Inside the fall of the trade deal

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How the trade deal collapsed

A last-minute change of direction by President Xi Jinping of China is what outraged President Trump and upended their countries’ trade talks, Chris Buckley and Keith Bradsher of the NYT report, citing more than a dozen interviews.

• “By May 1, Mr. Xi had demanded a substantial recast of the embryonic agreement that his chief negotiator, Liu He, had been haggling over for months with Mr. Trump’s team.”
• “The changes were discussed with other Communist Party leaders, which brought into focus worries that the proposed deal could make Mr. Xi and the party look as if they were bowing to pressure.”
• “Soon after, the Chinese negotiators sent their American counterparts a version of the draft agreement in a Microsoft Word document, speckled with cuts and changes.”
• It is this that prompted Mr. Trump to “accuse Beijing of reneging on terms that had been settled.”

“It is clear that Mr. Xi misjudged Mr. Trump’s eagerness for a deal and how far he could push the American negotiators,” Mr. Buckley and Mr. Bradsher write.

“Now Mr. Xi risks being backed into a corner, unable to compromise between his own positions and Mr. Trump’s,” Mr. Buckley and Mr. Bradsher add. “China’s leaders risk prolonging tensions with the United States by defending their decisions with combative, nationalist rhetoric that could narrow the room for a compromise, experts from both countries said.”

More: The state news media says China isn’t interested in renewed trade talks for now. And this week’s Economist cover story considers how a long feud between the two nations could be managed.

How Huawei could suffer from new U.S. bans

By restricting the Chinese technology giant’s ability to buy American components, Washington could hamstring Huawei’s operations worldwide, Raymond Zhong of the NYT reports.

• The Commerce Department announced on Wednesday that U.S. companies will need special permission to sell some products to Huawei.
• That’s a big deal: Of the $70 billion that Huawei spent on components and other supplies last year, $11 billion went to American companies, a Huawei spokesman told Mr. Zhong.

How much will it hurt? That depends on the range of products the ban turns out to cover, and how willing the Commerce Department is to grant exceptions. Early indications suggest not very.

“The effect could be catastrophic” if Huawei is cut off from companies like Qualcomm, Intel and Broadcom, which supply it with chips, or Google, whose Android software powers its phones.

Huawei saw this coming. It has stockpiled components “for uncertain times,” Guo Ping, a deputy chairman of the company, told reporters in March. It has also tried to find suppliers in other countries, and invested in making its own chips.

But “Huawei still depends on American suppliers for enough critical components that an all-out export ban from Washington would create a sizable headache,” Mr. Zhong concludes.

It’s Amazon vs. Uber in food delivery

Amazon said today that it will lead a $575 million investment in Deliveroo, the British restaurant delivery service — a move that means it’s squaring up against Uber.

Deliveroo reportedly considered selling itself to Uber late last year. The discussions are said to have stalled over price.

Now Uber faces a better-funded international competitor, in what it has recently highlighted as an important, fast-growing sector. Uber Eats is a bright spot for Uber, but the company has already blamed increased competition from DoorDash, Rappi and others for denting its growth.

Amazon was joined in the investment by existing backers like T. Rowe Price and Fidelity. Altogether, Deliveroo has now raised $1.53 billion, which it plans to use to continue growing internationally, including in markets like Hong Kong.

Meanwhile, DoorDash is also seeking more money. Amir Efrati of The Information reports that the U.S. start-up wants to raise funds at a valuation of as much as $12 billion.

Recession rescue? It could be automatic

Federal Reserve officials increasingly worry that inflation is too lowand could leave them with few means to soften a downturn, Jeanna Smialek of the NYT reports.

• “Several Fed officials have expressed a strong concern that persistently low inflation may be a more permanent economic phenomenon” that could “hamstring the Fed’s room to cut interest rates next time the American economy enters a recession.”
• “Permanently lower inflation would leave policymakers less room to cut interest rates and stimulate economic growth in a downturn.”
• That’s fueling “what seems to be an intellectual rift on the interest rate-setting Federal Open Market Committee.”

But don’t panic. There may be a way to ensure that squabbles among officials or in Congress don’t let the next downturn get out of hand. Neil Irwin of the Upshot suggests that the nation’s anti-recession plan could be automated.

• One possibility: Federal infrastructure grants could rise when unemployment falls by more than half a percentage point above its recent average level. Another: Work requirements for food stamps could be removed during recessions, and their value increased by 15 percent.
• Because no one can predict exactly when a recession will hit, these rules “can be devised in a state of ignorance — not knowing which party will hold the White House and Congress” when they’re needed, Mr. Irwin writes. That means “either party might assume it has equal chance of being helped.”
• And “the stabilizers can also be scheduled to go away when things get better. That could give some comfort to anyone worried about the possibility of open-ended government stimulus.”

Frothy-market deals aren’t going away

Even in the face of a trade war, Wall Street has continued to revel in stock buybacks and junk bond offerings — and it’s unclear what would stop the party.

