Trump’s strong-arming of China might be working

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America is pushing China around on trade. It might work.

The Trump administration is using the current trade truce with China to flex its diplomatic muscles in a bid to get its own way. So far, it looks like the strategy may be succeeding.

The U.S. sees a chance to push China around. “The country’s economy is in a sharp downturn, putting political pressure on President Xi Jinping to reach a deal with President Trump,” write Keith Bradsher, Alan Rappeport and Glenn Thrush of the NYT. “American officials recognize the leverage they now have, wielding tariffs to extract concessions that Beijing has long delayed or rejected altogether.”

China is already making some concessions. Beijing has begun to lift barriers it recently imposed on imports of American food, energy and cars — even as the U.S. maintains tariffs on $250 billion in Chinese goods. Orders for American soybeans are reportedly already rolling in.

But the Trump administration wants action on wider issues. The White House is concerned about issues like pressure on American companies to hand over valuable technology when they seek entry to the Chinese market and the theft of industrial secrets. The F.B.I. gave that view credence yesterday by deeming Chinese cyber espionage the “most severe” threat to U.S. security.

China may cede ground on that front, too. The WSJ reports that its government is redrafting the Made in China 2025 program, its road map for ascending as a technological power. The new version could “play down China’s bid to dominate manufacturing and be more open to participation by foreign companies,” sources told the newspaper.

Should Trump insert himself into the Huawei tussle?

The president said on Tuesday he would consider intervening in the case of Meng Wanzhou, the C.F.O. of the Chinese tech giant Huawei who was arrested in Canada this month at the request of U.S. authorities, if it might increase the chances of a trade deal. It’s not clear if that is a good idea.

The latest: After threatening Canada with “serious consequences” over the arrest of Ms. Meng, a second Canadian national may have been detained and questioned by Chinese authorities. Chinese state media has urged Canada to defy the U.S. and free Ms. Meng unconditionally.

What if President Trump steps in? He “has the power to intervene in the case,” Bloomberg writes, citing unidentified sources, and would probably ask the State Department not to move forward with the extradition. But these sources warned that “blocking prosecutors from extraditing Meng could provoke other countries to detain U.S. citizens as leverage in political and economic negotiations and erode U.S. standing in future extradition requests.”

In fact, he may already have stepped in. Mr. Trump’s remarks alone may help Ms. Meng’s case, because her lawyers could claim that the prosecution against her is colored by politics.

Canada has urged Mr. Trump not to act further. “Our extradition partners should not seek to politicize the extradition process or use it for ends other than the pursuit of justice,” the Canadian foreign minister, Chrystia Freeland, said yesterday.

Theresa May is still the Tory leader. Now what?

A fraught 24 hours ended in relief for the British prime minister when she won a vote to retain her role as Conservative party leader, but she still faces challenges in trying to navigate Britain’s exit from the E.U.

What happened: In yesterday’s vote on a confidence motion called by members of her own party, Mrs. May won the support of 200 Conservative lawmakers, while 117 voted against her. The number of votes against her exceeded many forecasts.

The good news? “Had she lost, the Conservatives would have been thrust into a divisive, drawn-out process that would have stretched well into the next month,” writes Stephen Castle of the NYT. “The delay would have threatened the country’s ability to reach a deal by the March deadline, potentially resulting in the messy prospect of a no-deal Brexit.”

And the bad? “The surprisingly strong vote against her within her own party underscores the difficulty she faces in winning approval for any plan for Britain to leave Europe, or Brexit, as the deadline for withdrawal looms,” Mr. Castle wrote.

Apple announced a $1 billion campus in Texas ...

The iPhone maker said it would expand its facilities in Austin and open three new offices around the country. Here are the details:

In Austin, a new 133-acre campus will initially accommodate 5,000 new employees, with that number expected to expand to 15,000. There will be new jobs in engineering, R.&D., operations, finance, sales and customer support. Apple already employs 6,200 workers in the city.

Seattle, San Diego and Culver City, Calif., will all get new offices, too. Each one will employ 1,000 new staff members.

... and faces the threat of a U.S. iPhone import ban 

Qualcomm persuaded the U.S. International Trade Commission to consider banning imports of some of Apple’s iPhones containing Intel chips, according to a report by Bloomberg.

Context: Apple and Qualcomm have been battling in court over intellectual property for two years. Qualcomm is using its patents to try to gain leverage over Apple with lawsuits in multiple countries.

Back story: In one of the suits, Qualcomm sought a U.S. import ban on Apple devices, citing several examples of patent infringement. In September, Judge Thomas Pender of the trade commission said an import ban would hurt America in its development of 5G technology, even though he found that Apple had infringed on a Qualcomm patent.

The news: On Wednesday, the commission said it would take a closer look at Judge Pender’s recommendation. But it appears to be doing so with a compromise in mind, asking Apple how long it would take to work around the infringed patent, while investigating how a sales ban might affect national security and exploring whether a limited import ban could be adopted.

What’s next: The commission will issue a decision Feb. 19.

