Will The Arrest Of Huawei Executive Derail Trade War Truce?

The market celebrated the trade war truce between U.S. and China after the successful meeting last week between President Trump and Xi. Unfortunately, it only lasted for about 24 hours as news came in with the arrest of Huawei top executive Meng Wanzhou in Canada. Meng faces an extradition to the U.S. on the allegation that she committed fraud to avoid sanctions against Iran. This arrest opens a new chapter in escalating battle between the U.S. and China to gain tech supremacy.

Huawei is the world's largest telecoms equipment provider and also the second largest mobile phone manufacturer. The founder Ren Zhengfei is a former military officer and Meng Wanzhou is his daughter. Huawei is one of the pillars in China's ambition to be an independent technology powerhouse. The arrest happened on December 1, the same day that President Xi and Trump had the dinner meeting in Buenos Aires.

China has poured hundreds of billions to push its "Made in China 2025" plan. The plan aims to make China a global leader in technology industry such as robotics, electric cars, and computer chips. Huawei plays a major role in this plan as it is the state champion for 5G wireless technology. President Xi has said that he wants China to dominate the 5G market globally. A lot of people think that 5G will be the next wave of technology like the Internet or smartphone.

The U.S. however has made it clear it wants to push back against China's growing tech power to maintain dominance. China's tech ambitions have long concerned the U.S as the American government believes China relies on American technology misappropriation to achieve their goals. This is the primary reason for the current trade conflicts as the White House demands China to stop forcing foreign companies to hand over tech secrets as a condition for market access. The U.S. has imposed billions of dollars of tariffs to encourage China to change their behavior.

The US has also targeted other Chinese companies in the past. Last year, ZTE, another Chinese telecoms firm, pleaded guilty to evading sanction on Iran and North Korea. The company had to stop its operations for months after the US ban sales of essential parts to the firm. The ban has since been lifted after the firm paid $1 billion fine. No one was detained at that time.

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