• Doug Palmer
• 05/21/2018

U.S. Treasury Secretary Steven Mnuchin said Monday that the Trump administration was considering possible changes to a penalty imposed on Chinese telecommunications giant ZTE, but insisted that had no connection to ongoing trade talks.

"I think there are plenty of people who are trying to make this out to be something it's not," Mnuchin said in a interview on CNBC about a preliminary trade deal struck last week with China. "There was no quid pro quo. There were discussions, but this is a completely separate issue that the president asked us to look into."

Heading into last week's negotiations, news reports said that China would agree to drop its retaliation on about $3 billion worth of U.S. agricultural exports if the U.S. eased off on sanctions on ZTE. Beijing originally threatened the retaliation in early April, after President Donald Trump imposed new tariffs on steel and aluminum products.

But trade tensions escalated after the Commerce Department in April imposed a seven-year ban on ZTE doing business with American companies after it was caught violating the terms of a penalty agreement after it made illegal sales to Iran and North Korea. The ban prompted ZTE to announce earlier this month that it was ceasing major business operations.

Trump helped fuel talk of a possible trade-off when he tweeted last weekend that he had asked the Commerce Department to look into easing the penalty on the company at request of Chinese President Xi Jinping.

Mnuchin said on Monday there was nothing unusual about Xi asking Trump to review the penalty because Trump often phones world leaders to ask them to do favors for U.S. firms.

"The president asked myself and the Commerce secretary to look into it. He didn't dictate any terms. He just asked us to look into it," Mnuchin said.

"The [Commerce Department's] intent was not to put the company out of business. It was an enforcement issue," Mnuchin continued. "We're reviewing some possible changes by the Commerce Department to the enforcement and I assure that they will support our national security position."

Trump's chief economic adviser Larry Kudlow underscored that point to reporters at the White House. "If anybody thinks that any changes are going to let them off scot-free they are wrong," Kudlow said.

The Commerce Department has not responded to questions about how quickly a decision could come on changes to ZTE's penalty.