Good Tuesday morning. (Was this email forwarded to you? Sign up here.)
U.S. charges Huawei with theft and sanctions evasion
The Justice Department partly unsealed a pair of indictments yesterday that accuse the Chinese telecommunications firm of trying to steal trade secrets, evade economic sanctions on Iran and obstruct a criminal investigation into its behavior.
The context: The charges come as officials from Beijing and Washington prepare to continue trade negotiations and as the Trump administration tries to shoulder Huawei out of international efforts to build the next generation of wireless networks, known as 5G. The company has denied the claims; a spokesman for China’s industry and information technology ministry called them “unfair and immoral.”
The allegations: The U.S. says that Meng Wanzhou, Huawei’s chief financial officer and the daughter of its founder, Ren Zhengfei, participated in a plot to defraud four large banks into clearing millions of dollars in transactions with Iran in violation of international sanctions. American officials say that Huawei tried to impede their investigation by destroying evidence and by moving employees out of the U.S. to prevent them from being called as witnesses. The company, prosecutors say, also stole information about a phone-testing robot called Tappy from T-Mobile facilities in Washington state and encouraged employees to steal other confidential information from competitors.
What now: Matthew Whitaker, the acting attorney general, said that the U.S. government wants to have Ms. Meng extradited from Canada, where she was detained last year at Washington’s request and where officials are now on tricky political turf trying to balance American and Chinese interests. The tussle has the industry on edge; an internal assessment from Deutsche Telekom concluded that the 5G rollout in Europe would be delayed by at least two years and cost billions of euros if governments banned Huawei, whose technology underpins much of the current network infrastructure.
Today’s DealBook Briefing was written by Andrew Ross Sorkin and Stephen Grocer in New York, and Tiffany Hsu and Gregory Schmidt in Paris.
Throwing a wrench into trade talks with China
The Huawei charges will complicate negotiations on Wednesday that were already expected to be tense.
A delegation of dozens of Chinese representatives led by Vice Premier Liu He will meet near the White House with a group headed by Robert Lighthizer, President Trump’s top trade negotiator, and Steven Mnuchin, the treasury secretary. On Thursday, Mr. Liu is expected to meet with Mr. Trump.
Mr. Mnuchin said there had been “significant movement” on talks that involved “very complicated issues,” including intellectual property protections and questions of enforcement. The Chinese may offer to increase their purchases of U.S. farm products and energy, and slightly change their industrial policies, while pushing back on demands to eliminate subsidies to favored industries.
The parties have until early March to reach an agreement, or else risk an escalation in the trade conflict.
Mr. Trump is being pressured by the markets and the corporate sector to deliver a deal. A recent survey found that his trade policies had led more than a third of American manufacturers to raise prices. Yesterday, the chip maker Nvidia and the bulldozer builder Caterpillar both issued warnings about business conditions in China.
As Eswar Prasad, the former head of the International Monetary Fund’s China division, notes:
“The damaging economic effects of the shutdown and Trump’s desire to score a cleaner win at least on trade could also make U.S. negotiators somewhat more flexible and willing to strike a deal.”
The aftershocks of the shutdown
The five weeks when much of the government was out of commission cost the U.S. economy $11 billion, nearly a quarter of it permanently lost, the Congressional Budget Office said yesterday.
That’s nearly double the $5.7 billion President Trump is seeking for a southern border wall — a project he still wants and is still threatening to shut down the government to get.
The damage will be mitigated somewhat as furloughed workers start to receive their back pay, but with the government only funded for three weeks, many federal employees plan to hold off on spending.
Here’s another wrinkle: Government statisticians just now returning to work are behind on collecting and analyzing figures on retail sales, manufacturing data, housing statistics and other information. Investors, executives and analysts nervous about signs of weakness in the economy are grasping for details about the labor market, inflation and business spending. And when the Federal Reserve’s policymaking group meets starting today, it will be missing some of its customary guides.
Howard Schultz defends his plan to run as an independent
Howard Schultz, the former chief executive of Starbucks, told Andrew yesterday that he was not fazed by criticism that his potential presidential bid as an independent could strengthen President Trump’s chances for re-election.
“Nobody wants to see Donald Trump removed from office more than me,” Mr. Schultz said at an event in a Barnes & Noble bookstore in New York to kick off his national book tour.
Responding to critics: Mr. Trump said in an early morning tweet that Mr. Schultz did not have the “guts” to run, a taunt that Mr. Schultz called “childish.” Michael Bloomberg, another possible presidential contender, condemned independent bids.
