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Huawei arrest in Canada adds new wrinkle to fraught China-U.S. trade relations

In this July 4, 2018, file photo, the Huawei logo is seen at a Huawei store at a shopping mall in Beijing. If trade ties between China and the United States had a Facebook page, this week's relationship status would surely read, "It's complicated." THE CANADIAN PRESS/AP Photo/Mark Schiefelbein, File

WASHINGTON — If trade ties between China and the United States had a Facebook page, this week’s relationship status would surely read, “It’s complicated.”

Even more so now: Investors, barely over the market-roiling mixed messages out of last weekend’s supposed tariff detente between President Donald Trump and Chinese counterpart Xi Jinping, fretted anew Thursday at the arrest in Vancouver of Meng Wanzhou, the chief financial officer of Huawei Technologies Ltd.

Huawei, of course, isn’t just any tech firm. It’s China’s largest mobile phone maker, the crown jewel in Xi’s national IT ambitions, a privately held juggernaut with projected 2018 sales of more than $102 billion US that has already overtaken Apple in smartphone sales and has Samsung squarely in its sights.

And Meng isn’t any old executive; the daughter of Huawei founder Ren Zhengfei, she’s described in some circles as “corporate royalty” in China. On TV and social media, commentators likened her arrest to the detention in China of a Mark Zuckerberg sibling or a cousin of Steve Jobs.

Authorities in Canada, who detained Meng at the direction of the U.S., were tight-lipped, citing a publication ban requested by Meng herself. In Washington, Department of Justice officials also refused to comment. But the Wall Street Journal has reported that U.S. authorities are investigating Huawei for possible violations of U.S. sanctions on Iran.

Trade experts warned against tying the arrest too closely to the trade tensions.

“I don’t think it’s in anyone’s interests to conflate the two,” said Patrick Leblond, an international trade expert and senior fellow at the Centre for International Governance Innovation. After all, the Chinese can hardly point fingers when it comes to detaining people from other countries, he added.

“This is something that the Chinese do too, and I know on the Canadian side we’ve tried to keep these things separate, so for now I would expect it would remain like that. But who knows?”

It’s been a busy week for those trying to chart the status of America’s relationship with China.

Trump went into the G20 summit last weekend looking to extract concessions from his greatest trade rival, He was convinced that China is a global trade cheat, stealing U.S. technology or strong-arming foreign companies into handing it over, then building it into products that it sells it back to American consumers.

He emerged confident that he’d won a 90-day truce, but markets were not persuaded — especially after his famous “Tariff Man” tweet that threatened to ramp up the punitive levies that he and his supporters are convinced comprise a win-win strategy that brings billions of dollars into U.S. coffers.

The uncertainty took a break Wednesday as Americans paused to pay tribute to the late 41st president, George H.W. Bush. But it was back in full force Thursday with news of Meng’s arrest.

Canada has already suffered from the trade friction, especially because of steel and aluminum tariffs imposed by the U.S. in the name of preventing Chinese exports from trickling through leaky borders into the United States.

But in some ways, Canada has benefited from the U.S.-China trade war, said Leblond: lobster exports to China have spiked as exporters in Maine send their bounty north to avoid Chinese tariffs, since there are no requirements to indicate whether they’ve been caught in U.S. or Canadian waters. Other Canadian agricultural exports, such as soybeans, have also seen an increase, he added.  

The major risk is of collateral damage from a trade war between the world’s two largest economies. 

“The bigger fear is more that the trade war will have an overall impact on the global economy, slowing it down and creating uncertainty, and that obviously is not something that would be good for the Canadian economy,” Leblond said.

“Given the integration of the Canadian economy with the U.S. economy, if exports to China from the U.S. — especially in manufactured goods — is affected, indirectly that could affect Canadian companies that are suppliers to American companies, or even companies with operations in Canada.”

Sen. Angus King, an independent member of the Senate Intelligence Committee, suggested that Meng’s arrest likely has more to do with the lingering risk Huawei poses to U.S. national security than it does with Trump’s trade agenda.  

“There’s a grave concern in this country, in Europe, in other countries, that embedding Huawei equipment in the next generation of the 5G generation of cellular, for example, creates a really serious national security risk,” King told CNN.

“That’s an overarching issue in the background here that is one that I believe we really have to take seriously.”

— With files from The Associated Press

— Follow James McCarten on Twitter @CdnPressStyle

James McCarten, The Canadian Press