Huawei Arrest Reignites U.S.-China Tensions

(Bloomberg) --

The trade war truce struck between Donald Trump and Xi Jinping just days ago is suddenly in jeopardy.

Canada confirmed yesterday it arrested Wanzhou Meng, chief financial officer of Huawei Technologies, one of China's most iconic brands. The move — reportedly for alleged violations of U.S. sanctions against Iran — outraged China, which called for her immediate release. The U.S. wants her extradited.

The arrest, which occurred the same day Trump met Xi in Argentina, amounts to a slap in the face for the Chinese leader. Meng is the daughter of Huawei's founder — the equivalent of Bill Gates — and the company is key to Xi's plans to dominate new technologies such as 5G networks.

Whether Trump was directly involved or not, he ends up with more leverage over Xi as they race to reach a trade deal before March. That puts Xi in a tough place: He's already under pressure not to cave in too much to the U.S. president.

For investors, all it does is create more uncertainty, a hallmark of Trump's administration. And that wasn't good for stocks, which fell from Asia to Europe.

Global Headlines

Merkel 2.0 | Angela Merkel's favored successor as leader of her Christian Democratic Union may draw from the German chancellor's playbook as she seeks to outmaneuver a male rival. Annegret Kramp-Karrenbauer, the CDU's general secretary, is still in contention despite a sustained campaign by social conservative Friedrich Merz. They're the top contenders as delegates meet tomorrow in Hamburg to vote on Merkel's replacement.

Cyberattack | A U.S. grand jury indicted two Iranian nationals over claims they carried out a March ransomware attack against the city of Atlanta, crippling its computer systems and causing millions of dollars in losses. During the assault, the hackers encrypted “vital city computer systems” and demanded a ransom, paid in Bitcoin.

Brexit lifeboat | Prime Minister Theresa May is in talks with Conservative Party rebels over a compromise that would avoid a crushing defeat when her Brexit deal goes to a vote next week. It's a so-called parliamentary “lock” that would require lawmakers to give their consent before the most contentious part of the exit agreement comes into force. In parallel, May has moved to put business at the heart of her sales pitch, and Bloomberg profiles the key adviser behind her shift.

Cow vigilantes | A violent protest by Hindu nationalists in India has led to the murder of a police officer — the latest sign that religious tensions are rising ahead of next year's general election. A mob formed in the country's most populous state of Uttar Pradesh after discovering the carcasses of numerous cows, which are considered sacred by India's majority Hindus.

Out of steam | Italy's populist party Five Star Movement entered government with pledges to shut down polluting power plants and boost renewables. But its green strategy limits incentives for geothermal energy, which provides about 30 percent of Tuscany's electricity, in a blow to both the region's fragile economy and the nation's biggest utility. It's now caught in a balancing act between the desire for cleaner power and the need to curb costs.

What to Watch

• Six U.S. senators introduced a non-binding resolution that asserts Crown Prince Mohammed bin Salman was complicit in the murder of columnist Jamal Khashoggi, as lawmakers try to reach agreement on a stronger bipartisan response.

And finally ... Dollars are hard to find in tiny, troubled Burundi — but used Land Cruisers and Range Rovers offer a solution. Buying vehicles from cash-strapped owners and selling them in neighboring Rwanda and the Democratic Republic of Congo is an increasingly popular ploy in a country that's emerging from three years of political upheaval. Along with cross-border sales of beverages and furniture, it's a neat way to beat foreign-currency shortages.

--With assistance from Kathleen Hunter, Chiara Albanese, Patrick Donahue, Stuart Biggs and Iain Marlow.

To contact the editor responsible for this story: Ruth Pollard at rpollard2@bloomberg.net

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