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Huawei exec’s arrest may put Canada in China’s crosshairs, trade experts warn

Canadian officials have jeopardized tighter trade ties with the world’s second largest economy in arresting the heiress apparent of telecom giant Huawei Technologies, according to Chinese-Canadian relations experts monitoring the situation.

Meng Wanzhou, the daughter of the Huawei’s founder and a top executive widely believed to be in line to lead the company, is reported to be facing extradition to the United States for allegedly violating U.S. sanctions against Iran. The 46-year-old was arrested by Canadian authorities in Vancouver on Saturday.

Gordon Houlden, director of the University of Alberta’s China Institute, expects Chinese officials will be unforgiving towards Canada for its role in the incident. A Chinese foreign ministry spokesperson has demanded the U.S. and Canada justify the arrest, and referred to Wanzhou’s detention as a human rights violation, a charge often leveled at Beijing.

“It is being seen by as a hostile act,” Houlden told Yahoo Finance Canada on Thursday.

Houlden added that Canada “doesn’t have much wiggle room” when it comes to extradition requests from south of the border, noting that a Canadian judge does not have to rule on Wanzhou’s guilt or innocence before handing her over to U.S. authorities for trial.

“The Chinese have difficulty accepting that there is really no possibility of interference in a decision like this,” he said. “The idea that no one here, not even the prime minister, can call up a judge and tell them what to do. They have trouble understanding that.”

Huawei recently surpassed Apple as the second-biggest smartphone maker, and is one of the largest telecommunications companies in the world. In China, the company is seen as a symbol of technological prowess and economic achievement.

Wanzhou’s arrest threatens the delicate 90-day truce in the U.S.-China trade war that the two nations agreed to at the recent G20 meeting. For Canada, the arrest could sour the chances of improving trade ties with Beijing as Ottawa looks to strike more global economic allies in the wake of the NAFTA 2.0 skirmish with the U.S.

“This is really not good for the Chinese-Canadian Trade relationship,” Sui Sui, a Canada-China trade expert and professor at Ryerson University’s Ted Rogers School of Management, told Yahoo Finance Canada.

She said Canada could also face backlash from Huawei, which employees over 500 people in the country and operates research facilities in Toronto, Ottawa and Waterloo, Ont. The company is currently the third largest hardware supplier to Telus Corp. (T.TO), and has stuck partnerships with both BCE Inc. (BCE.TO) and Telus on 5G wireless projects.

“It could jeopardize all of this,” Sui said of the arrest. “Of course, Huawei is a global company and wants to expand into foreign countries. They may see that Canada has to do this, and the Canadian investment relationship is important.”

Houlden said he expects China will take a wait-and-see approach for the time being, but warns officials may also opt for a “tit-for-tat” response against the U.S.

“I would not be astounded if a U.S. individual were arrested,” he said. “You can expect it to be a business person charged with something like industrial espionage or tax evasion or something like that.”

Houlden believes Huawei will prioritize business, and continue working towards approval for a 5G network with its Canadian partners. As for Hauwei and Beijing’s attitude towards the U.S., that’s another story, he said.

“Imagine if Bill Gates’ daughter, let’s say she played a prominent role at Microsoft, and she was arrested,” Houlden said. “The reaction of the U.S. government would be very strong.”

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