Former Foreign Secretary Boris Johnson is stepping up his campaign to be Britain’s next prime minister by challenging the European Union over Brexit terms.

Johnson told the Sunday Times he would refuse to pay the agreed-upon 39 billion-pound ($50 billion) divorce settlement unless the EU offers Britain a better withdrawal agreement than the one currently on the table.

 

The contest for leadership of the Conservative Party officially begins Monday. The post was vacated Friday by Prime Minister Theresa May, who will serve as a caretaker until a new leader is chosen and moves into 10 Downing Street.

 

The party expects to name its new leader in late July.

 

Johnson, the early frontrunner in a crowded field, told the newspaper he is the only contender who can triumph over the Labour Party led by Jeremy Corbyn and Nigel Farage’s Brexit Party.

 

Johnson is a hard-line Brexit advocate who vows to take Britain out of the EU on the Oct. 31 deadline even if there is no deal in place.

 

He and other contenders say they can get better terms from EU leaders in Brussels than the deal that May agreed to but was unable to push through Parliament. Those failures led to her decision to resign before achieving her goal of delivering Brexit.

 

But EU officials have said they are not willing to change the terms of the deal May agreed to.

 

One of Johnson’s main rivals for the post, Environment Secretary Michael Gove, continued to be sidetracked Sunday by questions about his acknowledged cocaine use when he was a youthful journalist.

 

He told BBC Sunday that he was “fortunate” not to have gone to prison following his admission of cocaine use. He said he was “very, very aware” of the damage drugs can cause.

 

Nominations for the leadership post close Monday afternoon.

 

 
…

U.S. Treasury chief Steven Mnuchin said Sunday President Donald Trump would be “perfectly happy” to tax more imports from China if he cannot reach a trade deal with Chinese President Xi Jinping.

Both presidents are scheduled to meet later this month at the Group of 20 meeting in Japan.

“We made enormous progress, I think we had a deal that was almost 90% done,” Mnuchin told CNBC. “China wanted to go backwards on certain things” — a charge Beijing denies.

“We’ve stopped negotiating,” Mnuchin said, with the next steps depending on Trump’s meeting with Xi in Osaka at the G-20 summit of leaders of major economies June 28-29.

“The president will make a decision (on tariffs) after the meeting,” Mnuchin said. “I believe if China is willing to move forward on the terms that we were discussing, we’ll have an agreement. If they’re not, we will proceed with tariffs.”

Trump has already imposed tariffs on $200 billion worth of Chinese goods, but now is thinking about taxing an additional $325 billion worth of Chinese products. That would include nearly everything China exports to the U.S. The world’s two biggest economies have sparred for months over a trade deal, but have not been able to reach an agreement.

Trump’s threatened tariff hike came as G-20 finance ministers meeting in Fukuoka, Japan, said trade and geopolitical conflicts are risking global economic growth, but at the U.S. insistence, dropped a call to “recognize the pressing need to resolve trade tensions.”

“Global growth appears to be stabilizing and is generally projected to pick up moderately later this year and into 2020,” the finance chiefs, including Mnuchin, said in an end-of-meeting communique. “However, growth remains low and risks remain tilted to the downside. Most importantly, trade and geopolitical tensions have intensified. We will continue to address these risks and stand ready to take further action.”

The International Monetary Fund warned last week that a continuing U.S.-China standoff on tariffs could cut a half-percentage point from the global economy in 2020.

Meanwhile, China vowed Sunday to build what it calls a strong firewall against attempts to restrict its ability to technologically innovate.

“China … will never allow certain countries to use China’s technology to contain China’s development and suppress Chinese enterprise,” the main state-run newspaper declared.

China plans to announce details of its plans in the near future.

The Chinese statement did not mention any country by name, but the United States has restricted U.S. firms from selling technology to China’s Huawei, suspecting the company of building spyware into its telecommunications products.

The U.S. has also warned its allies against the alleged risk in buying Huawei technology.

 

 

 

 

 

 
…

The giant e-commerce technology company, Amazon, has announced that it expects to start delivering orders to shoppers’ homes by drones in the coming months. The details are still in the works, but the innovation could change the way we get packages. VOA’s Kevin Enochs reports.
…

Rising trade tensions between the U.S. and China have sparked worries about the 17 exotic-sounding rare earth minerals needed for high-tech products like robotics, drones and electric cars. 

 

China recently raised tariffs to 25% on rare earth exports to the U.S. and has threatened to halt exports altogether after the Trump administration raised tariffs on Chinese products and blacklisted telecommunications giant Huawei.  

  

With names like europium, scandium and ytterbium, the bulk of rare earth minerals are extracted from mines in China, where lower wages and lax environmental standards make production cheaper and easier.  

  

But trade experts say no one should panic over China’s threats to stop exporting the elements to the U.S. 

 

There is a U.S. rare minerals mine in California. And Australia, Myanmar, Russia and India are also top producers of the somewhat obscure minerals. Vietnam and Brazil both have huge rare earth reserves.  

  

The sky is not falling,'' said Mary B. Teagarden, a China specialist, professor and associate dean at the Thunderbird School of Global Management in Phoenix.There are alternatives.” 

 

Simon Lester, associate director of the center for trade policy studies at the Cato Institute think tank in Washington, agreed. “Over the short term, it could be a big disruption, but companies that want to stay in business will find a way,” he said.    

