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Huawei got a 90-day reprieve. Now what?
A grace period in corporate America’s freeze-out of Huawei might not help the tech company very much.
• Last week, the Commerce Department said that U.S. companies would need special permission to sell some products to Huawei and other Chinese companies.
• Yesterday, companies including Google, Qualcomm and Broadcom were reported to have frozen their supply of components and software to the Chinese technology giant.
• Late yesterday, the Commerce Department said it would grant 90-day permissions for transactions needed to support handsets and equipment Huawei had already sold.
The reprieve “doesn’t mean much,” Ren Zhengfei, Huawei’s founder, said. He added that the company could “not easily” exclude U.S. chips from its devices, “but if there is a supply shortage, we have a backup.” He also said: “The current practice of American politicians underestimates our strength.”
What happens next?
• The exceptions suggest the move has “always been for leverage in the trade talks,” Derek Scissors, a scholar at the American Enterprise Institute, told the WSJ. If he’s right, it could be over as soon as it’s started.
• But the Trump administration has spoken repeatedly about blunting China’s tech development, citing issues like intellectual property theft and cyberespionage. And China has already threatened to retaliate. So don’t rule out a long and bitter fight.
Here’s one worst-case scenario:
• In a tech cold war, China would create “a digital Iron Curtain” that would keep out much of the world, Li Yuan of the NYT writes. “The United States and many other countries, goes this thinking, will in turn block Chinese technology.”
• That could hurt both sides, Tim Culpan of Bloomberg Opinion argues.
• It could also slow down development and deployment of new technologies like 5G wireless networks, which benefit from global economies of scale.
T-Mobile’s Sprint deal gets one crucial vote
The chairman of the Federal Communications Commission, Ajit Pai, said yesterday that he would back T-Mobile’s $26 billion takeover of Sprint. But he isn’t the only official who has to sign off.
Mr. Pai’s support followed several promises from T-Mobile: to expand its wireless broadband to cover rural areas, to build a big national 5G network and to sell its Boost Mobile prepaid wireless service.
A vote by the full F.C.C. is expected soon, probably along party lines. Republicans, including Mr. Pai, have a majority on the commission.
That means T-Mobile and Sprint cleared a major hurdle in creating a wireless carrier with more than 125 million customers. It would immediately become a strong competitor to AT&T, which has 148 million, and Verizon, which has 118 million.
But Justice Department staffers are less convinced. They reportedly want to block the deal. Citing an unnamed source, David McLaughlin of Bloomberg writes, “The remedies proposed by the wireless carriers earlier Monday don’t go far enough to resolve the department’s concerns that the deal risks harming competition.”
T-Mobile and Sprint are trying to assuage those concerns. The department’s decision rests with Makan Delrahim, the antitrust chief — and the F.C.C. and Justice Department have never publicly disagreed about a merger.
Jay Powell’s eye is on corporate debt
The Federal Reserve chairman said in a speech yesterday that growing business debt could hurt the U.S. economy — but that, for now, the financial system can handle it.
Nonfinancial corporate debt has hit $6.2 trillion, Jeff Cox of CNBC writes. The issuance of leveraged loans — which are made to low-rated, highly indebted companies — has swelled to $1.4 trillion, while lending standards have loosened over time, Sam Fleming of the FT notes.
Mr. Powell sees “reason to pause and reflect” for both businesses and investors, according to Nick Timiraos and Andrew Ackerman of the WSJ. His main concern: In an economic downturn, debt-burdened companies would struggle.
He’s not the only one. Janet Yellen, the former Fed chair, and officials at the Bank of England and the International Monetary Fund have raised similar concerns.
But Mr. Powell says it’s not a crisis yet. “Parallels to the mortgage boom that led to the global financial crisis are not fully convincing,” he said.
More: The Fed still isn’t sure how to deal with persistently low inflation.
A judge puts a crack in Trump’s wall of secrecy
A federal judge ruled yesterday that President Trump’s accounting firm must turn over his financial records to Congress. But the fight is far from over, Charlie Savage of the NYT reports.
This was an early test of Mr. Trump’s vow to stonewall “all” subpoenas by House Democrats. The president’s legal team has argued that the lawmakers’ demand was harassment with no legitimate legislative purpose.
The judge disagreed. Amit Mehta of the U.S. District Court of the District of Columbia said that Democrats’ justification for the subpoenas — to examine whether foreigners are in a position to use business dealings with the president to exert influence over American policymaking — was valid.
But the Trump team will keep fighting Democratic lawmakers. In addition to appealing Judge Mehta’s decision, Mr. Trump hopes to prevent the former White House counsel, Don McGahn, from testifying before Congress. (Mr. McGahn will not appear today, risking being held in contempt of Congress.)
Is Europe addicted to negative rates?
