The news that Meng Wanzhou, the CFO at the Chinese electronics giant Huawei, has been detained by Canadian authorities and is facing extradition to the US to face charges over illegal trade to Iran is much bigger than it might first appear.

It comes at a time when the Western intelligence agencies are reconsidering Huawei’s presence in their countries' digital infrastructure.

It may also put at risk the delicate trade cease-fire created by China and the US at their leaders' dinner last weekend.

In April, a congressional bill punished the Chinese company ZTE for the same behavior Huawei stands accused of — and the company’s stock dived 30% at a cost of nearly $7 billion in market value.

The news that Meng Wanzhou, the CFO at the Chinese electronics giant Huawei, has been detained by Canadian authorities and is facing extradition to the US to face charges over illegal trade to Iran is much bigger than it might first appear.

First, it comes when the West, particularly the so-called Five Eyes partners (Australia, the UK, the US, Canada, and New Zealand), are reconsidering Huawei's presence in their digital infrastructure.

Second, it may put at risk the delicate trade cease-fire created by China and the US at their leaders' dinner last weekend.

The UK has been reviewing its use of Huawei to build its 5G architecture. As Huawei has long been accused of maintaining links — through its founder, Ren Zhengfei — to China's military industrial complex, the willingness of Western countries to allow it to develop their networks has waxed and waned.

Philippe Le Corre, a French expert based at the Harvard Kennedy School, has tracked how Beijing has extended state support, in the form of cheap loans, to the company as it expanded its operations in Europe.

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This year alone, India and New Zealand have moved to ban the Chinese firm, following in the footsteps of the US and Australia. Germany, like the UK, is reconsidering its options. While Canada is at the center of Meng's arrest, the Trudeau government has been fairly friendly toward Chinese investment and is sure to go through its own debate.



While Meng's arrest is not directly tied to the issue, it could affect how the US deals with Huawei as a company. If, for example, Huawei is found guilty of intentionally allowing US-licenses technologies to be exported into Iran, then US companies and suppliers could be prohibited from dealing with the firm.

Could Huawei go the way of ZTE?

In the wake of a congressional bill that punished the Chinese company ZTE for the same behavior in April, ZTE's stock dived 30% and the company lost nearly $7 billion in value. While a political settlement allowed the company to continue operating, it is a stark warning to what could befall its bigger rival, Huawei.

A ban from US supplier chains would also put an unofficial nix on the company and make it increasingly difficult for countries like the UK to continue operating as they are. The current arrangement, developed after a 2011 parliamentary report on Huawei, was for UK government technicians to inspect Huawei components and code at a site paid for by the Chinese firm in Oxfordshire.

That risk-mitigation approach could be said to already be in trouble in light of a report this summer that said Huawei's engineering processes allowed for grave vulnerabilities to be inserted into UK infrastructure. While no issues have been found, experts say finding such backdoor code in the immeasurably more complex 5G system will be nearly impossible.

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Second, the US is no stranger from carrying out moves from one side of its government that contradict delicate negotiations.

In the past, we saw the US Treasury nearly destroy delicate Six-Party Talks with North Korea when it froze North Korean financial assets. However, with the Trump administration, it might well be a type of pressure.

This president is, after all, the most Chinese-style leader the US has, using a mixture of charm and blunt coercion to shape the negotiations with other powers. While China has moved troops onto India's border as New Delhi hosted President Xi Jinping, so has President Donald Trump overseen the arrest of a prominent Chinese scion of a major global tech company.

How Beijing reacts, and its willingness to put Huawei on the table — before the tariffs freeze — will say much about where it sees the US relationship going and how important the tech giant is to its geopolitical strategy.

Time will tell.

Dr. John Hemmings is director of the Asia Studies Centre at the Henry Jackson Society and an Adjunct Fellow at the Centre for Strategic and International Studies.