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Huawei arrest may impact trade war truce between China and the United States

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Canada has detained Meng Wanzhou, the Global CFO of Huawei Technologies, following a request by US authorities.

The US and Canadian governments have not provided details of any possible charges. Reports had emerged earlier this year that the US Department of Justice was investigating Huawei.

Foreign organisations doing business in China should be prepared for possible retaliatory actions, including measures directed against US and Canadian citizens. Whether the timing of today’s action is a coincidence or a conscious decision to send a strong message to the Chinese leadership, Ms. Meng’s arrest is likely to complicate future trade talks while calling into question the statements issued after the G20 meeting in Buenos Aires.

The US has previously indicted Chinese individuals on a number of occasions, but Ms Meng’s arrest is the first time a Chinese national has been arrested in another country at the request of US authorities. The bail hearing is set for 7 December and Ms. Meng faces extradition to the US. Her arrest may be connected with the trade war between the US and China. Another possibility is that the US is seeking to demonstrate its hardline approach to Iranian sanctions. This follows the US withdrawal from the Joint Comprehensive Plan of Action, in which Iran agreed to roll back parts of its nuclear program in exchange for sanctions relief from some sanctions.

Ms. Meng’s arrest follows the recent meeting between President Donald Trump and President Xi Jingping at the G20 summit in Argentina. The two leaders agreed to work together over a 90-day period to address “structural changes with respect to forced transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services, and agriculture.” A White House statement noted that President Xi had committed to purchasing an unspecified but “very substantial” amount of agricultural, energy, industrial, and other products from the United States. In return, President Trump agreed to extend the existing 10% tariff on US$200 billion of Chinese imports for an additional 90 days. This tariff had been scheduled to increase to 25% on January 1, 2019.

Ms Meng’s arrest threatens to undermine the limited progress made at the G20 summit. Huawei is regarded by Beijing as a “national champion” and is one of the key players in efforts by China to develop technological parity with the United States.