Five years ago, Europe’s central banks took the big step of using negative interest rates to revive their economies. But that has become a crutch, Brian Blackstone of the WSJ writes.
• Negative rates flip lending on its head: Commercial banks pay to keep their money in central banks, and some customers pay to deposit cash, which should incentivize borrowing and spending and discourage saving. Over time, rates are supposed to go positive again.
• But that hasn’t happened in Europe. “Central banks haven’t been able to wean their economies off them,” Mr. Blackstone writes. “No major bank that introduced negative rates during Europe’s debt crisis has turned main policy rates positive again.”
• Some banks report that major depositors want to park physical cash in vaults. That avoids the negative rates on electronic deposits — “but also does no good to the economy.”
• “The negative-rate policy’s ineffectualness is a sign of just how weak Europe’s economic engines are, and how vulnerable. The policy threatens pensions, creates the risk of real-estate bubbles and doesn’t fully quell the specter of deflation.”
• And it means that central banks will have “little ammunition to cushion the next downturn with the conventional tool of interest-rate reductions.”
Why corporations should want climate action
Helge Lund, the chairman of BP, outlined in an FT op-ed today why it is in the interest of the company’s shareholders for the oil giant to respond to climate change:
“Running a large multinational company in such an unstable environment would become increasingly difficult: How could we plan and develop strategies for the future knowing at some point the world will have radically to change course, but not knowing when or how?”
Such messages deserve healthy skepticism, as fossil-fuel companies have long talked about climate change while doing little about it.
But BP’s message appears to be part of a bigger shift in the way corporations think about the climate, as Amy Harder of Axios recently pointed out:
• “Companies across virtually all sectors of the economy, including big oil producers, are beginning to lobby Washington, D.C., to put a price on carbon dioxide emissions.”
• And that’s against the backdrop of an administration “that may not welcome such a shift.”
Snap named Derek Anderson, its vice president of finance, as C.F.O. and Lara Sweet, its interim C.F.O., as its head of human resources.
Deutsche Bank has hired Gil Ahrens from Wells Fargo as its head of venture capital and emerging growth company coverage, and Tracy Mehr from Jefferies as a managing director in leveraged finance, covering software.
Y Combinator promoted Geoff Ralston, one of its partners, to president. Sam Altman will step down as chairman but will remain as an adviser.
NBC News hired Chris Berend from CNN as the head of its digital operations. Nick Ascheim, who previously ran the division, will take a new, as-yet unspecified role within NBCUniversal.
The speed read
• Legg Mason will reappoint Nelson Peltz to its board to avoid a proxy fight. (WSJ)
• Goldman Sachs said that it’s in talks to buy B&B Hotels from the investment firm PAI Partners. (Reuters)
• Silicon Valley says Wall Street just doesn’t understand its long-term focus. The figures say otherwise. (CNBC)
• Slack wants its stock ticker symbol to be “WORK” instead of “SK.” (Business Insider)
• British Steel is reportedly on the brink of insolvency. (BBC)
Politics and policy
• The Environmental Protection Agency is reportedly planning to change how it calculates the health risks of air pollution, making it easier to drop climate change rules. (NYT)
• The fate of Philadelphia’s soda tax could hinge on local elections today. (NYT)
• Senator Kamala Harris of California proposed a way to close the gender pay gap: requiring companies to certify that men and women are paid equally. (NYT)
• President Trump’s demands to investigate political opponents has intensified debate about potential abuses of power. (NYT)
• Kris Kobach has 10 demands if he’s to be the White House immigration czar, including 24-hour access to a government plane and an assurance of becoming Homeland Security secretary by November. (NYT)
• One of the biggest backers of President Trump’s push to protect American Steel is Canadian. (NYT)
• Trade tensions between the U.S. and China put corporations in a tricky position: Toyota, for instance, only dared announce deals in China after it had unveiled investments in the U.S. (Reuters)
• Amazon’s shareholders will vote on whether to push the tech giant to examine the human rights and financial risks of facial recognition. (NYT)
• Here’s an in-depth look at how much data Facebook collects from your smartphone. Also: the company’s facial recognition privacy setting is still missing for some users, almost 18 months after it was announced. (Intercept, Consumer Reports)
• Here are the start-ups that are trying to make your kitchen redundant. (FT)
• The F.T.C. is reportedly widening its antitrust investigation into Broadcom over potential abuse of dominance in the Wi-Fi chip sector. (Bloomberg)
• Google Glass still exists, and just got an update. (Verge)
Best of the rest
• New York’s attorney general opened an inquiry after an NYT report revealed that thousands of immigrant taxi drivers had been left in crushing debt. (NYT)
• By August, Ford will have cut 7,000 jobs in two years. (NYT)
• Goldman Sachs hired Mazars as the accounting firm for its European arm, after regulators there have sought to break the stranglehold of the Big Four firms. (FT)
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