HOW TO THINK ABOUT IT

Everything is connected... Trump says helping ZTE is part of a “larger trade deal,” even though both Ross and Larry Kudlow, his top economic adviser, claim that any decision on ZTE is not linked to broader trade talks. So what’s really going on? Some observers argue that the Trump administration is trying to defuse a potential trade war, or to lighten up on China — North Korea’s main partner — ahead of talks with Kim Jong Un.

... maybe a bit too connected. There’s a darker explanation too: Trump’s reversal came just days after a Trump-licensed theme park in Jakarta received a $500 million loan from the Chinese government. The Trump Organization stands to make at least $3.7 million from the project, a fact most legal experts believe violates the U.S. Constitution’s emoluments clause, which prevents presidents from collecting money from foreign governments.

The art of the concession? Providing relief to ZTE was one of the top trade demands that the Chinese government gave to U.S. officials last month, and it appears that Trump may have acceded to that demand before extracting anything in return. Some observers argue that Trump’s apparent concession — and his flip-flop on ZTE — will only embolden other U.S. negotiating partners, including North Korea and the much larger Chinese telecommunications giant Huawei.

Room for compromise. The ZTE affair illustrates just how dependent the Chinese and American economies are on one another: While U.S. tech companies need Chinese production, Chinese firms need U.S. technology. The U.S. also wants to reduce its trade deficit, adjust unfavorable tariffs, and win both protections on intellectual property and more access to the Chinese market for American investors. While it’s unlikely any big structural changes will occur in China, it has room to make concessions: China could further open up free-trade zones in Hainan province and reduce tariffs on U.S. cars, high-tech and agriculture.

WHAT TO READ

China Cares a Whole Lot About Pigs in Iowa, by Mara Hvistendahl at The Atlantic
"Fully one in four rows of Iowa soybeans end up in China, meaning that Iowa’s farmers are, essentially, being kept afloat by China’s middle class."

Why Trump’s Desire to Bail Out Chinese Tech Giant ZTE Is So Alarming, by Mark Sullivan in Fast Company
"ZTE is the closest thing we have to a poster child for the Chinese trade mischief that Donald Trump railed about throughout his 2016 presidential campaign."

WHAT TO WATCH