The arrest of Huawei's global chief financial officer in Canada, reportedly related to a violation of U.S. sanctions, will corrode trade negotiations between Washington and Beijing.
"Beijing is likely to react angrily to this latest arrest of a Chinese citizen in a third country for violating U.S. law," Eurasia analysts wrote.
Canada's Department of Justice said on Wednesday the country arrested Meng Wanzhou in Vancouver, where she is facing extradition to the U.S. The arrest is related to violations of U.S. sanctions, a person familiar with the matter told Reuters.
U.S. authorities have been probing Huawei, one of the world's largest makers of telecommunications network equipment, since at least 2016 for allegedly shipping U.S.-origin products to Iran and other countries in violation of U.S. export and sanctions laws, sources told Reuters in April.
The analysts said the Huawei executive's arrest will not derail the start of trade negotiations after U.S. President Donald Trump and Chinese President Xi Jinping's meeting last weekend in Argentina saw them agree to first steps to resolve their trade dispute. Still, they acknowledged, the incident involving Chinese telecommunications giant Huawei is likely to cloud talks.
Meng, one of the vice chairs on the Chinese technology company's board and the daughter of company founder Ren Zhengfei, was arrested on Dec. 1 and a court hearing has been set for Friday, Reuters reported a Canadian Justice Department spokesman said.
Her arrest came amid multiple accusations levied by Trump's administration against Chinese technology companies.
Trump, who made U.S. trade policy a central plank of his platform as a presidential candidate in 2016, wants to address specific gripes about China's trade practices, especially its theft of U.S. intellectual property.
"Coupled with other pending actions the administration is considering, such as announcing that China is in breach of the 2015 (Barack) Obama-Xi agreement on cyber theft of IP (intellectual property) and trade secrets — which will likely be accompanied by sanctions against Chinese companies that benefited from IP theft — this type of action will affect the atmosphere around the negotiations — making them less likely to bring a sustainable settlement," the Eurasia Group analysts said.
Huawei confirmed the arrest in a statement and said that it has been provided little information of the charges, adding that it was "not aware of any wrongdoing by Ms. Meng."
China's embassy in Canada said it resolutely opposed the arrest and called for Meng's immediate release.