Although the U.S. is among the world’s top 10 countries for rare earths production, it’s also a major importer of the minerals, looking to China for 80% of what it buys from other countries, according to the U.S. Geological Survey. China last year produced 120,000 metric tons of rare earths, while the United States produced 15,000 metric tons.  

Mountain Pass Mine

 

The United States also depends on China to separate the minerals pulled from Mountain Pass Mine, the sole rare earths mine in the U.S., which was bought two years ago by the Chicago-based JHL Capital Group LLC .  

  

“We need to develop a U.S.-based supply chain so there is no possibility we can be threatened,” said Ryan S. Corbett, managing director of JHL Capital. 

 

The mine’s top products are neodymium and praseodymium, two elements that are used together to make the lightweight magnets that help power electric cars and wind turbines and are found in electronics such as laptop hard drives. 

 

Mountain Pass, located in San Bernardino County, Calif., was once the top supplier of the world’s rare earth minerals, but China began taking over the market in the 1990s and the U.S. mine stopped production in 2002.  

  

Mountain Pass later restarted production, only to close again amid a 2015 bankruptcy. Corbett said extraction resumed last year after JHL Capital purchased the site with QVT Financial LP of New York, which holds 30%, and Shenghe Resources Holding Co. Ltd. of China, a nonvoting shareholder with 9.9%.  

  

Since then, Mountain Pass has focused on achieving greater autonomy with a $1.7 billion separation system set to go online late next year that would allow it to skip sending rare earths ore to China for that step. 

 

China could hurt itself in the long run by cutting off the U.S., specialists said.  

  

David Merriman, a rare earths analyst for Roskill commodity research in London, said that during a similar trade flap with China in 2011, Japan began looking to other countries, including Australia, for the minerals needed to manufacture electronics.   

Australian rare earths production giant Lynas Corp. Ltd. this month announced a proposed deal with Blue Line Corp. of Texas for a separation facility at an industrial site in Hondo, Texas.  

Other deposits

  

There may be other options, too. Deposits of rare earths have been detected in other U.S. states, including Wyoming and Alaska, as well in several remote areas of Canada. The Interior Department is calling for more prospecting and mining of “critical minerals,” including on public lands currently considered off-limits, and even in oceans. 

 

We have to be more forward-thinking,'' said Alexander Gysi, an assistant professor in geology and geological engineering at the Colorado School of Mines in Golden.It would be better for the U.S. to have a greater range of sources for rare earths.”
…

Financial leaders of the Group of 20 gathered Saturday to brainstorm ways to adapt global finance to an age of trade turmoil and digital disruptions.

The central bank governors and other financial regulators meeting in this southern Japanese port city also flagged risks from upsets to the global economy as Beijing and Washington clash over trade and technology.

Asked if other financial leaders attending the meetings in Fukuoka were raising concerns over the impact on global markets and trade from President Donald Trump’s crusade against huge, chronic U.S. trade deficits, especially with China, U.S. Treasury Secretary Steven Mnuchin said no.

Trump and members of his administration contend that the ripple effects of the billions of dollars in tariffs imposed by Washington on Chinese exports over the past year are creating new business opportunities for other businesses in the U.S. and other countries.

But Mnuchin acknowledged that growth has been slowing in Europe, China and other regions.

“I’m hearing concerns if we continue on this path there could be issues. There will be winners and losers,” he said.

The G-20 officials were expected to express their support for adjusting monetary policy, for example by making borrowing cheaper through interest rate cuts, in a communique to be issued as meetings wrap up on Sunday.

Their official agenda on Saturday was focused on longer-term, more technical issues such as improving standards for corporate governance, policing cyber-currencies and reforming tax systems to ensure they are fair for both traditional and new, online-based industries.

Ensuring that governments capture a fair share of profits from the massive growth of businesses like Google and Amazon has grown in importance over the many years the G-20 finance chiefs have been debating the reforms aimed at preventing tax evasion and modernizing policies to match a financial landscape transformed by technology.

One aim is to prevent a “race to the bottom” by countries trying to lure companies by offering unsustainably and unfairly low tax rates as an incentive.

Mnuchin said he disagreed with details of some of the proposals but not with the need for action.

“Everyone, we are now facing a turning point,” Japanese Finance Minister Taro Aso told the group. “This could be the biggest reform of the long established international framework in over 100 years.”

Some European members of the G-20, especially, want to see minimum corporate tax rates for big multinationals. France and Britain have already enacted stop-gap tax systems for digital businesses, but they are not adequate, said French Finance Minister Bruno Le Maire.

“For the time being there is no fair taxation of this new economic model,” Le Maire said, adding that the hope is to have an agreement by the year’s end.

The issue is not confined to the wealthiest nations. Indonesia, a developing country of 260 million with more than 100 million internet users, is also struggling to keep up.

“The growth has been exponential but we cannot capture this growth in our GDP as well as in our tax revenue,” said Indonesian Finance Minister Mulyani Indrawati.

Mobile banking, big data, artificial intelligence and cloud computing are among many technologies that are expanding access to financial services for many people who in the past might not have even used banks.

But such innovations raise questions about protecting privacy and cybersecurity, Aso said.

“We need to stay vigilant against risks or challenges,” Aso said.

Japan, the world’s third-largest economy, is hosting the G-20 for the first time since it was founded in 1999. The venue for the annual financial meeting, Fukuoka, is a thriving regional hub and base for start-ups.

The G-20 groups include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States and the European Union.
…

One down, still others to go. President Donald Trump claimed a victory after Washington and Mexico agreed on measures to stem the flow of Central American migrants into the United States.

