Trade war, day 154: Shocking arrest of Huawei CFO

In The shocking arrest of Huawei CFO Meng Wanzhou in Canada on The China Project, Eurasia Group’s Paul Triolo writes:

The timing of the arrest and extradition request is rich. While the law enforcement action against Huawei has been in the works for some time, that Huawei’s CFO and company founder offspring Mèng Wǎnzhōu 孟晚舟 would choose to travel to Canada on the day President Donald Trump and Chinese leader Xí Jìnpíng 习近平 were meeting in Buenos Aires at the G20 may go down as one of the most ironic chance occurrences in U.S.-China relations ever. The U.S. action was also unprecedented.

Meng’s arrest complicates everything, and makes the chance of an agreement between Beijing and Washington more distant. Even without Meng’s arrest, Bloomberg notes that the Trump-Xi truce has done little to bridge the “vast U.S.-China divide,” and that so far the two countries “have failed to make significant headway in resolving issues at the heart of an escalating trade war. Another 90 days is unlikely to change much.”

Similarly, in the Financial Times (paywall), Timothy Ash argues:

Indeed, this could (and is likely to) be the first of many future battles on trade. And I am now near certain that this is only one front in the U.S.-China war for hegemony, and that we will see scraps across the board in the months and years to come, be that over 5G, AI, Taiwan, the South China Sea, the Belt and Road Initiative and Chinese loans versus the IMF.

Elsewhere, there are mixed signals:

• “China has said it will immediately implement measures agreed under a trade war ‘truce’ with the U.S.,” reports the Guardian, however, Beijing did not offer any details.
• Markets are down — Agence France-Presse reports that “Wall Street fell sharply early” today. (When markets rallied last week after some bit of trade war news, I commented on The China Project Access that it was “an excellent illustration of the fundamental idiocy that can drive the markets.” It’s worth repeating that.)  
• “Production among China’s robotics manufacturers is slowing as the trade war with the United States hits many of the industry’s biggest customers,” reports the South China Morning Post.
• China’s vow to curb fentanyl won’t end the American opioid crisis, according to analysts interviewed by Agence France-Presse

Fentanyl production has become a “very profitable” business for Chinese traffickers, said Mike Vigil, a former chief of international operations at the US Drug Enforcement Administration.

It is going to be tough for the Chinese government to control the business, he said, “especially given the huge demand that we currently have in the United States.”

• Daimler AG plans to take majority control of its China joint venture, “following a similar move in October by rival BMW AG,” reports Bloomberg (porous paywall). The two companies’ fortunes in China are test cases for the Chinese government’s commitment to opening up.

Previously in The China Project’s trade war coverage:

Trade war, day 153: China affirms ‘very successful’ trade meeting