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Arrest of Huawei Exec Threatens Trade War Ceasefire, Drags on China ETFs

This article was originally published on ETFTrends.com.

A fresh round of trade troubles dragged on China ETFs after the arrest of a top Huawei Technologies executive at the request of the U.S.

On Thursday, among the worst performing areas of the market, the SPDR S&P China ETF (GXC) fell 2.3%, the iShares China Large-Cap ETF (FXI) dropped 1.8% and Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) declined 1.8%, with each of the China-related ETFs testing their short-term support at the 50-day simple moving average.

The tentative truce between the U.S. and China trade war was being tested Thursday after the U.S. arrested Meng Wanzhou, Huawei’s chief financial officer and the daughter of the founder of the telecommunications giant, who was arrested changing planes in Vancouver on Saturday, the Washington Post reports.

Meng was arrested on U.S. extradition warrant as Huawei is suspected of trying to evade American sanctions on Iran. U.S. prosecutors have been investigating whether Huawei violated U.S. export and sanctions laws by shipping U.S.-origin products to Iran.

The developments added another wild card to the ongoing trade disputes between Beijing and Washington D.C., which have yet to be officially put to rest. The trade war has led to the imposition of tariffs on almost $400 billion in annual goods shipped between the two countries.

The timing of Wanzhou's arrest on Saturday during President Trump and China's Xi Jiping's meeting in Buenos Aires to negotiate a way out of the trade tiff is being viewed by China as politically motivated.

“These kinds of things happen with some frequency. We certainly don’t inform the President on every one of them,” National Security Advisor John Bolton told National Public Radio.

Some warn that China will not take this action sitting down and could move to dissolve talks. Jeff Moon, who conducted trade negotiations with China during the Obama administration, warned the arrest could chill new talks, adding that “up until this point, China’s goal has been to preserve the status quo. They have retaliated only after U.S. acted. In this case, we may tip them over into active retaliation.”

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