Trump called off plans to impose a 5% tax on Mexican exports, and Treasury Secretary Steven Mnuchin, speaking to reporters Saturday in Fukuoka on the sidelines of a meeting of financial leaders of the Group of 20 major economies, urged China to follow suit and return to stalled negotiations.

Mnuchin said he planned to have a private conversation with the head of China’s central bank, Yi Gang. In a G-20 group meeting later in the day, the two were seen exchanging friendly remarks, but there were no fresh signs Beijing is ready to compromise in the dispute over trade and technology.

“From our perspective of where we are now, it is a result of them backtracking on significant commitments,” Mnuchin said. “I don’t think it’s a breakdown in trust or good or bad faith. … If they want to come back and complete the deal on the terms we were negotiating, that would be great.”

Mnuchin said he had no direct message to give to Yi, who has participated in the 11 rounds of talks so far on resolving the dispute between the world’s two largest economies over technology and trade.

He said there were no plans for trade talks in Washington or Beijing before Presidents Donald Trump and Xi Jinping are due to meet in Osaka for the G-20 summit on June 28-29.

“This will be a one-on-one with Gov. Yi to talk alone about the trade issues,” Mnuchin said. But he added, “I would expect the main progress will be at the G-20 meetings of the presidents.”

The Trump administration began slapping tariffs on imports of Chinese goods nearly a year ago, accusing Beijing of using predatory means to lend Chinese companies an edge in advanced technologies such as artificial intelligence, robotics and electric vehicles. Those tactics, the U.S. contends, include hacking into U.S. companies’ computers to steal trade secrets, forcing foreign companies to hand over sensitive technology in exchange for access to the Chinese market and unfairly subsidizing Chinese tech firms.

The deal with Mexico helps alleviate uncertainty over the deal Washington recently reached on revising the North American Free Trade Agreement. The new U.S.-Mexico-Canada deal has been heading toward a vote in Congress and might have been stymied by new tariffs. But the U.S. is still negotiating new trade deals with Japan after withdrawing from a Pacific Rim arrangement, the Obama-era proposed Trans-Pacific Partnership.

America’s huge trade deficit with China — a record $379 billion last year — is one factor driving Trump’s frustrations with Beijing.

The United States now is imposing 25% taxes on $250 billion in Chinese goods. Beijing has counterpunched by targeting $110 billion worth of American products, focusing on farm goods such as soybeans in a deliberate effort to inflict pain on Trump supporters in the U.S. heartland.

The U.S. side has been preparing to expand retaliatory tariff hikes of 25% on another $300 billion of Chinese products, and Mnuchin indicated it was prepared to take that step if negotiations with Beijing fail. But he said Trump had not yet made a decision on that, suggesting room for further delays depending on the outcome of his discussion with Xi later this month.

“As the president has said, if we can get the right agreement, that’s great. If we can’t, we will proceed with tariffs,” he said.

 
…

In May, Arkansas became the latest state to cash in on the sale of medical marijuana. Lines of people wrapped around a newly opened dispensary, drawing in customers from all four corners of the Southern U.S. state.

“I see them standing outside the window with a big smile on their face,” said Bud Watkins, manager of Doctor’s Orders RX in Hot Springs. “They love it.”

In the first week of business, Arkansan dispensaries sold more than 22.6 kg (50 pounds) of cannabis in nearly 5,000 transactions.

According to Marijuana Business Daily, that revenue will contribute to a growing national market of retail medical and recreational cannabis that is expected to eclipse $12 billion in sales by the end of 2019.

​Business good, money managing isn’t

Passed in the 2016 general election by popular vote, the Arkansas Medical Marijuana Amendment made the state one of only a few in the South to allow legal purchase of the drug. It joined, however, a majority of U.S. states that had passed similar legislation.

While business is doing well, managing the money is difficult. Despite more states coming on board, plant-touching businesses are still operating as mostly cash-only enterprises.

Plant-touching businesses handle the cannabis plant itself, either cultivating, distributing or processing it. These tend to be the businesses most people think of when they imagine the cannabis industry. Plant-touching businesses are generally subject to the strictest regulations and licensing processes in the industry, as well.

“The vast majority of the businesses that touch the plant have a very difficult time finding banking partners,” said Sal Barnes, a director at Marijuana Policy Group. “The majority of those that do (bank) are going to be through credit unions and state banks, especially in California and Colorado, where we have what we like to call an adult-use market, and that is essentially just a glorified checking account.”

​Federally outlawed since 1970

Since 1970, cannabis has been officially outlawed at a federal level for any use, including medical. This means that federally insured banks operate under prohibitive restrictions about doing any business with any plant-touching businesses, which affects everyone along the supply chain, from the growth of the plant to the production or sale of a cannabis gummy.

In spite of this, states have increasingly passed legislation to allow for the legal purchase, putting them at odds with the federal government.

“The industry is hindered. Right now, the current as-is method is not safe. You literally have companies hiring ex-Marines to guard their cash, and that just doesn’t fly,” Barnes said.

Not having access to banking services means that cannabis businesses must pay for everything in cash, from salaries to taxes. And, because the cash is usually stored on-site, robberies are very common.

“We have one of the most secure buildings in the state,” said Watkins, who didn’t want to go into too many details.

Marijuana in the mainstream

Legalizing marijuana is no longer considered a fringe issue. According to a 2018 Gallop poll, two-thirds of Americans support legalizing marijuana.

