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December 5, 2018 | Trade Truce? Think Again: Canadian Authorities Arrest CFO of Huawei Technologies

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
At the request of the US, Canadian Authorities Meng Wanzhou, CFO of Huawei Technologies, over Iran sanctions violations.

Trade Truce? Deal with China in 90 days?

Think again on both counts: Canadian Authorities Arrest CFO of Huawei Technologies at U.S. Request

A spokesman for Canada’s justice department said Meng Wanzhou was arrested in Vancouver on Dec. 1 and is sought for extradition by the U.S. A bail hearing has been tentatively scheduled for Friday, according to the spokesman. Ms. Meng, the daughter of Huawei’s founder, Ren Zhengfei, serves as the company’s CFO and deputy chairwoman.

Ms. Meng’s arrest comes amid a year-long U.S. government campaign against a company it views as a national-security threat. In the past year, Washington has taken a series of steps to restrict Huawei’s business on American soil and, more recently, launched an extraordinary international outreach campaign to persuade allied countries to enact similar curbs.

U.S. authorities have suspected Huawei’s alleged involvement in Iranian sanctions violations since at least 2016, when the U.S. investigated ZTE Corp. , Huawei’s smaller Chinese rival, over similar violations. The Commerce Department released internal ZTE documents that showed the company studied how a rival identified only as “F7” had conducted similar business.

“China will see this as an escalation against Huawei and as an extraterritorial rendition,” said James Mulvenon, general manager at defense contractor SOS International. “There will be tremendous domestic pressure in China to get her back.”

Huawei is the world’s biggest maker of equipment for cellular towers, internet networks and related telecommunications infrastructure. It is also the world’s No. 2 smartphone brand.

Some of America’s closest allies, including most of the countries in the “Five Eyes” intelligence-sharing pact among English-speaking countries, have followed the nation’s lead. Australia in August banned Huawei from its 5G networks, while New Zealand last week blocked one of it major wireless carriers from using Huawei. In Britain, BT Group PLC said Wednesday that it was removing the Huawei equipment from its network, two days after a British intelligence chief questioned whether the country should be using the Chinese gear.

Probably vs Definitely

  • Definite: According to authorities, Ms. Meng was arrested while transferring flights in Canada.
  • Probable: Huawei violated US sanction on Iran.
  • Definite: The US sanctions on Iran are idiotic.
  • Probable: There will be no meaningful trade agreement with China in 90 days.
  • Probable: There would not have been a meaningful trade agreement with China in 90 days anyway.
  • Definite: US S&P 500 futures were up 16 points Tuesday evening. The US markets were closed Wednesday. The futures are now down 23 point.
  • Probable: The market reaction is in response to trade worries among other things but the market is so ridiculously overpriced that this news is meaningless over the long haul.

Mike “Mish” Shedlock

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December 5th, 2018

Posted In: Mish Talk

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