WASHINGTON (Reuters) - White House economic adviser Larry Kudlow said on Tuesday it was far from certain what steps the U.S. government would take on China's ZTE Corp (HK:0763), which he characterised as an enforcement, rather than trade, issue.
U.S. President Donald Trump has directed the Commerce Department to revisit penalties for telecom equipment maker ZTE for flouting U.S. sanctions on trade with Iran, saying it is a big customer of U.S. suppliers.
Kudlow was critical of ZTE in an interview with the Politico news outlet, saying it was a "very poorly run company" with "many internal flaws."
Trump has directed Commerce Secretary Wilbur Ross to review "remedies" for ZTE, Kudlow said.
"This is principally an enforcement issue, by the way. It's really divorced from the trade story," Kudlow said.
"I think the issue here is how harsh the remedies, how harsh the enforcement," Kudlow told Politico. "The issue here is not simply letting them off but perhaps to do so in a manner that they could conceivably go back into business. I don't want to get that far down the road but I think that's the intent."
Trump, who campaigned for the White House pledging to get even with China on trade practices that hurt American consumers, faced backlash from Republican and Democratic lawmakers after he promised to work with Chinese President Xi Jinping to help ZTE, saying too many jobs in China had been lost.
The company shut its main operations after the Commerce Department last month banned U.S. companies from selling components to ZTE for seven years for violating the terms of a settlement deal for illegally shipping goods made with U.S. parts to Iran and North Korea.
"We don't know what the outcome is going to be - I can't possibly say here," Kudlow said.
Republican U.S. Senator Marco Rubio has opposed any softening on ZTE.
"Clearly President Xi personally intervened for #ZTE but replacing sanctions with fine of $300/$400 million is not a good deal," Rubio said Tuesday on Twitter. "We have leverage to bring fairness back to relationship with #China whose other tech firms Tsinghua, Huawei, BBK, Yiomi & Lenovo rely on U.S. chips as well."
Democratic Senator Ron Wyden warned against giving sanctions relief to ZTE.
The president's comments on ZTE "sound an alarm bell for counterintelligence, cyber security, & red, white and blue jobs. His own top counterintelligence official said ZTE threatens U.S. national security," Wyden said on Twitter.