On Monday, following the conclusion of the Saturday evening dinner between President Xi Jinping of China and President Donald Trump of the U.S., both sides agreed to a 90-day negotiating period and it looked like there was a framework for a tentative trade deal between the two countries that would see trade tariffs dissolved.
Based upon remarks from Trump and others in the administration, stocks surged on Monday adding more than 300 points to the Dow Jones index.
Trump said: “If the two countries cannot agree on a deal, the U.S. will proceed with “major Tariffs” against Chinese products and that ultimately, I believe, we will be making a deal — either now or into the future.”
He also said that his is the “Tariff Man” and in other remarks said that America is going to have a “REAL DEAL” or “no deal at all” with China.
At around the same time, China’s Ministry of Commerce said in a statement on its website that the weekend meeting between Trump and Chinese President Xi Jinping was successful. The ministry also said the two countries will push ahead with negotiations within 90 days, and Beijing will work to address issues agreed upon as quickly as possible.
Whatever “good will” exists between China and the U.S. seemed to evaporate on Wednesday when it became know that Meng Wanzhou, Chief Financial Officer (CFO) for Chinese electronic giant Huawei had been arrested in Canada “at the same time” that Xi and Trump were sitting down for their dinner.
John Bolton, U.S. National Security Advisor said on Thursday that the U.S. had been pushing for the arrest of Meng and that he had known that the arrest was planned at the same time as the Saturday dinner between the two presidents. When asked by reporters whether President Trump knew of the arrest, Bolton said he didn’t know.
The United States has placed Huawei on a “blacklist” of companies and in April banned all Huawei phones and devices from being sold on U.S. military bases since it claims Huawei phones are embedded with software that sends information to the Chinese military.
As an extension of its blacklist, the U.S. had pressured its allies to also refrain from allowing Huawei to participate in large-scale 5G network projects. As of the time of this writing, Australia, Canada, Japan and the United Kingdom have all said that they would banish Huawei from their telecom projects for now and “for the foreseeable future.”
Huawei was established by Meng Wanzhou’s father, Ren Zhengfei, who is an ex-People Liberation Army officer. It has long been rumored that Huawei’s networks and phones have “backdoors” that allow the Chinese government (military) to access data from users. The U.S. contends this is the reason that Huawei should be penalized, but it has never provided proof its allegations.
Chinese media have seized on Trump’s remarks and the arrest of Meng as proof that the U.S. administration is dishonest and that the words of the president cannot be trusted. The Global Times, the newspaper of the Chinese communist party said that Trump’s deceit and the arrest of Meng prove that the U.S. will do everything possible to slow China’s technological and economic raise.
China had demanded that Meng be released immediately and returned to China. A spokesperson for the Chinese government said that Canada and the U.S. have not provided any proof or evidence of its allegations against Meng and that her arrest is unwarranted and will cause harm to relationships between the countries involved.
The U.S. said that it will ask Canada to extradite Meng to the U.S. and has said that it will seek to prosecute here on crimes related to Huawei violating Iran sanctions and that if Meng is convicted that she could serve 30 years in a U.S. prison.
Many political commentators in U.S. media said that the Trump administration seems to believe that if it is holding Meng and has a 30-year old sentence hanging over her, that China will be more accepting of the U.S trade policies.
The arrest of Meng has sent shockwaves through the U.S. business community about that prospects that China could also arrest U.S. business executives in China in a “tit-for-tat” move against the U.S. Jeff Moon, who was the Assistant U.S. Trade Representative for China from 2016 ~ 2017 said that Trump’s actions exposes all U.S. executives and that if he were Tim Cook of Apple, he wouldn’t travel to China at this time.
The U.S. stock market was up and down, like a rollercoaster throughout the week. At the beginning of the week, the Dow Jones had a 300 point increase ... which was then followed by a 800 point sell-off ... which was then followed by another rebound of 700 points. At the end of the week, the Dow closed the week lower by 558.72 points to 24,388.95 and erased its gains for the year. Previous to the drop, the Dow had been 8% up on the year, but now, all gains have been lost.