Meng Wanzhou, Chief Finance Officer of smartphone maker Huawei and daughter of Huawei’s founder Ren Zhengfei, was arrested in Canada on Saturday and is facing extradition to the United States. News of the arrest was made public on Wednesday, December 5.
Meng has allegedly been accused of violating US sanctions with Iran.
Former hedge fund manager, writer, and host of CNBC’s ‘Mad Money,’ Jim Cramer, says that Meng’s arrest will cause technology companies in the United States who are doing business in China to lose value.
Cramer told investors that the arrest “means any tech company that does a huge amount of business in China, including Apple or Micron or Intel or Skyworks or Qualcomm Broadcom is worth a little less today than it was yesterday.”
Huawei, one of China’s most important firms, is the second largest smartphone maker in the world. It poses as a serious rival to Samsung and Apple. Qualcomm and Intel, among other companies, supply Huawei with smartphone parts.
Meng’s arrest could also affect the relationship between the US and China, which has been tense for months now due to trade relations.
Cramer said that to call the arrest of Huawei’s CFO an “escalation” in tensions was “one of the biggest understatements of the year.”
“To say that it could wreck any further negotiations seems reasonable. Until we know more, we have to figure there could be more downgrades ahead [and] more pain to come in these tech stocks, unless the CFO is allowed to return to China, or at least released on her own recognizance. Even then, we’re in seriously uncharted waters here. Caution is warranted, at least on the Chinese-related tech stocks, until we know more.”
For Cramer, the arrest would be further impetus for US officials who are against China’s rise to make sure the world’s second-biggest economy slows down, including Vice President Mike Pence and Trade and Industrial Policy Director Peter Navarro.
“These guys want to maintain America’s place as the world’s sole superpower. They believe some pain needs to be taken, even if it hurts corporate profits, to prevent China from challenging the U.S. hegemony. This kind of thing gives the hardliners a lot of ammunition because it illustrates that trade with China is about a lot more than making money.”
One day after Meng’s arrest was reported, stocks fell rapidly, with the Dow Jones Industrial Average’s 2-day losses reaching more than 1,500 points.