Arrest of top Huawei executive may complicate already fraught US-China ties and have wider effect on global markets.

On the day global attention zeroed in on a highly-anticipated meeting between Donald Trump and Xi Jinping in the Argentine capital, thousands of kilometres away, on Canada‘s western coast, a new, dramatic front was opening in the US-China trade war – one that would reignite fears over the viability of a vague and fragile truce between the world’s two largest economies.

It wasn’t until Wednesday that the world learned that Meng Wanzhou, chief financial officer of Chinese telecoms giant Huawei, had been arrested on Saturday in Canada at the behest of US authorities. Hours before her arrest, the presidents of the United States and China had agreed over dinner in Buenos Aires to call a 90-day ceasefire in their countries’ bitter dispute which has seen Washington slap tariffs on $250bn worth of Chinese goods, and Beijing responding in kind.

The news of her arrest sent shockwaves through global financial markets, which fell sharply as concerns intensified that US-China trade tensions could escalate again.

Meng’s arrest is significant. Huawei is the world’s biggest producer of telecoms equipment, operating in more than 170 countries and regions. This year, it dethroned Apple as the world’s second largest smartphone maker. And Meng isn’t merely a top executive at the company. As the daughter of Huawei’s founder, Ren Zhengfei, she is seen as his heir apparent.

She now faces extradition to the US on suspicion of violating Washington’s sanctions against Iran. At a Vancouver court hearing on Friday, the 46-year-old faced US fraud accusations that Huawei used a sham shell company to sell equipment to Iran despite the sanctions, a Canadian prosecutor said. If convicted, Meng faces more than 30 years in prison. Her bail hearing was adjourned until Monday at 10am (18:00 GMT).

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China says Meng has done nothing wrong and has demanded her release.

“This is not your run-of-the-mill arrest for a run-of-the-mill commercial crime,” Pauline Loong, managing director of the Hong Kong-based research consultancy Asia-analytica, told Al Jazeera.

“Huawei is China’s flagship technology firm, which is part of Beijing’s ambitious plan to launch the nation into a global leadership in technology within the decade and Ms Meng is the company’s number two.

“At this point, it seems unlikely the arrest will derail the 90-day truce, but it makes an agreement after 90 days more difficult.”

Raising the stakes

Comments made on Thursday by John Bolton, Trump’s national security adviser, signal that the arrest may have as much to do with long-standing US grievances with Huawei and other Chinese companies as it does with concerns about possible violations of sanctions.

After telling a radio station that he knew of the arrest plan before the operation took place, while also declining to state whether Trump was himself aware when he met Xi, Bolton went on to accuse Chinese companies of engaging in intellectual-property theft and forced technology transfers from US firms.

“You should not turn a blind eye when states, as a matter of national policy, are stealing intellectual property from their competitors,” he told the US-based National Public Radio. “Huawei is one company that we’ve been concerned about. There are others as well.”

But Einar Tangen, a China political affairs analyst, said there are “troubling questions about the conflicting narratives and timing” of Meng’s arrest.

“Bolton says he knew during the Argentinian summit but didn’t notify Trump. [Peter] Navarro says no one knew and it was never discussed,” he told Al Jazeera, referring to the White House trade adviser who has called the arrest and the trade talks “two separate events”.

Although Washington’s unease over Beijing’s economic policies predates the two years of Trump’s presidency, the US has dramatically ramped up criticism of China’s economic development model in recent months, with a focus on technology.

It has charged that Beijing has stolen trade secrets, violated patents, hacked industrial targets and forced US companies investing in China to hand over their technology to Chinese partners. US negotiators have said that these issues will be negotiated during the 90-day truce.

Meanwhile, Beijing’s own aspirations to become a technological leader via the Made in China 2025 initiative have been perceived in Washington as a possible attempt to supplant the US and dominate hi-tech globally in the future.

Through the 10-year programme, China aims to develop self-sufficiency and global leadership in robotics, artificial intelligence, aviation and new energy vehicles. In August, citing a national security risk, the US struck a blow against the policy, restricting the sale of advanced technologies to China, including semiconductors, air defence systems and satellite communication networks.

“Huawei is a symbol of pride and success in China, in much the same way as Apple and Microsoft are in the US. Many in China see this [Meng’s arrest] as the US trying not to compete but to disable its competitor. Others see it as another distraction to change the narrative in DC away from Trump’s legal and political troubles,” said Tangen.

“Meanwhile, Huawei has been consistently singled out by America and its security allies as a national security threat – adding these things together makes this look questionable, at best.”

It is within the context of the broader economic clash between two industrial powers, and the 90-day window allocated to resolve it, that Meng’s arrest should be viewed, according to Marshall Mays, director of Emerging Alpha Advisors Limited.

“This action looks like another effort by the Trump administration to raise the stakes in the ongoing state-to-state negotiations over industrial policy,” he told Al Jazeera.

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Perhaps the most recognisable symbol of a globalising, but not completely trusted China, Huawei has been facing scrutiny and hurdles in its global ambitions to become involved in infrastructure projects amid cyber espionage concerns regarding the relationship between the company and the Chinese state.

The governments of the United Kingdom, Australia and New Zealand have moved to prevent Huawei technology being used in their future 5G mobile phone networks, following a US drive to stop its allies from buying from the company.

Richard Harris, chief executive of Port Shelter Investment Management, suggested that while the arrest will likely blow over and not affect the negotiations between the US and China, “it serves to highlight how toxic the Huawei brand has become in the West.

“There are now too many allegations of technological transfer, forced or otherwise, too many allegations of being close to the military and too many allegations of breaking sanctions for the brand to be comfortable to Western buyers,” he told Al Jazeera.

‘Indirect response’

While it appears that Meng’s arrest does not pose an immediate, existential threat to the trade truce, there are longer-term risks to the relationship.

Her detention comes less than two months after a Chinese intelligence officer was arrested in Belgium and extradited to the US to face espionage charges, in the first case of a Chinese intelligence official being taken to the US to face prosecution in an open court.

According to Kerry Brown, associate fellow for the Asia-Pacific Programme at Chatham House, there is a risk that China could start to feel that it is being unfairly targeted and could impose some kind of retaliatory measures on the US in the future.

“For the moment, it seems that there is no immediate impact but these things linger in the system,” he told Al Jazeera.

“I don’t think the Chinese would be so sophisticated as to just respond directly, overtly and explicitly. They probably will take their revenge in other ways, which are not so straightforward.”