The arrest of Huawei Chief Financial Officer Meng Wanzhou took a toll on US stocks Thursday as investors contemplated how it is likely to impact the highly-anticipated trade discussions between the Trump administration and Xi Jinping-led Chinese government.
Investors believe the decision to detain such a high-profile Chinese citizen could have a negative impact on U.S.-China and Canada-China relations. The Dow Jones Industrial Average dropped about 500 points, or 2%, to 24,512 on Thursday morning, spurred by the arrest. Meanwhile, the S&P 500 slumped 1.6% to 2,656 as the Nasdaq Composite lost 0.7% to 7,103 before recovering in the afternoon session.
Meng’s detention came on the same day that President Donald Trump and his Chinese counterpart Xi Jinping set in motion a truce in the escalating trade tensions between the U.S. and China. Both the U.S. and China have been asking trading partners and allies to take sides in a trade war. The government of Justin Trudeau has been speaking enthusiastically of seeking some trade truce with China, a few days after renegotiating a free-trade deal with Mexico and the U.S.
Meng 46, was arrested and detained by Canadian authorities in Vancouver on December 1, 2018, at the request of the U.S. government over potential violations of sanctions on Iran. The Chinese embassy in Canada released a statement earlier this week terming her arrest as a violation of human rights and strongly condemning it.
Meng is the daughter of Huawei founder and president Ren Zhengfei. She has been serving as deputy chairwoman and CFO of Huawei as of December 2018. Huawei is the largest private company in China, employing 180,000 people.
Earlier this year, Meng made a speech during a Singapore academic conference in which talked about the future technology development role of Huawei. “Without universities, the world would be left in darkness. Without industry, science would be left in the ivory tower. The fourth industrial revolution is on the horizon and artificial intelligence is one of its core enabling technologies. Huawei is lucky to be part of it,” she said.
Her father is among the most successful businessmen in China. He is also an elected member of the 12th National Congress of the Communist Party of China and former officer of the People’s Liberation Army.
His company has been at loggerheads with President Trump’s administration for the last few months and the Justice Department is currently investigating it for going against US sanctions against Iran. Meng now faces extradition to the U.S.
Earlier this year, President Trump banned Huawei hardware in the networks of the U.S. government, citing national security concerns more so in relation to the 5G network rollout. Huawei later dismissed the concerns, saying they were unwarranted.
Republican Senator Marco Rubio, who is also a member of the U.S. Senate intelligence committee, hailed the arrest of Meng saying, “Huawei has direct ties to the Chinese government and Communist Party, has long posed a serious risk to U.S. national security, and I continue to strongly urge Canada to reconsider Huawei’s inclusion in any aspect of its 5G development, introduction, and maintenance.”