U.S. and China could roll back tariffs

Good morning. (Was this email forwarded to you? Sign up here.)

A fragile step toward defusing the trade war

The United States and China have agreed that an initial trade deal between the two countries would roll back a portion of the tariffs they have placed on each other’s products, Ana Swanson, Keith Bradsher and Alan Rappeport of the NYT report.

• This would be the first time the Trump administration has agreed to remove any of the tariffs it has placed on $360 billion worth of Chinese goods.
• The agreement has not yet been completed, and a deal could fail to materialize as it has in previous rounds of negotiations.

It would be “a significant step toward defusing tensions between the world’s largest economies,” Ms. Swanson, Mr. Bradsher and Mr. Rappeport write. Its supporters argue that it would allow Mr. Trump to claim that he had “forced China to open its markets and buy more American agriculture goods while retaining leverage in future negotiations.”

Investors embraced the news, with the S&P 500 closing at a record high yesterday. Shares of companies with close ties to China’s vast manufacturing base, like semiconductor manufacturers and retailers, also rose.

But critics fear that it could amount to capitulation by the U.S. if China doesn’t make big enough concessions in return. And Peter Navarro, a White House trade adviser, warned that “there is no agreement at this time to remove any of the existing tariffs as a condition of the Phase 1 deal.”

The situation is delicate. “The current febrile atmosphere appears to have left the fundamentals of this dispute behind,” writes David Fickling of Bloomberg Opinion. “A single tweet from @realdonaldtrump could be enough to puncture the party mood.”

More: The departing European Commission president, Jean-Claude Juncker, said he did not think Mr. Trump would impose tariffs on imported European cars.

Michael Bloomberg gears up for a presidential run

Michael Bloomberg is said to be taking steps to enter the 2020 race for the Democratic presidential nomination. The former mayor of New York is expected to file paperwork this week designating himself as a candidate in at least one state with an early filing deadline, Alexander Burns writes in the NYT.

The first sign that he’s serious about a campaign was that Mr. Bloomberg sent staff members to Alabama to gather signatures in an effort to qualify for the primary there. The state does not hold an early primary, but Friday is the deadline there for candidates to formally enter the race.

Mr. Bloomberg has been privately weighing a bid for the White House for weeks, according to unidentified sources. But he has not made a final decision on whether to run, Mr. Burns writes.

The billionaire businessman has prepared to enter presidential races before, in 2016 and then earlier this year, only to pull back in the end. But until now he has never taken the step of filing to put his name on a state ballot.

The possible bid is born out of concern that current Democratic candidates are not strong enough to defeat President Trump, Mr. Bloomberg’s adviser, Howard Wolfson, told the WSJ. “Mike believes that Donald Trump represents an unprecedented threat to our nation,” he said.

Mr. Bloomberg faces an uphill struggle. His presence would offer fodder to the Democratic Party’s populist wing, led by Senators Bernie Sanders and Elizabeth Warren, who contend that the wealthy wield far too much influence in politics.

Gap’s C.E.O. steps down

Art Peck, the Gap C.E.O., who was viewed as a beacon of digital expertise, is leaving the company after less than five years in the role, writes Sapna Maheshwari of the NYT.

Gap didn’t explain why Mr. Peck is leaving, but said that a search for his successor would focus on “strong leadership candidates with operational excellence to drive greater efficiency, speed and profitability.”

He will be replaced on an interim basis by Robert Fisher, the company’s nonexecutive chairman, who is a son of the couple who founded the retailer.

Mr. Peck was charged with ushering the company into the era of digital commerce, but faced challenges to revive sales at the company’s flagship brands, especially Gap and Banana Republic. Shares of the company had fallen about 30 percent this year.

But his departure came as a surprise, because the company’s biggest transformation under Mr. Peck — a spinoff of Old Navy — is not yet complete.

A Boeing partner’s turn in the hot seat ?

Behind the scenes of Boeing’s 737 Max jet crisis, scrutiny of the accidents has extended to one of the company’s partners, Collins Aerospace. That company provided the software that is blamed for playing a role in both fatal crashes and built the plane’s flight deck displays, Chris Hamby reports for the NYT.

“Boeing has blamed the flight deck software supplier, without explicitly naming Collins, for a problem with an alert on the flight deck displays that, according to Indonesian investigators, might have helped prevent the first crash if it had been functioning properly,” Mr. Hamby writes.

• “In legal filings, Collins has acknowledged writing the software code but said it was merely executing Boeing’s design.”
• “Collins has denied making any errors in its work on the flight control computers.”

Congressional investigators and lawyers are asking what Collins knew about the Max’s problems, and when. The company has provided records about its work on the jet to the House Transportation and Infrastructure Committee, which is examining the crashes.

• A former Collins engineer called the system that the company built “a no-go” because of its reliance on a single sensor, which he said should have raised concerns.

“It’s becoming clear that Collins played an important role, which wasn’t clear immediately after the accident,” said Justin Green, a lawyer who represents many families of the crash victims.

More: Legislators have demanded that the F.A.A. explain why it overruled its own experts during the development of the 737 Max. And how the C.E.O. of American Airlines is thinking about the jet crisis.

Goldman lowers its sights in Europe

Goldman Sachs has historically worked for top-tier clients. But that has slowly started to change — a shift that is on display in its operations in Western Europe, write Laura Noonan and Olaf Storbeck of the FT.