• So far, S&P 500 companies have reported buying back $188 billion worth of their own shares during the first quarter this year, the WSJ reports. That’s on pace to be the second-highest amount in 20 years.
• And investors are snapping up risky debt: Last week alone, companies priced $12 billion worth of junk bonds, the busiest period in 20 months, according to Bloomberg.

The exuberance could lead to problems. Companies may take on more debt than they can handle during an economic downturn. And skeptics of buybacks say the cash would be better spent on companies’ core businesses.

But the frothy deals could continue until it’s too late, according to some Wall Street skeptics. “If you’re an investment banker, what do you do?” Marshall Front, the chief investment officer at Front Barnett Associates, told Bloomberg. “You keep dancing until the music stops.”

The Trump Organization’s mixed 2018

Many companies enjoyed strong results last year thanks to the booming economy. President Trump’s wasn’t among them, the NYT reports.

• The Trump Organization’s Mar-a-Lago resort in Florida saw a 10 percent drop in revenue from 2017. So did hotels in Chicago and Hawaii and several golf courses.
• The company’s biggest money-generator, Trump National Doral, saw a 2 percent increase in revenue. The Trump golf course in Turnberry, Scotland, enjoyed a 15 percent rise in revenue.
• And Trump’s Washington hotel saw its revenue rise 1 percent from 2017 as it has become a favored spot for Republicans, lobbyists and (subject to a court fight) some foreign governments.

In total, Mr. Trump reported 2018 revenues of at least $434.9 million, down about 4 percent from a year earlier. He reported assets worth at least $1.4 billion, about the same as 2017.

The disclosure shows how the Trump Organization has become “a more modest company than it was just a few years ago, when Mr. Trump spoke of a large pipeline of new deals even as he pledged to back away from any involvement in its management,” the NYT reports.

More: Mr. Trump took out a 30-year mortgage on an $18.5 million oceanfront home near Mar-a-Lago.

Revolving door

Craig Phillips, the Treasury Department official tasked with fixing Fannie Mae and Freddie Mac, is leaving.

Nissan Motor said that it would keep Hiroto Saikawa as its C.E.O.

Angela Ahrendts, Apple’s former retail chief, is joining the board of Airbnb.

Jack Stoddard is stepping down as the C.O.O. of Haven, the health care venture backed by Amazon, Berkshire Hathaway and JPMorgan Chase.

Jeanmarie McFadden, the former head of communications at Morgan Stanley and MetLife, will join the Brunswick Group P.R. firm as a partner.

The speed read

Deals

• Luckin Coffee, a Chinese competitor to Starbucks, has raised $561 million in its American I.P.O., at a valuation of $4 billion. (FT)
• Shareholders in Altria questioned the tobacco giant’s C.E.O., Howard Willard, yesterday about the company’s $12.8 billion investment in the vaping company Juul. (CNBC)
• HP Enterprise is reportedly near a deal to buy the supercomputer maker Cray. (Bloomberg)
• WPP has reportedly shortlisted several private equity firms as potential buyers of a majority stake in its Kantar data analytics business. (Reuters)
• Just Inc., the maker of the vegan mayonnaise substitute Just Mayo, said it was considering going public. (Bloomberg)

Politics and policy

• House Democrats passed bills aimed at lowering drug prices and rolling back Trump administration changes to the Affordable Care Act. (Politico)
• Federal investigators recommended that the Environmental Protection Agency try to reclaim nearly $124,000 in “excessive” travel costs from its former leader Scott Pruitt. (NYT)
• President Trump canceled $929 million worth of grants meant for California’s high-speed train project. (Bloomberg)
• Democratic lawmakers called on the Trump administration to review the Russian aluminum company Rusal’s plans to invest $200 million in a Kentucky plant. (NYT)
• Boris Johnson confirmed that he will run to succeed Prime Minister Theresa May of Britain. (BBC)

Tech

• Ten people have been charged over hacks that plundered bank accounts and caused more than $100 million in losses. (NYT)
• A Tesla Model 3 that was involved in a fatal crash in March was operating in Autopilot mode. (WSJ)
• Pinterest’s stock fell after-hours over disappointment with its first post-I.P.O. financial results. (NYT)
• Google has reportedly backed off aggressive investigations into leaks. (Wired)
• Facebook is said to be having a hard time recruiting. (CNBC)
• Bitcoin and other cryptocurrencies fell again after a short-lived rally pushed them to their highest values in almost a year. (CNBC)

Best of the rest

• Walmart, Exxon Mobil and Apple top this year’s Fortune 500 list. (Fortune)
• Purdue Pharma, the maker of the opioid OxyContin, has been hit with lawsuits from six more states. (WSJ)
• China formally arrested two Canadian citizens it has detained on espionage charges. (WSJ)
• Europe fined five banks a total of $1.2 billion for their roles in foreign exchange cartels. (NYT)
• Hong Kong’s corruption watchdog charged a former JPMorgan Chase vice chairman with bribery. (FT)
• Western companies are getting entangled in China’s crackdown on its Muslim population. (WSJ)
• The SAT is getting an adversity score to take students’ socioeconomic hardship into account. (NYT)

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