The United States and China (FXI) have been involved in a bitter spat this year. While US-China trade relations have received all the attention as the two sides have imposed duties on billions of dollars of each other’s goods (TSLA), the tussle has a political as well as diplomatic angle.
The most recent flashpoint between the United States and China is over the arrest of Huawei CFO Meng Wanzhou in Canada. She has been arrested in connection with dodging US sanctions on Iran and faces possible extradition to the United States (SPY). Reportedly, the United States has urged its allies to shun Huawei products, citing espionage concerns. Australia and New Zealand have already barred Huawei from supplying 5G equipment. To be sure, Western governments have been increasingly apprehensive of an ambitious China. In November it was revealed that Alibaba’s (BABA) Jack Ma is a long-time member of China’s Communist party.
China has taken an aggressive stance on Wanzhou’s arrest and summoned US and Canadian ambassadors. China has also warned Canada of “serious consequences.” The arrest comes at a time when the United States and China have decided on a 90-day truce in their trade war. In the meantime, the two sides won’t impose new tariffs on each other’s goods. Consumer products like Apple (AAPL) could be the next in line if the Trump administration goes ahead with more tariffs.
Please read Cold War 2.0: Why It Looks Like a Real Possibility for more analysis on US-China relations.