass legislation, which shows how serious the senators are about cracking down on both ZTE and Huawei: Should the amendment turn into a sticking point, or if the White House threatens to veto the NDAA over the amendment, the controversy would force a massive funding bill for U.S. defense back to the drawing board. "I talked to my colleagues on the Intelligence Committee and they are pretty dug in on this," said Sen. Bob Corker (R-Tenn.).

Ross went to Congress to lobby against the amendment. But it's unclear if the White House would actually go to the mat and threaten a veto over it. "I don't think the president cares about ZTE. Someone told me that he gave them a wink and a nod and told them he didn't care," Corker added. "I think [Trump] did what he did for the Chinese leader but doesn't really care what Congress does."

Nationalism has always played a big role in Republican politics. But cutting taxes and regulations for corporations is equally, if not more, important. The GOP has generally shied away from expressing nationalism through aggressive U.S. trade policies, and has instead focused on national security issues. That's certainly where the Republican senators amassed against ZTE and Huawei are coming from.

Trump, on the other hand, has been happy to deploy economic policy in defense of nationalism as well. Indeed, to the extent he's used laws meant for national security to slap tariffs on China and other countries, it's been a rather obvious pretext for starting trade fights in the name of jobs. But he also wants to be seen as America's dealmaker-in-chief, so if he ultimately forces other countries to the bargaining table — as seemed to happen with China on ZTE, initially — he's fine with that too.

All of which is how we've arrived at the odd impasse of the normally laissez-faire Senate trying to pick a trade fight with China, while the Trump administration pushes for comity and the cessation of hostilities.

The only remaining question is whether Trump will actually fight to preserve the ZTE deal. If the president is comfortable with showboating, and he certainly seems to be, he could just blame the Senate for scuttling the deal. Or if he's worried about losing face on the international stage, he could just veto the NDAA and denounce the Senate for trying to tie his hands in negotiations.

Either way, like most things in Washington these days, it all comes down to Trump.