On the day when Donald Trump and Xi Jinping struck a trade war truce in Argentina, around 7,000 miles away, Canadian authorities made an arrest that will have an impact on the U.S.-China conflict, making it much worse.

The U.S. is seeking the extradition of the chief financial officer of Huawei technologies Co. ,Wanzhou Meng. It convinced Canada to arrest her on Dec. 1. She had been arrested in connection with violating sanctions against Iran.

China in reaction to this , demanded that both countries move to free Meng. However, the foreign ministry said that it was waiting for details of her arrest , saying that the trade talks should continue.

Meng’s arrest is significant for Beijing as she is the daughter of the founder of Huawei, who played an integral part in Xi’s efforts for making China self-sufficient in strategic technologies. While the U.S. commonly extradites drug lords, arms dealers and other criminals, but such a major arrest has grabbed eyeballs.

As per the media reports, Andrew Gilholm, director of North Asia analysis at Control Risks Group, said, “The timing and manner of this is shocking ,” in a telephonic conversation. It’s not often the phrase OMG appears in our internal email discussions, she added.

Right now, Trump’s role in Meng’s arrest is unclear, or if he would intervene at some point. The U.S. leader has spent a past few days trying to convince the world and the equity investors about China agreeing to major concessions, including reducing or removing tariffs on U.S. cars. Stocks fell across Asia on Thursday.

Analysts said it’s more likely the case proceeded separately from the trade talks as part of Trump’s efforts to step up prosecutions against Chinese companies that conduct economic espionage and violate sanctions.

China is almost certain to view Meng’s arrest, will lead to a trade war between the world’s biggest economies. As part of trade talks, Trump has insisted that China stop providing government support to strategic sectors including artificial intelligence and robotics as part of its “Made in China 2025” policy.

Dennis Wilder, a former CIA China analyst and senior director for Asia at the National Security Council, said, “It will definitely complicate the negotiations and they may believe this was done to increase the pressure during this 90-day period,” under President George W. Bush.

“This is sending a signal that there is a new game,” Wilder said of the recent U.S. arrests. “They are trying to deter Chinese espionage and make it clear that there are real consequences”, he added.

Perhaps no company better personifies the perceived trade threat than Huawei. It’s overtaken Apple Inc. in smartphone shipments and aims to surpass Samsung Electronics Co. while targeting record sales of $102.2 billion this year. It’s shooting for the lead in fifth-generation wireless networks and preparing to take on some of America’s biggest chipmakers.

This was the reason that Trump’s administration invoked its name in blocking a Qualcomm Inc.-Broadcom Inc. merger that would’ve been the largest deal ever, saying it would hand the lead in 5G to China.

Huawei has since been blocked from selling its gear in Australia and New Zealand, and was frozen out of a Korean contract, and faces U.S.-led competition even in Papua New Guinea.

The latest U.S. action against Huawei may be even more significant. The company has made advances in developing its own microchips, but it still relies on American equipment for making networking gear and smartphones. ZTE Corp., another Chinese technology company, nearly collapsed because of the U.S. penalties for violating Iran sanctions before the US President rescued it following a request from Xi.

The ZTE case showed China’s leaders that they were required to become independent from the U.S. in case of critical technologies like semiconductors and network infrastructure, said Graham Webster, coordinating editor of DigiChina at the Washington-based think tank New America.

“What makes Huawei important is that it is a leader in developing technologies that will make China less dependent on U.S. or European suppliers,”. “Targeting Huawei through seeking the extradition of a top executive is a major move by the U.S. government, whether coordinated or not,” he added.


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