There is also bipartisan traction in Congress. In March, a U.S. House of Representatives committee passed the Secure and Fair Enforcement Banking Act of 2019, more commonly known as the SAFE Banking Act. It would provide legal protection from persecution for banks and federally regulated creditors that do business with state-legal cannabis businesses.

State attorneys, including Arkansas’ Leslie Rutledge, are now also applying pressure to see changes in federal law.

“After careful consideration and speaking with members of the banking industry, as well as our state regulatory authority, the attorney general felt that it was important for the office to support the SAFE Banking Act to help minimize fraud, tax evasion and money laundering that arises from cash only businesses,” said Rutledge’s office in an emailed statement.

Earlier this month, 38 Republican and Democratic state attorneys general sent a letter in support of the SAFE Banking Act.

“This is not just an issue facing Arkansans, but affects a majority of states,” Rutledge’s office stated. “If passed, this legislation will help Arkansas minimize the dangerous problems seen by other states, such as burglaries and robberies of dispensaries who can maintain a large quantity of cash, while at the same time, allowing legitimate businesses and service providers to also conduct business within the regulated banking system.”

As for whether the SAFE Banking Act eventually makes it to a vote, or future federal bills attempt to change banking regulations, Barnes said it’s only a matter of time.

“Next year, no. Next two to three years, possibly. Within the next four to five, definitely,” he said.
…

Uber is parting ways with two of its top executives less than a month after the company’s rocky stock market debut.

CEO Dara Khosrowshahi told employees in an email Friday that he plans to be more involved in day-to-day operations now that the initial public offering of stock has passed. He said the heads of the company’s global rides and food-delivery teams will report directly to him, and Chief Operating Officer Barney Harford will leave the company.

Khosrowshahi said he plans to combine the marketing, communications and policy teams, and Chief Marketing Officer Rebecca Messina also will leave the company.

“It’s increasingly clear that it’s crucial for us to have a consistent, unified narrative to consumers, partners, the press and policymakers,” Khosrowshahi said.

Stock struggling

San Francisco-based Uber’s stock has struggled since its initial public offering last month. The company posted strong revenue growth in its first quarter as a public company, but also $1 billion in losses.

The stock closed Friday down 76 cents, or 1.7%, at $44.16. It went public at $45 a share.

“This is Dara asserting more control over the company and taking over the wheels at a time the company really needs to execute in the eyes of the public investors,” said Dan Ives, managing director of equity research at Wedbush Securities. “It’s a double-edged sword for him, because it’s going to put that much more pressure on the success of Uber riding on his shoulders.”
…

Two key U.S. legislators want answers from Boeing and federal regulators about why the company waited more than a year to disclose that a safety alert in its 737 Max plane wasn’t working properly. 

 

U.S. Reps. Peter DeFazio of Oregon and Rick Larsen of Washington sent letters to Boeing and the Federal Aviation Administration seeking details on what they knew when, and when airlines were told. 

 

The feature is designed to warn pilots when a sensor provides incorrect information about the pitch of the plane’s nose. 

 

Boeing admitted in May that within months of the plane’s 2017 debut, engineers realized that the sensor warning light worked only when paired with a separate, optional feature. 

 

The sensors malfunctioned during flights in Indonesia and Ethiopia. Both planes crashed, killing 346 people in all.
…

Finance ministers and central bank governors meeting in Japan this weekend will try to make headway on long-standing issues such as how much global giants like Facebook and Amazon should pay in taxes. 

 

They’re likely to end up focusing a large share of their attention on how to keep global growth on track when the world’s two biggest economies are entrenched in an escalating trade war. 

 

U.S. Treasury Secretary Steven Mnuchin, who has headed trade talks with Beijing along with U.S. Trade Representative Robert Lighthizer, was due to meet with Yi Gang, governor of China’s central bank, on the sidelines of the G-20’s annual financial gathering in Fukuoka in southern Japan. 

 

But it was unclear if their meeting, a possible prelude to talks at the G-20 summit later this month between President Donald Trump and Chinese President Xi Jinping, might lead to a restart of those talks after weeks of stalemate. 

China’s ability to endure

 

As the Trump administration prepares to expand retaliatory tariff hikes of up to 25% to another $300 billion of Chinese products, Beijing has sought to highlight China’s capacity to endure and overcome hardship.  

 

Yi told Bloomberg Television in an interview broadcast Friday that he expected the meeting with Mnuchin to be “difficult.” But he said China’s central bank, the People’s Bank of China, had plenty of room to maneuver to help keep the economy growing despite the pounding the country’s export manufacturers are taking as the toll from higher tariffs mounts. 

 

Speaking Thursday in France, Trump said he plans to make a decision about ramping up tariffs on China after speaking with Xi at the summit in Osaka at the month’s end.

“I will make that decision, I would say, over the next two weeks — probably right after the G-20,” he said.

The Trump administration began slapping tariffs on imports of Chinese goods nearly a year ago, accusing China of resorting to predatory tactics to give Chinese companies an edge in advanced technologies such as artificial intelligence, robotics and electric vehicles. These tactics, the U.S. contends, include hacking into U.S. companies’ computers to steal trade secrets, forcing foreign companies to hand over sensitive technology in exchange for access to the Chinese market and unfairly subsidizing Chinese tech firms.

Trade deficit

Trump has also complained repeatedly about America’s huge trade deficit with China — a record $379 billion last year — which he blames on weak and naive negotiating by previous U.S. administrations.

