The escalation of the U.S.-China trade war into tit-for-tat arrests suggests a new stage of hostility in their rivalry for economic and technological dominance in the coming decades.
- Everyone is a potential target in this brinkmanship as nerves fray, the global order erodes and the old rules of international engagement are thrown out.
The big picture: In recent days, China has detained two Canadian citizens — Michael Kovrig and Michael Spavor — for "engaging in activities that endanger the national security" of China, a Chinese Foreign Ministry spokesperson said. In interviews with Axios' Erica Pandey and me, U.S. experts interpreted the detentions as direct retaliation for an arguably provocative new American approach toward China.
- In October, Belgian police arrested Yanjun Xu, a Chinese intelligence officer accused of economic espionage in the U.S., on the request of American authorities. He has already been extradited to the U.S.
- On Dec. 1, Canadian authorities arrested Meng Wanzhou, CFO of Chinese phone giant Huawei, and daughter of the company's founder. Meng allegedly violated U.S. banking fraud laws and sanctions against Iran. The U.S. is seeking her extradition.
"By making a prominent example of Canada, Beijing is sending a message globally," Dennis Wilder, the National Security Council's senior director for East Asia under George W. Bush, tells Axios.
"Foreign businesses and other entities operating in China need to recognize that there are no more 'grey areas' in the Xi Jinping era when it comes to conforming to the letter of Chinese law. You might get away with it in the near term, but then you will be a convenient target when tensions with your home country escalate."— Chris Johnson, Center for Strategic and International Studies
Why it matters: It's rare for the U.S. to seek and achieve the arrest of a senior official — commercial, military or political — from any other major country. While it's not surprising for a country to nominally file charges against the elite of a rival nation, it's highly unusual for detention and extradition to actually happen, largely because — as has occurred in this situation — it is hard to know where tit-for-tat would stop.
- "It is a clear escalation of the economic competition between China and the United States and its allies. Tariffs are one thing, putting each other’s citizens in jail is another," says Michael Beckley, a professor at Tufts University.
- Meanwhile, Trump has gone on to violate yet another legal norm by suggesting his readiness to seek Meng's release in Canada should he manage to strike an advantageous trade deal with China.
- In a statement today, Canada warned Trump to stop and "not seek to politicize the extradition process or use it for ends other than the pursuit of justice."
The bottom line: As we've reported before, the U.S. and China are racing to "reborder" the world for a new cold war — in effect, redividing the world into spheres of influence. This new brinkmanship could accelerate that dynamic.
Meanwhile, firms and governments on both sides are on high alert.
- Cisco urged some employees to postpone nonessential travel to China for fear that they may become targets of a counterstrike, the NYT reports.
- The government of British Columbia is rescheduling a trade trip to China for the same reason.
- Zhang Ruimin, CEO of the Chinese appliance maker Haier, told Bloomberg that Meng's arrest "has created a shadow in everyone’s hearts."