• “Expansion in the U.S., where Goldman has deployed extra bankers in second-tier cities such as Atlanta and Dallas, attracted attention when the drive was announced in April,” the FT writes.
• “But the bank has also quietly built up a 40-strong team charged with winning business from middle-market companies on the other side of the Atlantic.”
• Of particular interest, according to the FT, are the approximately 900 small and medium-size “Mittelstand” companies in Germany, which have revenues of $550 million to $2.2 billion.
• “We looked at it and said, more feet on the street begets more revenue,” Goldman’s president, John Waldron, told the FT.
• “That’s what happens when your share price trades at below book value and your chief executive is under pressure to juice revenues and income,” the FT adds in a separate article.

Billionaires have lost a little of their wealth

The world’s wealthiest people aren’t quite as rich as they were this time last year, Reuters reports.

“Billionaires’ wealth fell by $388 billion globally to $8.539 trillion,” Reuters reports, citing a new report by UBS and PwC. That’s the first decline since 2008, and the report blames geopolitics, with U.S.-China trade tensions and global political uncertainties cited as the main reasons.

There was “a particularly sharp decline in Greater China,” Reuters explains. The net worth of China’s richest people “dropped 12.8 percent in dollar terms on the back of tumbling stock markets and a weaker local currency,” it adds.

Their wealth may increase again this year, Simon Smiles, UBS’s chief investment officer for ultra-wealthy clients, told Reuters. But it might not track the growth that the financial markets have seen, he added.

More: Senator Elizabeth Warren offered to meet with Bill Gates to discuss her plans to tax the wealthy after he questioned whether “she’d even be willing” to sit down with someone “who has large amounts of money.”

Revolving door

Wells Fargo named Bill Daley, who was chief of staff to President Barack Obama, as its new vice chairman of public affairs.

Capital One is moving its chief information security officer, Michael Johnson, to an advisory role in the wake of the bank’s recent data breach. It is looking to fill his old role externally.

The speed read

Deals

• Saudi Aramco is reportedly tapping some of the country’s wealthiest people to invest in its I.P.O. And the company’s bankers are offering the prospect of bonus dividends to attract investors. (Bloomberg, FT)
• Saudi Arabia’s sovereign-wealth fund has reportedly invested $400 million in Travis Kalanick’s new company, CloudKitchens. (WSJ)
• Airbnb is valued at up to $42 billion by investors who are trying to buy indirect stakes in the company ahead of a potential I.P.O. next year. (FT)
• Alibaba has reportedly cut its fund-raising target for a secondary listing in Hong Kong this year to as little as $10 billion — half its original goal. (FT)
• T-Mobile is still in talks with Sprint to extend their merger agreement. (Reuters)
• The Madison Square Garden Company plans to give up its equity stake in the New York Knicks next year. (NY Post)

Trump impeachment inquiry

• George Kent, the senior State Department official in charge of Ukraine, testified that he saw President Trump’s demands for Ukraine to “initiate politically motivated prosecutions” as corrupt. (NYT)
• Republican lawmakers are trying to raise questions about whether Gordon Sondland, Rudy Giuliani and Mick Mulvaney were representing the president or pursuing their own agendas. (WaPo)
• Mick Mulvaney, the acting White House chief of staff, has been subpoenaed to testify on Friday about his role in the decision to withhold military aid to Ukraine. (FT)
• The relationship between Mr. Trump and his attorney general, William Barr, may be growing more complicated with the rising threat of impeachment. (NYT)

Politics and policy

• A Trump administration policy makes it easier for coastal communities to take sand from protected ecosystems to replenish their beachfronts. (NYT)
• President Emanuel Macron of France has laid out his vision for a more “strategic” and “sovereign” Europe. (Economist)
• The anonymous writer who penned an NYT Opinion essay about Mr. Trump last year argues in a new book that the president’s contract shouldn’t be renewed. (NYT)

Tech

• A visual guide to how Google came to dominate online advertising. (WSJ)
• The E.U.’s antitrust chief, Margrethe Vestager, said she did not want to break up tech giants. (Business Insider)
• Disney’s investment in its streaming ambitions have contributed to a 66 percent decline in the company’s fourth-quarter profit. Also, its Disney Plus streaming service will appear on Amazon’s Fire TV devices. (NYT, WSJ)
• About 7,000 pages of confidential Facebook files were made public yesterday as part of a lawsuit. (Ars Technica)
• China is reportedly making a renewed attempt to attract technology listings to it stock markets. (WSJ)
• A Silicon Valley trend: dopamine fasting. (NYT)

Best of the rest

• General Motors sold its factory in Lordstown, Ohio, to a company that promised union labor and wages to make electric pickup trucks. (NYT)
• Juul Labs said it would stop selling mint-flavored pods ahead of an expected federal ban on most flavored e-cigarettes. (NYT)
• A French court upheld criminal charges against the multinational cement maker Lafarge over accusations that it had financed the Islamic State in Syria. (NYT)
• A growing number of China’s smaller banks are stumbling as Beijing tries to balance economic concerns with the health of an enormous but fractured financial system. (NYT)
• Sears said it would close 96 more Sears and Kmart locations by February, leaving it with just 182 stores in operation. (WSJ)
• Drivers for Instacart, Postmates and other platforms say their pay is being squeezed by ever-changing algorithms. (WaPo)

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

We’d love your feedback. Please email thoughts and suggestions to [email protected].