The Globe and Mail newspaper, citing law enforcement sources, said she is suspected of trying to evade US curbs on trade with Iran.
This is not the first time a Chinese technology company has found itself in hot water with the US.
The US sees Huawei and smaller Chinese tech suppliers as possible fronts for spying and as commercial competitors.
It's particularly worth noting that Meng was arrested on the same day that U.S. President Donald Trump and his Chinese counterpart Xi Jinping held a significant bilateral meeting in Buenos Aires, Argentina.
US stock futures and Asian shares tumbled as news of the arrest heightened the sense a major collision was brewing between the world's two largest economic powers, not just over tariffs but also over technological hegemony.
'China has already made solemn representations to the United States and Canada, demanding they immediately correct their wrong behavior and restore Ms Meng Wanzhou's freedom'. The arrest has been made by Canadian law enforcement at the request of the USA over violating the Iran sanctions.
USA stock futures took a sharp move downward, a sign that the global stock rout is set to continue amid heightened trade war fears after the US-led arrest of a Chinese executive.
Last month, the Trump administration launched an unusual lobbying campaign directed at allied foreign governments, asking them to press wireless and internet providers in these countries not to use Huawei equipment, according to The Wall Street Journal.
China's embassy in Canada criticized Canada and the United States for the arrest. "The incident could turn out to be a breaking point", Zhu said.
Earlier this year, six top USA intelligence chiefs voiced their concerns about Huawei phones to the Senate Intelligence Committee, with FBI Director Christopher Wray saying he was "deeply concerned about the risks of allowing any company or entity that is beholden to foreign governments that don't share our values to gain positions of power inside our telecommunications networks". It's shooting for the lead in fifth-generation wireless networks and preparing to take on some of America's biggest chipmakers.
Police target 'Ndrangheta mafia in raids across Europe
Settimino Mineo, center, who allegedly took over as the Palermo head of Cosa Nostra, is escorted by Italian Carabinieri police. Cocaine and ecstasy pills also were seized in Wednesday's raids.
The UK has not blocked firms from using Huawei, although BT, which dominates the UK's telecoms network, said this week it would not use the Chinese firm's equipment in its "core" 5G infrastructure.
European shares fell on Thursday after the arrest of a top executive at Huawei fed new worries over the Sino-U.S. trade war, hitting export-oriented tech and auto stocks. Washington has previously raised concerns about the Chinese conglomerate because of its links to Beijing's government.
That same month, Washington barred Huawei rival ZTE Corp. from exporting USA technology in a separate case over exports to Iran and North Korea.
In exchange, ZTE agreed to pay a hefty $1 billion fine and put an additional $400 million in escrow in case of future violations.
Huawei is regarded as far stronger commercially than ZTE.
Ben Kwong, director of research at KGI Asia in Hong Kong, noted Huawei was not the only reason for scepticism in the market.
Despite being essentially barred from the critical USA market, Huawei surpassed Apple to become the world's number two smartphone maker in the second quarter of this year and has market leader Samsung in its sights.
In the latest development that is sure to upset the newly-formed trade truce between the U.S. and China, a senior Huawei exec has been arrested in Canada and now faces extradition to the US. "The company has been provided very little information regarding the charges and is not aware of any wrongdoing by Ms. Meng", it said.
A US Justice Department spokesman declined to comment.
Huawei has said it complies with all applicable export control and sanctions laws and US and other regulations.
Meng's arrest also threatened to inflame disagreements over Iran and Trump's decision to break with other governments and re-impose sanctions over the country's nuclear development.
Sasse said China had been "working to creatively undermine our national security interests, and the United States and our allies can't sit on the sidelines".