The United States now is imposing 25% taxes on $250 billion in Chinese goods. Beijing has counterpunched by targeting $110 billion worth of American products, focusing on farm goods such as soybeans in a deliberate effort to inflict pain on Trump supporters in the U.S. heartland.

Unease over trade tensions and their potential impact on other economies has deepened since Trump announced he would impose a 5% tax on Mexican products starting Monday — a tax that would reach 25% by Oct. 1 if the Mexican government fails to stop the flow of Central American migrants into the United States.

While the tariffs have taken a minor toll on the U.S. economy, the uncertainty and slowing demand are rippling across the globe. Earlier this week, the World Bank downgraded its forecast for the global economy in light of trade conflicts, financial strains and unexpectedly sharp slowdowns in wealthier countries.

Slashing rates

The weakness has prompted central banks, most recently in Australia and India, to slash interest rates to fend off recession. 

 

Japan, hosting the G-20 for the first time since it was founded in 1999, has plumbed the limits of that strategy. The Bank of Japan’s policy interest rate has been at minus 0.1% for years, to keep credit cheap and support a modest pace of expansion.

As the trade conflicts percolate, the officials gathering in Fukuoka, a bustling port city on the southern main island of Kyushu, will carry on chipping away at financial reforms and other perennial issues. 

 

Some European members of the G-20, especially, want to see minimum corporate tax rates for big multinationals. 

 

Japan’s Kyodo News service reported Friday, citing a draft communique, that the finance leaders are also discussing the issue of how developing countries are handling debts incurred through major construction projects, efforts to combat money laundering, and efforts to prevent terrorist groups from using cybercurrencies as a source of funding.
…

Italian-U.S. carmaker Fiat Chrysler on Thursday pulled the plug on its proposed merger with Renault, saying negotiations had become “unreasonable” because of  political resistance in Paris.  

 

Fiat Chrysler Automobiles, or FCA, had stunned the markets last week with a proposed “merger of equals” with the French group that would — together with Renault’s Japanese partners, Nissan and Mitsubishi Motors — create an auto giant spanning the globe.  

 

The French government, which controls 15 percent of Renault, gave the deal a conditional green light, with analysts suggesting it wanted more control over the combined group alongside Fiat’s Agnelli family. 

 

FCA said late Wednesday that it “remains firmly convinced of the compelling, transformational rationale” of the tie-up, which it said was “carefully balanced to deliver substantial benefits to all parties.”

 

“However it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully,” it said in a statement.  

 

On Thursday, FCA chief John Elkann stood by the decision to start, and then leave, the merger talks. 

 

“When it becomes clear that the conversations have been brought to the point beyond which it becomes unreasonable to go, it is necessary to be equally brave to interrupt them,” Elkann wrote in a letter to employees published by Italian media.  

Renault expressed its “disappointment” at the turnabout. 

 

“We view the [Fiat] opportunity as timely, having compelling industrial logic and great financial merit, and which would result in a European-based global auto powerhouse,” it said in a statement. 

 

The combined group, including Nissan and Mitsubishi, would have been by far the world’s biggest, with total sales of 15 million vehicles, compared with both Volkswagen and Toyota, which sell around 10.6 million apiece. 

 

Shares in Renault plunged by more than 6 percent on the Paris stock exchange. In Milan, FCA shares also initially slid but then recovered to close up 0.1 percent.

Nissan holds key

Despite the verbal sparring that erupted after FCA’s announcement, industry experts did not rule out talks being resumed.  

 

“The collapse of the proposed Fiat Chrysler/Renault merger leaves both firms exposed to the shifting dynamics of a sector at a crossroads,” Ilana Elbim, credit analyst for Hermes Investment Management, said in a note.  

 

Pointing to falling sales volumes in major auto markets, she said “mega-mergers designed to save on capital expenditures remain inevitable.” 

 

On Tuesday, Renault’s board had said it was studying FCA’s offer “with interest,” but held off final approval pending further deliberations.  

 

By Wednesday, all Renault directors had come around in favor of the merger, with the exception of the employee representative affiliated with the powerful CGT union and two from Nissan who abstained, according to a source close to Renault.   

The two Nissan directors were said to have asked for more time to approve the deal. There was no official comment from Nissan headquarters in Tokyo. 

 

Relations between Renault and Nissan have come under strain since the arrest in November of their joint boss, Carlos Ghosn, who awaits trial in Japan on charges of financial misconduct. 

 

French Finance Minister Bruno Le Maire had laid down conditions for the tie-up with FCA, insisting there be no plant closures and that the Renault-Nissan alliance be preserved.  

 

The Renault source said Le Maire had asked for another board meeting next Tuesday following his return from a trip to Japan, where he was to discuss the proposal with his Japanese counterpart at a meeting of G-20 finance ministers.  

Blame game

A source close to FCA said it was the “sudden and incomprehensible” objections by Le Maire’s ministry that had caused the deal to collapse. 

 

Italian Deputy Prime Minister Luigi Di Maio said: “When politics tries to intervene in economic procedures, they don’t always behave correctly, I don’t want to say any more.”   

But Le Maire stressed that, of his conditions, only the explicit approval of Nissan remained to be secured, while aides denied that the ministry had played politics with the deal. 

 

A source close to the finance ministry said the French government “regrets the hasty decision of FCA.” 

 

“Despite significant progress, a short delay was still necessary so that all conditions set by the state could be met,” it said. 

 

Le Maire indicated the French government was amenable to changes at Renault despite FCA’s U-turn. 

