(Reuters) — The daughter of Chinese tech giant Huawei’s founder has been arrested in Canada and is facing extradition to the United States, dealing a blow to hopes of any easing of Sino-U.S. trade tensions and rocking global stock markets.
The shock arrest of Meng Wanzhou, who is also Huawei Technologies Co Ltd’s [HWT.UL] chief financial officer, is riling authorities in Beijing and raises fresh doubts over a 90-day truce on trade struck between Presidents Donald Trump and Xi Jinping on the day she was detained.
The arrest is related to violations of U.S. sanctions, a person familiar with the matter said. Reuters was unable to determine the precise nature of the violations.
The arrest and any potential sanctions on the world’s second biggest smartphone maker could have major repercussions on the global technology supply chain. Shares in Asian suppliers to Huawei, which also counts Qualcomm Inc and Intel among its major suppliers, tumbled on Thursday.
Meng, one of the vice chairs on the company’s board and the daughter of company founder Ren Zhengfei, was arrested on December 1 at the request of U.S. authorities and a court hearing has been set for Friday, a Canadian Justice Department spokesman said. Trump and Xi had dined in Argentina on Dec. 1 at the G20 summit.
Sources told Reuters in April that U.S. authorities have been probing Huawei, the world’s largest telecoms equipment maker, since at least 2016 for allegedly shipping U.S.-origin products to Iran and other countries in violation of U.S. export and sanctions laws.
Huawei confirmed the arrest in a statement and said that it has been provided little information of the charges, adding that it was “not aware of any wrongdoing by Ms. Meng”.
She was detained when she was transferring flights in Canada, it added.
China’s embassy in Canada said it resolutely opposed the arrest and called for Meng’s immediate release.
In April, the sources told Reuters the U.S. Justice Department probe was being run out of the U.S. attorney’s office in Brooklyn.
The U.S. Justice Department on Wednesday declined to comment. A spokesman for the U.S. attorney’s office in Brooklyn also declined to comment.
Chinese media backlash
The arrest drew a sharp response from Chinese media and on the mainland’s social media.
“I am shocked. The U.S. can’t beat Huawei in the market. Don’t act like a despicable rogue,” tweeted Hu Xijin, editor of the Global Times, a nationalistic tabloid run by the ruling Communist Party’s People’s Daily.
Jia Wenshan, a professor at Chapman University in California, said the arrest was part of a broader geo-political strategy from the Trump administration to counter China and it “runs a huge risk of derailing the U.S.-China trade talks”.
A user of China’s Twitter-like Weibo platform said Chinese should boycott products made by U.S. tech giant Apple Inc and instead buy Huawei products to show support for one of China’s national champions.
The probe of Huawei is similar to one that threatened the survival of China’s ZTE, which pleaded guilty in 2017 to violating U.S. laws that restrict the sale of American-made technology to Iran.
Earlier this year, the United States banned American firms from selling parts and software to ZTE, which then paid $1 billion this summer as part of a deal to get the ban lifted.
In January 2013, Reuters reported that Hong Kong-based Skycom Tech, which attempted to sell embargoed Hewlett-Packard computer equipment to Iran’s largest mobile-phone operator, had much closer ties to Huawei than previously known.
Meng, who also has gone by the English names Cathy and Sabrina, served on the board of Skycom between February 2008 and April 2009, according to Skycom records filed with Hong Kong’s Companies Registry.
Several other past and present Skycom directors appear to have connections to Huawei.
The news about the arrest comes the same day Britain’s BT Group said it was removing Huawei’s equipment from the core of its existing 3G and 4G mobile operations and would not use the Chinese company in central parts of the next network.
Huawei has said it complies with all applicable export control and sanctions laws and U.S. and other regulations.
Meng’s arrest drew a quick reaction in Washington.
U.S. Senator Ben Sasse praised the move and said that it was “for breaking U.S. sanctions against Iran.” He added: “Sometimes Chinese aggression is explicitly state-sponsored and sometimes it’s laundered through many of Beijing’s so-called ‘private’ sector entities.”
U.S. stock futures and Asian shares tumbled as news of the arrest heightened the sense a major collision was brewing between the world’s two largest economic powers, not just over tariffs but also over technological hegemony.
Shares of Huawei suppliers slumped on Thursday as investors fretted over the arrest. Samsung Electronics fell 2.3 percent, while Chinasoft International sank as much as 13 percent.