Trump’s New China Front
The Trump administration is pulling out the big guns in its push to slow China’s rise, with potentially devastating consequences for the rest of the world. The White House initiated a two-pronged assault on China: barring companies deemed a national security threat from selling to the U.S., and threatening to blacklist Huawei from buying essential components. China’s embassy was informed of the move in advance, U.S. Commerce Secretary Wilbur Ross told Bloomberg TV. The company said it will seek remedies, after Beijing pledged to protect its corporate interests and respond if the Trump administration carries through on plans to expand tariffs. China responded with the formal arrest of two detained Canadians. Here’s our QuickTake on how Huawei became a government target.
Stocks Rally, Baidu Bombs
Asian equity futures are pointing mostly higher after U.S. stocks rose for a third day as investors shifted focus to strong earnings from Walmart and Cisco, which muted concerns about the trade war. Oil spiked on Iran concerns, while gold slumped. The rally left Baidu behind after the online search company posted a loss for the first time since going public in 2005. Shares dropped after trading closed in New York.
Damage from the trade war will be global and the fallout may be hard to avoid because the Trump administration resents Beijing’s growing power, said former Goldman Sachs Economist Jim O’Neill. Chinese growth could tumble, debt may surge and foreign firms might flee. Bank of America, Morgan Stanley and UBS say expansion could slow below 6% for the first time in almost three decades. Companies are already struggling to adjust to the ever-changing landscape.
A Warning From The House
Trump said he hopes the U.S. doesn’t go to war with Iran as House Speaker Nancy Pelosi warned him against doing so without congressional approval. The Iranian foreign minister said his country isn’t seeking a conflict but will defend its interests. Crude hit a two-week high after Saudi Arabia accused Tehran of aiding this week’s oil facilities attacks.
Big Banks, Big Fines
Citi, JPMorgan, Barclays, RBS and Mitsubishi UFJ were fined a total of 1.07 billion euros ($1.2 billion) by the EU for colluding on FX trading strategies in online chatrooms. Citi will pay the most at 310.8 million euros. UBS escaped a fine because it was the first to fess up. While relatively large, the cartel fines are lower than a 1.3 billion-euro penalty slapped on banks for rigging Euribor rates.