 

“We remain open to the prospect of industrial consolidation, but once again, in calmness, without haste, to guarantee the industrial interests of Renault and the industrial interests of the French nation,” he told the French parliament. 

 

For his part, Elkann said FCA “will continue to be open to opportunities of all kinds that offer the possibility of strengthening and accelerating the realization of this strategy and creating value.” 
…

The U.S. economy could be weakened by escalating trade wars or a sudden downturn in global financial markets, the International Monetary Fund (IMF) warns.

In an annual review of the U.S. economy, the IMF said it was on a 2.6 percent growth track this year, greater than the 2.3 percent growth rate forecast in April.

But the report also said the U.S. economy appears to be increasingly vulnerable amid investor concern over America’s trade wars, noting they could trigger worsening global financial conditions.

The IMF criticized U.S. President Donald Trump’s administration for efforts to remake global trade relationships through higher tariffs and said it was “especially important” to resolve the trade dispute with China.

The report said the U.S. economy has recovered from the financial crisis that began in 2008, but millions of Americans did not benefit from the recovery. Household income increased a meager 2.2 percent from the end of the last century, the report said, while the U.S. economy expanded 23 percent per capita during the same period.

“The poorest 40 percent of households have a level of net wealth that is lower today than it was in 1983,” the report said.

The report called on the Trump administration to avert an economic slowdown by adopting measures to cut public and corporate debt and address inequality.

On Wednesday, the IMF warned the U.S.-China trade war could cut world economic growth next year.

IMF Managing Director Christine Lagarde said Trump’s threat to tax all trade between the two countries would shrink the global Gross Domestic Product (GDP) by one-half-of-one percent.

“This amounts to a loss of about about $455 billion, larger than the size of South Africa’s economy,” Lagarde said in a briefing note for the Group of Twenty (G-20), a collection of the world’s largest advanced and emerging economies. “These are self-inflicted wounds that must be avoided… by removing the recently implemented trade barriers and by avoiding further barriers in whatever form,” she added.

The warning came as G-20 finance ministers and central bankers prepare to meet in Japan later this month. They will gather just weeks after U.S.-China talks collapsed amid claims of broken promises and another round of punishing tariffs.
…

Liz Hung supports a lot of the imaginative concepts being discussed to make Vietnam “greener” economically and in terms of urban planning.

 

Consider traffic lights. Hung described how government authorities could collect smartphone data to see which streets are crowded, and then calibrate the stoplights to optimize traffic flow.

 

Hung and others in the private sector are giving Vietnamese officials their wish list for a green economy, from more renewable energy to buildings that collect rain water for use.

 

“Road congestion costs us at least 2 to 5% of our [gross domestic product] growth every year because of the time we lost or the high transportation cost, so that is why being smart [in] mobility is very crucial,” said Hung, who is CBRE associate director of Asia Pacific Research.

 

Hung’s comment highlights the link between good city planning and economic benefits.

Emulating China, Australia

 

There is also a larger debate about whether the economic benefits outweigh the costs of going green.

 

There is a financial cost of technology to make Vietnam more efficient. But there also is a security cost, as “smart devices,” like lights connected to the internet, have looser security settings that make them easier to hack.

 

In looking for inspiration for Vietnam’s future, Hung looked at places from Hangzhou, China, where she heard about the traffic data, to Adelaide, Australia, where authorities installed smart sensors in trash bins, which alert garbage collectors when the bins are nearly full.

 

If the idea is to increase efficiency, Vietnam should think about energy use, said Tomaso Andreatta, vice chair at the European Chamber of Commerce in Vietnam.

 

Last month, the chamber held a forum on sustainable cities. In addition to rooftop solar panels and wind turbines, some cities are exploring ways to create energy from things that would otherwise be tossed out.

 

Trash can be burned, for example, to boil water for steam generators that produce electricity, a process known as waste-to-energy. This does risk increasing carbon emissions or decreasing incentives for recycling, however.

Aiming for zero waste

 

“More and more we realize that resources are limited, and producing waste destroys the quality of life,” Andreatta said. “Therefore, there’s been a movement worldwide to reducing waste to an absolute minimum, ideally zero.”

 

He went on to say, “The rapid development of the middle class and its lifestyle, which includes intensive air conditioning use, accounts for a considerable proportion of energy consumption growth.”

 

It may be the middle class that benefits most from a greener Vietnam, where the private sector steps in to create greater efficiencies, when the government is not involved.

 

Property developers are building enclosed communities where sustainability is part of the design, whether it’s motion-detecting lights, or insulation that keeps indoor temperatures manageable. One developer introduced pollution warnings. Another made a transportation app just for its residents.

 

But what about those who are not lucky enough to live in a gated community?

 

Government officials say they are listening to proposals across all sectors. They say that as Vietnam faces a major threat from climate change, it needs to make greater efforts at green planning.

 

“Climate change will have a big impact on the region,” said Huynh Xuan Thu, deputy chief officer of the Ho Chi Minh City Department of Architecture and Urban Planning.

 

Some of the ideas, such as a country full of electric cars, may be a pipe dream or years down the road. But Vietnam is getting started on some of the proposals.

 

In Ho Chi Minh City, officials are looking at traffic sensors and gathering data on congestion, which they hope to reduce through technology in the near future.

 
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In a double blow for Mexico, credit ratings agency Fitch downgraded the nation’s sovereign debt rating on Wednesday, citing risks posed by heavily indebted oil company Pemex and trade tensions, while Moody’s lowered its outlook to negative.

