History says Canada will almost always side with its superpower next-door neighbor. Yet at the same time, Canada is trying to create much-needed new trade avenues with China. | Lintao Zhang/Getty Images Trade Canada caught between Trump and China in Huawei case

MONTREAL — The arrest of Huawei CFO Sabrina Meng at a Vancouver airport puts Canada in the middle of a volatile diplomatic situation between two world superpowers.

Whatever the outcome from Meng's Friday bail hearing, Prime Minister Justin Trudeau's government will be left wrestling with which one of them to anger.


History says Canada will almost always side with its superpower next-door neighbor. It's in the midst of sealing a trade deal with the U.S. and Mexico.

Yet at the same time, Canada is trying to create much-needed new trade avenues with China.

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And the U.S. and China are having their own trade battles and are in the middle of trying to find a resolution — though both China and the U.S. on Friday were downplaying the impact the arrest could have on their upcoming trade talks.

"I don’t know, by the way, that that necessarily spills over into the trade talks, to be honest with you," White House National Economic Council Director Larry Kudlow said in an interview on CNBC. "At the moment I rather doubt it."

Trudeau said Thursday that he was given advance notice of the arrest of Huawei’s chief financial officer, made at the request of the U.S., but did not intervene.

“We are a country with an independent judiciary," he said. "The appropriate authorities took the decision ... without any political involvement.”

But Canada is actively trying to stave off a diplomatic rift. Canada's Ambassador to China John McCallum has assured the Chinese foreign ministry that due process is being followed in Canada and consular access will be provided. Foreign Affairs Minister Chrystia Freeland characterized McCallum's conversation with the Chinese as positive, The Canadian Press reported.

That may be a position difficult to maintain if Canada doesn't ultimately agree with the U.S. accusations against Meng. The Canadian government has limited knowledge about the case, and the final decision could come down to a Trudeau appointee.

Former Canadian ambassador to Beijing David Mulroney said the Meng case brings Canada and China to a reckoning.

"China has entertained hopes that they could split us away from the U.S. in the Trump era," he told The Canadian Press. "This reminds the Chinese, and ourselves, that we are part of an international order backed by the U.S."

Meng, whose Chinese name is Meng Wanzhou, faces an investigation into whether she has run afoul of U.S. trade sanctions against Iran, people familiar with the probe told The Wall Street Journal.

It's part of a broader U.S. investigation into whether Huawei used the global banking system to circumvent U.S. sanctions against Iran, Reuters reported Thursday, citing sources familiar with the situation.

According to South China Morning Post reporters in the Vancouver courtroom at Meng’s bail hearing, the fraud charges come down to this: The U.S. alleges that Meng misled banks about a Huawei subsidiary called SkyCom, which had dealings with Iran. U.S. banks became concerned about Huawei’s involvement with SkyCom, but Meng allegedly assured the financial institutions that the companies were separate.

"This was the crux of the fraud," the Canadian government's lawyer John Gibb-Carsley said.

Lawyers representing Canada at the hearing said SkyCom employees used Huawei email addresses, were managed by Huawei employees, the companies were linked by bank records and that in effect the two companies were the same.

Gibb-Carsley said Meng faces multiple charges, each of which carries a maximum penalty of up to 30 years in prison, and told the court Meng is a flight risk because of her access to vast resources.

“There is an incentive to flee,” he said.

While some extradition cases are handled swiftly, another high-profile Chinese extradition case in Canada lasted two years.

Canada's longstanding extradition treaty with the U.S. says it will ship the accused criminal over the border when the crime is something illegal in Canada, too. China is vehement that Meng has done nothing wrong and should be released.

Under extradition procedures shared by Canada’s Justice Department, the United States has 60 days from the date of provisional arrest to provide Canada with documents supporting the charges. A Canadian government legal team must decide by 30 days later whether to proceed.

The accused can plead to a court of appeal. That decision can then be appealed to the Supreme Court of Canada.

At the very end of the appeals process, Canada’s justice minister — who is appointed by Trudeau — makes the call on whether someone is surrendered to the U.S.

All the back and forth could coincide with Congress taking up the revamped U.S-Canada-Mexico trade deal, President Donald Trump's ongoing deliberations about steel and aluminum tariffs that have been brutal for the Canadian economy and the beginning of talks with China about trade. And it would overlap with Trump and China's ongoing cease-fire in their trade war.

“We see where the future is headed and we are taking the necessary steps to secure it now,” Canada's trade minister Jim Carr said Thursday, according to a prepared remarks.

The future he was talking about was in China.

Megan Cassella contributed to this report