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“At halftime of the Super Bowl of trade relations”
President Trump might keep some tariffs on Chinese goods even if Beijing and Washington reach a trade agreement, he told the NYT yesterday, after delegates from both countries wrapped up another round of negotiations.
“Without the tariffs, we wouldn’t be talking,” he said in an interview.
How were the discussions? According to Mr. Trump’s posts on Twitter, they went well, “with good intent and spirit on both sides.” He hosted the negotiators in the Oval Office and suggested that President Xi Jinping of China was willing to welcome more American companies and to buy more American products — including five million tons of soybeans. The Chinese representatives, led by the American-educated vice premier, Liu He, said that the two sides had made “important progress” and had “candid, specific and fruitful” talks. Robert Lighthizer, the top American trade negotiator, was less sanguine. “We did not come off the rails,” he said. “That’s significant.”
What’s next? The two sides hope to reach an agreement by early March, before Mr. Trump plans to increase tariffs after a 90-day truce. Mr. Lighthizer and Steven Mnuchin, the Treasury secretary, will go to Beijing after the Chinese New Year holiday this month to prepare for talks between the two presidents. Mr. Trump said that summit meeting would happen “in the near future” and that it would address “some of the long standing and more difficult points.” According to Myron Brilliant, the head of international affairs at the U.S. Chamber of Commerce, “we are in the fifth inning of a nine-inning game.” He also used another sports analogy to describe the negotiations:
I would now say we are at halftime of the Super Bowl of trade relations.
Today’s DealBook Briefing was written by Andrew Ross Sorkin and Stephen Grocer in New York, and Tiffany Hsu and Gregory Schmidt in Paris.
A reminder to Facebook and Google: Don’t mess with Apple
Facebook’s 35,000 employees got a reminder this week of Apple’s power over their day-to-day routines. So did workers at Google.
After Facebook and Google ran afoul of Apple’s rules for distributing apps, Apple hit back by blocking the two Silicon Valley giants from using the internal apps and updates that run on iPhone software.
Sheryl Sandberg, Facebook’s chief operating officer, told the NYT that the offending app had not been a secret and had operated with users’ consent. Apple eventually restored access for both Facebook and Google, but its point had been made: Cross us at your peril.
The tension with Apple was not Facebook’s only concern.
• The social network, in a collaboration with Twitter, said that other countries appeared to be following the Russian playbook for using social media to disseminate propaganda and disinformation. One campaign, from Iran, touched on the conflict in Syria and conspiracy theories about the Sept. 11, 2001, terrorist attacks. Facebook said it had removed 783 pages, groups and accounts with ties to Iran, while Twitter said it had taken down more than 2,000 accounts.
• Facebook, already being investigated by the authorities in Massachusetts, New Jersey and New York, is also said to be the target of several more inquiries, including in Connecticut, Illinois and Pennsylvania, over its mishandling of user data.
A Deutsche Bank and Commerzbank merger seems increasingly likely
Deutsche has been in a lot of trouble for a very long time. Now, it’s looking increasingly probable that the German government will step in to combine it with its smaller, but also struggling competitor, Commerzbank.
Deutsche reported its first full-year net profit since 2014 today but still failed to meet analysts’ expectations. Its fourth quarter showed continued weakness.
The bank has lurched through various failed restructuring efforts, has been hit with fine after fine and was recently raided by prosecutors pursuing a money-laundering investigation. Its stock price has more than halved in the past year. If it is unable to recover on its own, it is thought a merger with Commerzbank may occur by midyear.
But that may not be wise, writes Elisa Martinuzzi of Bloomberg:
The deal looks like the option of last resort. Combining two of Europe’s most inefficient banks to create an even bigger supertanker would require tens of thousands of job cuts and a risky (read costly) integration to stand a chance of working.
Expect ambiguity in the jobs data
The Labor Department will release its monthly estimate of hiring and unemployment at 8:30 a.m. But there’s even more uncertainty than usual, writes the NYT’s Ben Casselman. Here’s what to look for:
Crucial time: The United States’ decade-long expansion could be nearing its end, and the partial government shutdown has added to those fears. Not all the effects will show up in the jobs data, but they will make the report unusually hard to interpret.
Potential impact: There is one place the shutdown will probably show up: the jobless rate. Unemployment could go up by one- or two-tenths of a percentage point.
Solid foundation: The job market is strong, however. Claims for unemployment insurance recently hit a nearly 50-year low, and paychecks are growing.
Earnings reports show looming challenges
Investors looked to earnings reports yesterday from two bellwethers of the U.S. economy: Amazon and General Electric. Both seem to be struggling with growing pains.
Stiff competition: The latest quarterly results suggested that Amazon’s retail business not only faced more competition, it was also maturing, as growth slowed from its usual breakneck pace. But the company compensated by expanding its highly profitable cloud and advertising businesses. Its revenue guidance fell short of expectations, sending shares down sharply in after-hours trading.
Seeking a turnaround: G.E.’s fourth-quarter results pointed to the depth of the company’s challenges, despite a strong performance by the company’s jet engine business. G.E. made no forecast for what its profit and revenue would look like this year, and its chief executive, Lawrence Culp, said that 2019 was “still very much a work in progress.” The company also said that it had reached a $1.5 billion settlement in an investigation of its role in the 2008 financial crisis, reassuring investors.
