A dinner could make or break the trade war

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Trade is front and center at the G-20 meeting

On the sidelines of the Group of 20 meeting in Buenos Aires that begins today — more on that below — President Trump will dine with President Xi Jinping of China tomorrow night. Forget small talk: The pair will focus on trade.

A deal may be in the works. The WSJ reports that the U.S. and China “are exploring a trade deal in which Washington would hold off on further tariffs through the spring in exchange for new talks looking at big changes in Chinese economic policy,” according to unidentified sources.

But Mr. Trump remains unpredictable. “I don’t know if we want to do it,” he told reporters yesterday. “I’m open to making a deal, but frankly, I like the deal we have now.” The president said this week that he would probably still increase tariffs on $200 billion worth of Chinese goods on Jan. 1.

And a long-term truce may be a pipe dream. “Any agreement in Argentina will be a tactical pause at best,” Ely Ratner argues in Foreign Affairs. “On most issues of consequence, there is simply no overlap between Xi’s vision for China’s rise and what the United States considers an acceptable future for Asia and the world beyond.”

Trump’s business ties with Russia run deeper than we thought 

Michael Cohen pleaded guilty yesterday to lying to Congress. It’s the first charge that President Trump’s former top lawyer faced from Robert Mueller, the special counsel. But Mr. Cohen’s admission that Mr. Trump was more involved in trying to build a tower in Moscow than had originally been stated was the real news.

What happened: Mr. Cohen said that he and an associate spoke with Russian contacts for months in 2016 about the Trump group’s plans for a huge new building in Moscow. The proposal included giving President Vladimir Putin of Russia a $50 million penthouse in the tower, BuzzFeed News reports, citing unnamed sources.

Why it might be a big deal: The NYT reports that Mr. Cohen’s admission “raises the possibility that he might have information about the central focus of the inquiry: whether President Trump or any of his associates conspired with Russia’s efforts to disrupt the 2016 election.” The NYT also asks: Did the effort influence Mr. Trump’s views on U.S. sanctions on Russia?

The White House response: Mr. Trump’s lawyers played down the news, saying that the president’s written statements about his Moscow dealings matched Mr. Cohen’s account. The president said yesterday that he would have gone back to business had he lost in 2016, so “why should I lose lots of opportunities?”

Facebook’s vetting of George Soros finances

It seems that Sheryl Sandberg wasn’t thrilled when the liberal billionaire delivered a speech at the World Economic Forum in January calling Facebook and Google a “menace” to society and expressing support for more regulation of the companies.

Ms. Sandberg is said to have questioned his motivations. She “asked Facebook’s communications staff to research George Soros’s financial interests in the wake of his high-profile attacks on tech companies, according to three people with knowledge of her request,” write Nicholas Confessore and Matthew Rosenberg of the NYT. Specifically, she wanted to know whether he was betting against the company’s stock.

Facebook says the vetting started earlier. “Mr. Soros is a prominent investor, and we looked into his investments and trading activity related to Facebook,” the company said. “That research was already underway when Sheryl sent an email asking if Mr. Soros had shorted Facebook’s stock.”

This compounds Facebook’s recent P.R. scandal. “The revelation complicates Ms. Sandberg’s shifting explanations of her role in Facebook’s decisions to hire Definers and go on the offensive against the social network’s growing legion of critics,” including Mr. Soros, Mr. Confessore and Mr. Rosenberg add.

More Facebook news: The company will reportedly release findings of an audit of civil rights on its platform this year. And a San Francisco official proposed taking Mark Zuckerberg’s name off a hospital to which the Facebook chief donated millions.

Coming up: All eyes on the G-20 

Aside from the Trump-Xi dinner, there’s plenty to note from the Group of 20 meeting that kicks off today in Buenos Aires:

• President Trump canceled a meeting with President Vladimir Putin, citing Russia’s naval clash with Ukraine.
• Prime Minister Shinzo Abe of Japan is expected to promote the Trans-Pacific Partnership trade agreement.
• Prime Minister Theresa May of Britain will try to gain international backing for her proposal to leave the E.U.
• Mrs. May and President Emmanuel Macron of France plan to press Saudi Arabia’s crown prince, Mohammed bin Salman, over the killing of a prominent Saudi dissident.
• On the sidelines, the U.S., Canada and Mexico are scheduled to sign the successor to Nafta tomorrow — though details of the agreement are apparently still being worked out.

How Google reportedly tried to shield its China work

The company’s efforts to restart business in China have drawn criticism from employees and outsiders. But The Intercept writes that internally, some executives tried to push the work forward while shutting out its own privacy and security specialists.

Some staff members didn’t like what they heard. Citing unidentified sources who worked on the China project, the Intercept claims that some Google workers were “left stunned” by a February 2017 meeting that detailed the China work. They worried about how the Chinese government could use a new search product against its citizens.

Senior executives reportedly dismissed those concerns. Scott Beaumont, Google’s head of operations in China, is said to have “shut out members of the company’s security and privacy team from key meetings about the search engine, the four people said, and tried to sideline a privacy review of the plan that sought to address potential human rights abuses.”

And they were super-nervous about leaks. “Google’s leadership considered Dragonfly so sensitive that they would often communicate only verbally about it and would not take written notes during high-level meetings to reduce the paper trail, two sources said.”

The bottom line: Google knows how controversial its China project is, but that doesn’t appear to be stopping its executives from pushing the plans forward.

The Fed will raise rates in December. After that, things are less clear. 