The Mexican peso weakened as much as 1.3% on the news.

Cutting Mexico’s rating to BBB, nearing junk status, Fitch said the financial woes of state oil company Pemex were taking a toll on the nation’s prospects.

Fitch said mounting trade tensions influenced its view, according to a statement issued shortly after the end of a meeting in the White House in which Mexican officials tried to stave off tariffs U.S. President Donald Trump has vowed to impose next week.

Following a surge in mostly Central American migrants arriving at the U.S. border, Trump threatened blanket tariffs on Mexican imports if it did not do more to stem the flow.

“Growth continues to underperform, and downside risks are magnified by threats by U.S. President Trump,” Fitch said.

Mexican President Andres Manuel Lopez Obrador took office in December with ambitious plans to build a $8 billion refinery, a decision ratings agencies and investors warned would divert funds from its more profitable production and exploration business.

“Further evidence that medium-term growth is in decline, whether as a result of policies that actively undermine growth or because of continued policy unpredictability, would put downward pressure,” Moody’s said in a statement.

Mexico’s finance ministry declined to comment.

Lopez Obrador has said the ratings agencies were punishing Mexico for the “neo-liberal” policies of previous administrations.

A Reuters analysis of Pemex accounts from the past decade shows debt increased by 75% during the term of Lopez Obrador’s predecessor, Enrique Pena Nieto, amid a landmark energy reform.

Pemex

Moody’s highlighted the risks posed by Pemex, formally known as Petroleos Mexicanos, the world’s most indebted oil company.

“The impact of the contingent liability represented by Pemex weighs increasingly heavily on the sovereign credit profile,” Fitch said in a statement.

The latest moves by the ratings agencies on Mexico’s sovereign rating could also ratchet up pressure on the oil company’s own rating, which is teetering on the brink being downgraded from investment grade.

In March, S&P cut its stand-alone assessment of Pemex by three notches, following Fitch’s move to downgrade its credit in January. S&P pegs the rating of Pemex to that of the sovereign rating and the stand-alone assessment does not equal a rating.
…

U.S. refiners warned the Trump administration that tariffs on imports from Mexico could deliver a punishing blow to refiners and raise the cost of gasoline just as the U.S. driving season kicks into high gear, according to sources familiar with the discussions.

Trump surprised Mexico last week with a threat to impose 5% tariffs on all its exports to the United States unless the Mexican government took measures to stem the flow of illegal immigrants into the United States.

The United States imports more than 650,000 barrels of crude per day from Mexico, about 10% of total crude imports, according to U.S. government data. Refiners are also worried that Mexico could retaliate with tariffs on its imports of U.S. fuel, a major source of revenue for the U.S. industry.

“If these tariffs take hold, particularly if they’re able to get up to 25%, that could really impact the overall competitiveness of the U.S. refining industry,” said Chet Thompson, chief executive of the American Fuel and Petrochemical Manufacturers trade association. The group has had discussions with the administration and Congress on the issue, Thompson said.

​Mexico oil complements US oil

Mexico’s oil is heavy and refiners need it to blend with lighter U.S. oil to produce diesel fuel, gasoline and other products. Tariffs would drive up the cost of those imports — and Trump has said he would increase levies by 5% monthly until they reach 25% in October.

Mexico is a prime supplier of heavy crude, which has been harder to come by since the United States imposed sanctions on Venezuela in January.

Gasoline prices have remained subdued as global oil prices have declined because of worries about worldwide economic demand. But without enough heavy crude, U.S. refineries could run plants at lower rates to save money if heavy crude feedstock becomes too costly, lobbyists said.

“The heavy crude market is tight and it’s only Mexico at the moment. The tariff would essentially make the crude uneconomical and we may have no choice but to consider run cuts,” said one Washington-based refinery lobbyist.

Refiners have said that could drive up the price of gasoline at the pump, just as American drivers take to the road in the period of the highest gasoline demand in the United States.

Texas lawmakers alarmed

International crude prices are near a six-month low, so any rise in gasoline prices is unlikely to be prohibitive.

Right now a regular gallon of gasoline in the United States averages $2.80, according to the American Automobile Association, but it tends to rise in the summer months.

“We are trying to educate the administration on what this means for gas prices,” the lobbyist said. The potential for tariffs has alarmed lawmakers of both major U.S. parties, including members of Congress from Texas, a reliably Republican state that voted for Donald Trump in 2016 but depends on the oil industry and cross-border trade with Mexico, which accounts for 39 percent of the state’s exports, according to the Texas-Mexico Trade Coalition.

“We shouldn’t be imposing tariffs on Mexico,” said Senator Ted Cruz, Republican of Texas. He told Reuters that Republican senators “had a vigorous and frank discussion” with White House officials on the issue.

Texas has 5.7 million barrels of daily refining capacity, more than any other state.

U.S. refiners are also concerned about retaliatory actions by Mexico, which buys about one-quarter of U.S. refined product exports. In March, Mexico bought about 1.3 million bpd of oil products from the United States, according to U.S. Energy Department data.

“It would be pretty devastating to us,” a second Washington-based lobbyist said.
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Lazaro Hernandez, who has made a good living showing U.S. cruise ship passengers around Havana in his pink 1950s Chevrolet, says the new U.S. ban on cruises to Cuba will wipe out 90% of his business overnight.

Hernandez is one of thousands of Cubans who benefited from the boom in American visitors to the Caribbean’s largest island following the loosening of travel restrictions under former U.S. President Barack Obama during the short-lived 2014-2016 detente between the Cold War foes.