Hecklers in the crowd: “Don’t help elect Trump,” yelled one protester, who was escorted out of the event in New York. Mr. Schultz was interrupted a second time by a man who chanted, “Health care is a human right.”
More: Bill Burton, a former adviser to President Barack Obama, pushed back against criticism over his decision to join Mr. Schultz’s team. And the harsh response on social media to a potential Schultz candidacy could affect the Starbucks brand, according to the Washington Post.
Ghosn’s plight reveals a pattern in Japan
Carlos Ghosn, the global auto chief indicted on charges of financial wrongdoing, remains consigned to a small cell after a Tokyo court again denied his bail request. His predicament has turned a spotlight on the Japanese criminal justice system, writes the NYT’s Motoko Rich:
The lawyers can detain defendants for more than three weeks before bringing charges, arrest suspects multiple times to extend their detention and interrogate them without their counsel.
Some in the West have reacted strongly to the power that prosecutors have wielded. “This is an approach to the rights of accused people that one would expect in a dictatorship, not in Japan,” one critic wrote.
BlackBerry named Bryan Palma, a senior vice president at Cisco, as its chief operating officer and president. (MarketWatch)
The Speed Read
• Unilever acquired the Laundress, a New York-based line of premium cleaning products, as it tries to bolster its high-end home care products. (Reuters)
• Edward Lampert, the Sears chairman, says his bid for the retailer will make the company competitive and profitable again, but experts say there’s more to it. (CNN)
• Two House panels will hold a joint hearing on Feb. 13 on the proposed merger between T-Mobile and Sprint. (Reuters)
• Joe Kaeser, the chief executive of Siemens, said the European Union might be right in blocking his company’s planned rail merger with Alstom. (Bloomberg)
• Dropbox agreed to acquire HelloSign, an e-signature software company, for $230 million in cash. (Bloomberg)
Politics and Policy
• After a long back-and-forth, Speaker Nancy Pelosi invited President Trump to deliver the State of the Union address on Feb. 5. (NYT)
• The special counsel Robert Mueller is close to finishing his investigation, Matthew Whitaker, the acting attorney general, announced in a highly unusual confirmation of the state of the inquiry. (NYT)
• The Trump administration imposed economic penalties on Venezuela, a punitive step to add to the pressure on President Nicolás Maduro to resign. (NYT)
• Prime Minister Theresa May of Britain is to present Parliament with an amended version of her Brexit deal today, but the public seems to be tiring of the apparently interminable saga. (CNBC)
• A glitch in FaceTime, Apple’s video and audio calling app, allows iPhone users to eavesdrop on others. (NYT)
• The letter that forced Travis Kalanick out of Uber was among a series of files that were unsealed as part of a lawsuit over trade secrets brought by Alphabet’s Waymo. (Bloomberg)
• Less than four months after Elon Musk settled fraud charges over his claims that Saudi Arabia was ready to back a buyout of Tesla, the kingdom has hedged most of its 4.9 percent stake in the company to protect against stock price volatility. (FT)
• As the money-losing Snap tries to lure and keep users, its Snapchat app is considering what was once unthinkable: permanent posts. (Reuters)
Best of the Rest
• The California utility Pacific Gas & Electric filed for bankruptcy protection in anticipation of billions of dollars in liability claims for two years of wildfires. (NYT)
• Wynn Resorts reached a proposed settlement with Nevada regulators over claims that its executives ignored sexual misconduct claims against Steve Wynn. (WSJ)
• A lawyer for John Kapoor, the founder and former chairman of Insys Therapeutics, denied in court that he had any role in the U.S. opioid crisis. (Reuters)
• Corporate debt loads have been growing, but household borrowing less so — and that could keep economies from tipping into recession. (WSJ)
• Investing in utilities, once seen as safe, boring and modestly profitable, is now considered riskier and more exciting, because of alternative energy, global warming and natural disasters. (Bloomberg)
• Andrea Orcel left UBS to join Santander as its chief executive, but then the offer was rescinded because of a compensation dispute. Now he is said to be preparing a legal fight. (FT)
• American International Group, the insurance conglomerate, says it is 100 years old. Maurice Greenberg, its former chief executive, disagrees. (WSJ)
• Peloton, which sells a high-tech exercise bike for roughly $2,000, is being roasted on social media for the ostentatious symbols of wealth in its most recent ad campaign. (FastCo)
Thanks for reading! We’ll see you on Wednesday.
You can find live updates throughout the day at nytimes.com/dealbook.
We’d love your feedback. Please email thoughts and suggestions to email@example.com.