Finance Minister Bill Morneau said Canada-China relations are going through a “challenging moment” as tensions mount over the arrest of Huawei CFO Meng Wanzhou.

“We’re going through a diplomatic moment with China,” Morneau told Bloomberg Television Friday morning at the World Economic Forum in Davos, Switzerland. “It’s a very challenging moment.”

“We need to follow our laws and that’s the only way we can face issues like the current challenge,” he added, reinforcing the federal government’s ongoing message that the issue is before the courts and is not a political matter.

However, Morneau did acknowledge the fallout for investors and businesses.

“For investors, [it’s] a moment where people are having some pause,” he said. “For travellers, you’re clearly questioning your ability to do the business you want to do. So that is the moment we’re in right now.”'

Tensions between China and Canada have been escalating since Meng’s arrest in Vancouver last month, putting the possibility of a free trade deal between the two countries at risk.

“It’s certainly very unwelcome to see these tensions flare up between Canada and China,” said Brian Madden, senior vice president and portfolio manager at Goodreid Investment Counsel, in an interview with BNN Bloomberg Friday, noting the trade risk.

“And really, Canada is being dragged in as a bystander and unfortunate victim of a spat that’s really between the United States and China.”  

Morneau also addressed concerns about the risk of Canada entering a recession in the interview, acknowledging headwinds like low oil prices and trade tensions, but said the country is well-positioned for growth.

“Right now, we are continuing to forecast growth this year and for the forecastable future,” he said. “We’re well-positioned in a challenging time.”