Huawei CFO Arrest And Extradition Strains US-China Trade Talks Further

Huawei's CFO Meng Wanzhou has been arrested in Canada and faces extradition to the United States. The charges levied against her haven't been revealed at this time, but Meng Wanzhou's arrest has already had staggering effects on stock exchanges around the world.

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In addition to being Huawei's CFO, Meng Wanzhou serves as the deputy chairwoman of Huawei's board, and she is the daughter of Huawei's founder Ren Zhengfei. Meng Wanzhou was in Canada on a layover when she was apprehended by Canadian police. A publication ban has prevented the Canadian Justice Department from sharing additional details about why she was arrested, but a law enforcement official indicated that she was wanted as part of an ongoing investigation into Huawei.

We can't be completely certain what the United States government wants with Meng Wanzhou, but it's worth noting that the government has been taking action against Huawei on multiple fronts this year. At the beginning of this year, a report circulated that the US Justice department was investigating Huawei to determine if the company had violated US sanctions placed on Iran.

Soon after, the Pentagon issued an order that forbade stores located inside of American military bases from selling Huawei and ZTE products, as these devices reportedly posed a security threat. This action was then followed up by a campaign by the Trump administration that cautioned American allies against using Huawei's telecommunications equipment. The US further petitioned its allies to reject all Huawei devices over spying allegations last month. The US Justice Department hasn't disclosed the findings of its investigation yet, but the escalating action taken against Huawei gives us the impression that they found something concerning.

Huawei Headquarters
Huawei's Headquarters

Huawei has said little about Meng Wanzhou's arrest, but a statement from a Huawei spokesperson acknowledged Meng Wanzhou's arrest and indicated a firm belief that the US courts will set her free.

"The company has been provided very little information regarding the charges and is not aware of any wrongdoing by Ms. Meng," said the Huawei spokesperson. "The company believes the Canadian and US legal systems will ultimately reach a just conclusion. 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."

The Chinese government also issued a statement urging the United States and Canada to set Meng Wanzhou free.

"The Chinese side has made clear our solemn positions to the United States and Canada, and asked them to clarify the reason of the detention and to release the detainee immediately, and to earnestly safeguard the legal and legitimate rights and interests of the person involved," said foreign ministry spokesperson Geng Shuang.

Huawei isn't the only company that needs to be concerned following Meng Wanzhou's arrest though, as the trade war between the United States and China has shown clear signs of intensifying. The main index on the Hong Kong and Tokyo Stock Exchanges dropped 2.5% and 1.9% respectively since this news first broke. Shanghai's stock exchange is also down by 1.7% with several others in Europe also falling by roughly between 1% to 1.5%. US Stocks have also dropped by around 1%. Huawei itself isn't is a privately held corporation, but two of its major suppliers AAC Technologies and Sunny Optical both saw their stock fall by around 6%.