Is the truce between China and the United States over?

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The capture of Meng Wanzhou, from Huawei, in Canada, has complicated the truce between the United States and China

Is the truce between China and the United States over?

For decades, the United States and China have begun to compete to be the world's biggest economic power. According to the latest report of the World Trade Organization, "Statistical Examination of World Trade 2016", where annual statistics on world trade are compiled, China and the United States are the main exporters and importers of merchandise worldwide, being responsible for the 23% of world's exports and almost 40% of world GDP.

Leer en español: ¿Adios a la tregua entre China y Estados Unidos?

2018 has been a difficult year for trade between these two countries. Tariffs and quotas have come 50/50 in order to sabotage the rival industry. In the end, only the G20 diplomacy could pause the commercial war. However, this was a short break, because that same day was arrested in Vancouver, Canada by United States' orders, one of the heiresses and top executives of the Chinese telecommunications company Huawei, Meng Wanzhou.

Huawei is one of the largest Chinese brands in the market. According to Forbes, worth $8.4 billion dollars, this telecommunications company has 180,000 employees and generates sales revenue of close to $86 billion dollars per year. How can a commercial truce survive when the United States has such an influential figure in custody?

How does a commercial war develop?

The competition for being the greatest power in the world in economic matters took an unexpected turn with the measures taken by the current president of the United States, Donald Trump, in the middle of this year.

With its idea of generating greater parity in trade, the United States decided to impose tariffs on much of the merchandise that was being imported from China (approximately 34,000 million annually), thus initiating a commercial war. Before this measure, China decided to tax products from major American industries that have a strong relation with production in the Asian country such as agriculture, automotive and medicine.

All this situation created a widespread concern in the world economy, generating mistrust about companies around the world and increases in the prices of products, which will affect especially the consumers and possibly will generate a global crisis.

To avoid this confrontation, both governments decided to establish agreements in the dispute of the tariff war that was becoming increasingly tense. Issues such as the reduction of the US trade deficit and the increase in imports of US goods and services to China were major issues in the negotiation, since, in the trade balance between these two countries, China was the most favored party.

Meng's capture puts the truce at risk

This commercial war is further complicated by the capture of Meng Wanzhou, director of finances of Huawei and daughter of the founder of the company, in Vancouver on December 1 without any explanations. According to US authorities, Meng would have violated, through his father's company, the economic sanctions that the United States had imposed on Iran, requesting, with these arguments, his extradition from Canada to US soil.

Meng started in Huawei after graduating from the accounting master's degree at Huazhong University of Science and Technology. The links with his father, the founder of Huawei, Ren Zhengfei, were hidden from the public until just a few years, so Meng took the name of his mother, a very unusual practice in China. She was accused of trying to cheat the banks, claiming that a subsidiary of Huawei was instead independent, in order to avoid US trade restrictions with Iran.

The capture operation occurred on the same day that Donald Trump and Chinese President Xi Jinping dined together in Argentina during the G20 summit and determined that there would be a truce in the commercial war that had panicked international markets.

Read also: Everything you should know about the G20

To this day, the Wanzhou lawyers have failed in the mission of releasing her on bail, and her arrest is increasingly threatening to destroy this brief truce in the constant imposition of tariffs and quotas between the Chinese government and the US government.

Given these facts, the government of China expressed, through a spokesperson of the Ministry of Foreign Affairs, its great disagreement with this decision, demanding explanations about his capture and, at the same time, his immediate release.

This has caused that the economic panorama in Asia begins to see negatively impacted, especially in China, a country that has begun to show a fall in the stock market since the capture of one of the main leaders of one of the flagship companies of this country.

LatinAmerican Post | Juan Sebastián Salguero

Translsted from "¿Adios a la tregua entre China y Estados Unidos?"

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