The arrest of a Chinese tech giant Huawei’s chief financial officer, Meng Wanzhou, in Canada, has brought the US China trade deal in a complicated phase yet again.
On Saturday, President Donald Trump met the Chinese President Xi Jinping to discuss the bilateral issues on the sidelines of the G20 Summit in Buenos Aires, attaining the global attention. However, the timing of this significant event for the US clashed another dramatic episode.
Hours after the two leaders agreed to call a 90-day truce in the trade dispute, the top Chinese technology executive, Wanzhou was arrested in Vancouver, by the instructions of the US authorities. However, it wasn’t made public until late Wednesday.
A victorious juncture for the Trump administration, the detention brought multiple unexpected consequences. Along with intensifying the US China trade tensions, the arrest also set off a market meltdown on Thursday. The Dow dropped by as much as 785 points before recovering.
David Dollar, former economic and financial emissary to China for the Treasury Department, said, “Markets were already nervous before this arrest information came out.”
He also said, “After some initial euphoria it became clear that there weren’t a lot of detailed preparations, and therefore nobody really knew what was the likelihood of this agreement lasting.”
Earlier this week, the Dow had crashed by nearly 800 points, despite the truce between the two countries.
Meng Wanzhou’s arrest
The arrest of Meng Wanzhou, the daughter of the founder of Huawei, is substantial. It followed this year’s reports regarding the Justice Department’s investigations on whether Huawei had violated American sanctions on Iran.
According to the White House officials, the DOJ is seeking Wanzhou’s extradition, on suspicion of violating the US sanctions against Iran.
The charges on the Huawei executive have not yet been specified by the US and Canadian governments.
In a statement, Huawei said that it “has been provided very little information regarding the charges and is not aware of any wrongdoing by Ms. Meng,” adding that “Huawei complies with all applicable laws and regulations where it operates, including applicable export control and sanction laws and regulations of the UN, US and EU.”
Huawei is long viewed as a national security threat by the US intelligence agencies. In an interview with National Public Radio, the national security adviser, John Bolton, said that the Chinese technology has represented “enormous concerns for years” for the US over the theft of its intellectual property and forced technology transfers, which are two major issues of the US China trade negotiations.
According to CNN, an official from Trump administration said that the Washington would seek Wanzhou’s extradition from Canada, which he said could provide US with an advantage against China as trade talks advance.
The arrest of Meng Wanzhou is being speculated to escalate the US China trade tensions, though it didn’t have an instant consequence. Besides, no such signs have been received from China’s end so far.
Beijing offered a constrained response on the detention of Wanzhou, where only public outrage was expressed over the issue.
On Thursday, the Commerce Department of China represented conviction that the US China trade agreement could still be reached within 90-day deadline. However, the department urged the US and Canada to “immediately correct the wrongdoing” and restore Wanzhou’s “personal freedom.”
The muted response by China is considered a sign that it wants to dodge any situation which could upset the negotiations with the US President.
Elizabeth Economy, a senior fellow at the Council on Foreign Relations, said, “It really speaks to the depth of the Chinese concern in their economies and their desire to get the US-China relationship back on a more even keel.”
She also said, “At any other time, if the Chinese were feeling more confident, if they were feeling their economy were more robust, the response would have been to cancel any pledges they made. This company is a national champion, and the daughter of the founder, who is the CFO, it doesn’t get any tighter with the leadership of the elite than this.”
Although the Trump administration is considering it as a sort of victory, the existential threat to the US China trade truce cannot be avoided. The administration’s strategy of targeting two priorities at once could weigh on the US.
The expected benefits of Trump’s tactics might prove to be true in the short run, but they are more likely to lay long term risks to the relations between the two countries. While Trump is trying to fulfill all of his interests, he must remain aware that the representatives on the other side of the table could retaliate against the United States in the future.
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