More earnings news: Nintendo shares dropped more than 9.3 percent after it cut its full-year target for sales of its Switch video game console.
Intel named its interim chief executive, Robert Swan, as its permanent leader, ending a seven-month search. (NYT)
Symantec said its chief financial officer, Nicholas Noviello, planned to step down in the coming months to pursue other opportunities. (FT)
John Brumby, a former Australian lawmaker, retired from the board of the Australian subsidiary of Huawei, the Chinese telecommunications giant. (FT)
• Blackstone and Apollo, two of the biggest private equity firms, recorded sharp declines in profit in the fourth quarter of 2018 after investments were hit by rocky markets. (FT)
• Seeking to narrow its focus to consumer appliances, Electrolux plans to spin off a unit that supplies restaurants and hotels with food, beverages and equipment. (FT)
• Blackstone said it would buy a controlling stake in Tallgrass Energy, a midstream energy company, for $3.3 billion. (Reuters)
• Jeff Bezos’s space venture, Blue Origin, reached a deal with Telesat of Canada to launch part of a satellite constellation intended to provide faster internet access. (Reuters)
• New e-commerce rules in India caused widespread disruption on Amazon’s website there. (Reuters)
• Elon Musk blamed layoffs at SpaceX on the company’s “two absolutely insane projects.” (CNBC)
• Mark Zuckerberg added $6.2 billion to his net worth after Facebook posted revenue that beat Wall Street estimates, sending its shares soaring. (Bloomberg)
Politics & Policy
• President Trump said in an exclusive interview with the NYT that he would proceed with a border wall regardless of the result of talks with lawmakers and dismissed any suggestions of wrongdoing in the investigations that have ensnared his associates. (NYT)
• The Republican-led Senate voted 68 to 23 to advance legislation that strongly opposes President Trump’s withdrawal of U.S. military forces from Syria and Afghanistan. (NYT)
• President Trump signed an executive order intended to funnel more federal funding into infrastructure projects that employ American workers. (NYT)
• Mitch McConnell, Republican of Kentucky and the Senate majority leader, called Democratic legislation that aims to clear obstacles to voting and to make Election Day a federal holiday a “power grab.” (NYT)
• Mr. Trump is said to be considering Herman Cain, the former pizza company executive and Republican presidential candidate, for a seat on the Federal Reserve Board. (Bloomberg)
• Senator Elizabeth Warren, Democrat of Massachusetts, wants a 2 percent tax on household wealth exceeding $50 million, and a 3 percent tax for those with more than $1 billion. Here’s how the plan from the presidential hopeful would work. (Bloomberg)
• Senator Bernie Sanders of Vermont has his own plan to subject billionaires to a 77 percent estate tax. Here’s how much Jeff Bezos, Bill Gates and Warren Buffett would have to pay. (CNBC)
Best of the Rest
• Fears that supply chains will be severely disrupted in the event of a no-deal Brexit are leading to shortages of food and medicines in Britain. (Reuters)
• Nearly a third of British companies could move their operations abroad because of Brexit, according to a recent survey. (BBC)
• The timing of Italy’s recession could not be worse: Europe is at an economic standstill, raising anxieties that the world is on the verge of a significant slowdown. (NYT)
• The Venezuelan company Citgo Petroleum, one of the largest refiners in the U.S., is considering bankruptcy after the Trump administration placed sanctions on Venezuela’s oil sector. (WSJ)
• Chinese factories increasingly make goods for the country’s middle class, but when those consumers hold back, local workers can suffer. (NYT)
• Lime, a scooter start-up based in San Francisco, is raising $400 million in its latest funding round, which values the company at $2 billion. (WSJ)
• Palantir, a data-mining company, is handing out more bonuses and cheaper stock options after a succession of shareholder write-downs and political controversies tied to its co-founder, Peter Thiel. (Bloomberg)
• Shell Oil reached a tentative agreement with the United Steelworkers union to increase pay by 11 percent over three years for 30,000 American workers. (Reuters)
• Banks and smaller companies helped lift the stock market, a sign that investors are favoring sectors tied to the U.S. economy as trade tensions cloud global growth. (WSJ)
• E.U. antitrust authorities have accused eight banks of colluding from 2007 to 2012 to manipulate the market for eurozone government bonds. (FT)
• The cosmetics company e.l.f. Beauty imported 156 shipments of false eyelash kits with material sourced from North Korea, violating sanctions. The company will pay a settlement of nearly $1 million to the U.S. Office of Foreign Assets Control. (CNBC)
• As China’s economy slows, gambling revenue in Macau fell 5 percent to $3.1 billion in January, the first fall since July 2016. (FT)
• The polar vortex may cost American retailers and restaurants nearly $1 billion. (FT)
• Commonwealth Bank of Australia, the country’s largest bank, may struggle if a powerful government inquiry intensifies regulatory pressure. (Reuters)
• The curious case of why shares of PG&E rose after the utility company filed for Chapter 11 bankruptcy. (WSJ)
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