What happened when Amazon went to City Hall

Two Amazon executives faced more than three hours of public grilling by the New York City Council yesterday about the company’s plan to open a major campus in Long Island City, Queens, writes J. David Goodman of the NYT:

• It was the first time Amazon had truly stepped into the public spotlight in New York since announcing the deal.
• Council members vented their anger over benefits Amazon has been offered by the state and city governments, as well as its business practices, treatment of labor unions and work on behalf of federal immigration officials.
• The council members were urged on with applause, shouts and jeers by opponents of Amazon’s plans. The crowd drowned out the company executives several times.
• But the hearing was symbolic: The agreement between the city, the state and Amazon is subject to a state planning process. The City Council is powerless to stop it.

More Amazon news: Here’s the data that New York gave the company during the competition to land the new headquarters. Employees at an Amazon warehouse on Staten Island have started a union push. And the company is testing a smaller version of its cashierless stores.

Is “sell the rally” the new “buy the dip”?

Investors welcomed the apparent easing of trade tensions between the U.S. and China yesterday, with the S&P 500 up 0.5 percent by the end of the day after slumping in the afternoon.

But what happened in earlier trading was particularly interesting.Yesterday was the fourth straight day that investors sold an early rally, Bloomberg points out. That is a reversal from recent years when investors would buy the smallest of pullbacks.

What they’re saying: “We’re in a stock market correction,” Michael Antonelli, the managing director at Robert W. Baird & Co., told Bloomberg. “All rallies are suspect.”

Anyone hoping for a yuletide recovery faces long odds. December has traditionally been the S&P 500’s best month, with average gains of 1.61 percent. “But with the S&P 500 down about 3.95 percent for the month,” notes Robert Burgess of Bloomberg Opinion, the index would have to rise “a further 6 percent by year-end to match the average.” Christmas miracle, anyone?

Banks expect another feverish year for M&A

Bank merger and acquisition activity is already at its highest level since 2008 in terms of aggregate deal value. Can the trend continue into 2019?

There’s reason to be gloomy. “The largest seven deals announced year to date close to $1 billion in value and above have all underperformed on a relative basis on the day post, week post, and month post announcement,” researchers from the investment bank KBW said in a note. “We believe the poor performance of buyers in these higher-profile deals along with post-Labor Day equity market volatility has dampened deal activity since the summer.”

Bankers are optimistic anyway. A KBW survey of 167 bank executives found that 41 percent of respondents expected deal-making to accelerate from this year’s record level. Just over half expected deal activity to maintain the same pace.

They may be cheered by the easing of regulations. Just over a third of respondents said they had noticed that regulators were approving transactions at a quicker pace. KBW said the median number of days from when deals were announced to when they closed was about 40 days less for deals closed in the first three quarters of 2018 than the annual median for the prior five years.

The speed read

Deals

• The activist hedge fund Elliott Management has built a roughly $1.1 billion stake in the drinks maker Pernod Ricard. The latter intends to defend itself from the former. (FT)
• Tencent Music had a successful first day of trading, with shares rising 7.7 percent. (WSJ)
• The German government is intensifying its push to fix up Deutsche Bank, including efforts to make it easier for the company to merge with Commerzbank. (Bloomberg)
• Procter & Gamble acquired Walker & Co. Brands in a bid to sell more health and beauty products to African-Americans. (WSJ)
• The F.C.C. will consider ending its ban on mergers among America’s four largest broadcast networks. (Reuters)

Politics and policy

• Michael Cohen, President Trump’s former lawyer, was sentenced to three years in prison yesterday after implicating Mr. Trump in a hush-money scandal. (NYT)
• Michael Flynn, Mr. Trump’s former national security adviser, asked a federal judge to spare him prison time for lying to the F.B.I. (NYT)
• Rudolph Giuliani, one of Mr. Trump’s personal lawyers, has been seeking work overseas for his security company while representing the president in the special counsel’s investigation. (NYT)
• Representative Nancy Pelosi reached a deal with dissident Democrats to limit herself to four years as speaker. (NYT)
• Italy has promised to cut its budget to avoid E.U. sanctions. (FT)

Trade

• Apple suppliers reportedly plan to keep production operations running in China if the U.S. places a 10 percent import tariff on smartphones, but will reassess if tariffs reach 25 percent. (Bloomberg)
• Europe and Japan’s new trade deal, which slashes almost all tariffs between the two, will take effect in February. (WSJ)

Tech

• Democratic senators introduced a major new data-privacy plan, one of several now under consideration. (Verge)
• How Google workers are reportedly trained to treat contractors. (Guardian)
• An F.C.C. advisory committee has proposed a new tax on digital subscription services like Netflix to finance an expansion of broadband in rural areas. (Ars Technica)
• Here’s a deep dive into the state of A.I. in 2018. (A.I. Index)

Best of the rest

• America’s national debt has jumped 6.6 percent, or $1.36 trillion, since the start of 2018. (Bloomberg)
• In the wake of #MeToo, more women are reporting incidents of harassment, but they still risk retaliation. (WSJ)
• Nissan will reportedly increase the number of external director seats on its board and introduce a compensation committee amid the Carlos Ghosn scandal. (Reuters)
• Big Tobacco and Big Weed are cozying up. Now what? (NYT)
• Despite President Trump’s tariffs, solar power is getting cheaper. (Reuters)
• Boy Scouts of America may file for bankruptcy protection. (WSJ)
• Read the story of Tariff Man, in comic form. (NYT)

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