The U.S. central bank is poised to raise interest rates next month, according to minutes from its November meeting. While more rate increases are likely next year, they may not be as regular as this year’s, Nick Timiraos of the WSJ points out:

At their recent meeting, officials debated whether they should change that key phrase to stress their next few moves would depend more on the most recent data, a subtle but important shifting of the Fed’s policy-planning gears.

Not everyone thinks a pause is imminent: Paul Ashworth, the chief U.S. economist at Capital Economics, told the NYT that the Fed minutes “do not suggest that Fed officials anticipated an imminent pause in the tightening cycle.” But indicators suggest that there may be bigger pauses along the way.

More Fed news: Jay Powell, the central bank’s chairman, has four rules for dealing with a president who criticizes him in public: Find allies in the White House, don’t fight back publicly, never discuss politics — and don’t name-check President Trump.

Bayer is hurting from lousy deal-making 

The German conglomerate said yesterday that it planned to sell businesses like Coppertone, Dr. Scholl’s and its animal health unit. It will also lay off 12,000 employees, or about 10 percent of its work force. It’s a sign that some of its biggest-ever deals have become burdensome, and two in particular appear to be too unwieldy for shareholders’ liking:

The Merck deal. Bayer bought Merck’s consumer businesses, including Coppertone and Dr. Scholl’s, for $14.2 billion in 2014. But in yesterday’s announcement, Bayer said selling them would help it “focus on driving profitable growth in its core consumer health categories.”

The Monsanto acquisition. Since closing the $63 billion takeover this year, Bayer has had to contend with a huge debt load and expensive legal headaches tied to the Monsanto weed killer Roundup. While Bayer’s C.E.O., Werner Baumann, told reporters yesterday that Roundup litigation wasn’t a driver of the restructuring, investors still worry about the costs of the Monsanto deal.

China must act to lift its slowing manufacturing sector

Beijing reported today that a crucial measure of its industrial activity had broken a two-year growth streak. Expect the country to take additional steps to shore up its economy.

China’s official manufacturing purchasing managers’ index fell in November, and is now hovering between expansion and contraction. It’s the latest sign that the trade fight with the U.S. and efforts to curb risky lending at home are weighing on Chinese economic growth.

Analysts say they think Beijing will act. ANZ economists say the news gives the government “room for accommodative monetary policies.” And ING China suspects that “stimulus is on the way.”

Revolving door

• The C.E.O.s of Renault, Nissan and Mitsubishi will jointly lead their alliance for the time being, after the arrest of their former shared chairman, Carlos Ghosn.
• Dan Amman will give up his role as G.M.’s president to become C.E.O.of the carmaker’s Cruise autonomous driving unit.
• The online publication Mic laid off most of its staff before selling itself to the Bustle Digital Group.

The speed read

Deals

• Brexit appears to have derailed the $3.7 billion takeover of the British retailer Intu Properties, with the buyers citing “potential near-term volatility across markets.” (WSJ)
• SoftBank’s mobile division is still set to be valued at about $63 billionin its I.P.O. Also: The company’s Vision Fund uses a complicated trickbased on dual-class stock to avoid national security reviews of its deals.
• Stevie Cohen’s Point72 investment firm is reportedly considering opening a venture capital arm. (Bloomberg)
• “Mating two dinosaurs will not prevent their extinction,” a new book argues, looking at why big-ticket M.&A. often fails. (FT)
• Deutsche Bank’s deal makers worry their firms’ scandals will wash away their bonuses. (Bloomberg)

Politics and policy

• The Trump administration could extend subsidies to health insurance programs that violate Obamacare. (NYT)
• Democrats rejected a Republican proposal to help fund President Trump’s border wall, increasing the risk of a partial government shutdown. (WaPo)
• Tim Scott, the Senate’s lone black Republican, blocked a Trump appointee to a federal judgeship who was seen as hostile to African-Americans. (NYT)

Trade

• China’s cyberespionage has picked up amid the nation’s trade war with the U.S. (NYT)
• The trade fight is squeezing America’s only rare-earth mining operation. (WSJ)
• The tariffs battle is disrupting the natural rhythms of U.S. farmers. (NYT)
• How tariffs actually work, in case you were too afraid to ask. (NYT)
• Britain and the U.S. have reached a post-Brexit aviation agreement. (NYT)
• Some companies are managing to outmaneuver the Trump tariffs. (Politico)

Tech

• Newly proposed U.S. rules could allow homes to be sold after appraisals solely by computers instead of by humans. (WSJ)
• Floyd Mayweather and DJ Khaled were fined as part of an S.E.C. crackdown on initial coin offerings. (NYT)
• The White House will hold a round-table discussion with tech leaders next week. (WSJ)
• Alphabet’s smart-city project in Toronto is said to have been scaled back. (Information)
• Cambridge Analytica reportedly used fashion tastes to target right-wing voters. (NYT)
• Technology companies really want defense work. (Axios)

Best of the rest

• Federal prosecutors have charged the tech mogul Mike Lynch over the $11 billion sale of his Autonomy business to HP, seven years after the deal. (FT)
• China plans to clean up its peer-to-peer loan market. (Bloomberg)
• The Fed is heightening scrutiny of Goldman Sachs over the firm’s involvement in the 1MDB scandal. (Bloomberg)
• How falling oil prices could hurt the U.S. And why commodities losses might be here to stay.
• President Trump reportedly wants a full-blown Space Force. (Politico)
• Iceberg lettuce prices shot up as much as 168 percent after romaine lettuce was taken off shelves. (CNBC)

Thanks for reading! We’ll see you next week.

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