Obama’s successor, President Donald Trump, aims to punish Cuba’s Communist government, especially for its alliance with Venezuela, by tightening the rules once more. Yet Cubans say those who will really suffer are the people, including the private-sector workers the United States purports to support.

“This is a fatal blow for us,” said Hernandez, 27, who makes $30 an hour — the equivalent of the average monthly state salary — doing tours of Havana. “If there’s no tourism, we don’t have work.”

​Second-biggest group of tourists

U.S. travelers excluding Cuban-Americans became the second-biggest group of tourists on the island in recent years after Canadians, with cruise travelers making up half of those.

Although they typically contributed less to the economy as they stayed on ships rather than in hotels or bed-and-breakfasts, they hired drivers and tour guides and spent at private shops, bars and restaurants.

“We bought T-shirts as souvenirs and bags,” said Sarah Freeman, 42, one of the passengers on the last U.S. cruise ship to sail from Havana, using a handcrafted wooden Cuban fan to fend off the Caribbean heat.

The new restrictions on U.S. travel to Cuba also include the elimination of so-called group people-to-people educational travel, one of the most popular exemptions to the overall ban on U.S. tourism to Cuba.

‘Negative perceptions’

William LeoGrande, a Cuba expert at American University in Washington, estimated the measures could reduce the number of non-Cuban-American U.S. visitors by two-thirds or more.

That could cut overall tourist arrivals in Cuba by about 10%, he said. Another expert, John Kavulich, said the drop could be as much as 20%.

“Optically, not having Carnival, Norwegian and Royal Caribbean in the marketplace will recreate negative perceptions about Cuba,” said Kavulich, president of the U.S.-Cuba Trade and Economic Council Inc., referring to the three main cruise lines forced to cancel service.

Earlier restrictions cut revenues

Tourism revenues, the country’s second-biggest source of hard currency, already slumped nearly 5% last year, according to official data.

That was partly the result of an earlier round of Trump administration restrictions.

Washington says it is pressuring Cuba to reform and tamp down its support for socialist Venezuelan President Nicolas Maduro, whom Trump has been seeking to force out in favor of opposition leader Juan Guaido, who is backed by most Western countries.

Critics say Trump is seeking to drum up support from the Cuban-American community in the swing state of Florida ahead of next year’s election.

Starting Thursday, many Cubans will be feeling the sudden absence in revenue from cruise passengers.

“For me, it will have a domino effect,” said Nichdaly Gonzalez, who earns her living posing for photos, dressed up in her colorful colonial garb, adding she expected to have to rein in her spending. As such, it will have a trickle-down impact on the local economy, especially in the ports of Havana, Santiago de Cuba and Cienfuegos that received the U.S. cruise ships.

The Cuban government has said it is aiming for tourism income to increase 5.8% this year, but it is hard to see how it can reach that goal now.

“We’ve lived with U.S. hostility now for 60 years, since the revolution, so we’ll get by,” said Abel Amador, 46, selling sketches to tourists on a cobbled street. “But this new move will still affect us.”
…

The trade war between the United States and China could cut world economic growth next year, the International Monetary Fund (IMF) warned Wednesday.

IMF Managing Director Christine Lagarde said U.S. President Donald Trump’s threat to tax all trade between the two countries would shrink the global Gross Domestic Product (GDP) by one-half of one percent.

This amounts to a loss of about about $455 billion, larger than the size of South Africa’s economy,” Lagarde said in a briefing note for the Group of Twenty (G-20), a collection of the world’s largest advanced and emerging economies. “These are self-inflicted wounds that must be avoided… by removing the recently implemented traded barriers and by avoiding further barriers in whatever form,” she added.

The warning came as G-20 finance ministers and central bankers prepare to meet in Japan this weekend. They will gather just weeks after U.S.-China talks collapsed amid claims of broken promises and another round of punishing tariffs.

Lagarde urged governments to adopt policies that support economic growth to avoid a global economic decline. “Should growth substantially disappoint,” she wrote, policymakers must do more, including “making use of conventional and unconventional monetary policy and fiscal stimulus.”

The GDP is a monetary measure of the value of all goods and services produced in an economy during a specific period of time.
…

Christy Lee of VOA’s Korean Service contributed to this report.

The escalating trade dispute between the United States and China could distract Beijing from dealing with nuclear North Korea and undermine its efforts to enforce international sanctions, potentially hampering the U.S. attempt to denuclearize the country, experts said.

Even as the Trump administration pursues its “maximum pressure” campaign to push North Korea to denuclearize, Washington has engaged in rounds of talks with China that have turned into a bitter tit-for-tat trade war. 

With the aim of making American-made goods competitive in the United States relative to cheaper Chinese imports, the U.S. launched an investigation into Chinese trade policies in 2017. Washington imposed tariffs on more than $250 billion out of total $539 billion worth of Chinese goods the United States imported in 2018.

Beijing retaliated by raising tariffs on $110 billion of a total $120 billion U.S. goods imported last year. 

The latest hike came earlier in May when the Trump administration raised U.S. tariffs on $200 billion in Chinese imports from 10% to 24%. Trump threatened to add a 24% tariff on the remaining $325 billion worth of imports from China.

This was followed by Beijing’s retaliatory tariff hike on American goods as high as 25% from 10%, affecting $60 billion in American imported goods starting June 1. 

China has accused the United States of starting what it called “the largest war in economic history” and an “economic terrorism.” On Sunday, China said it will “not back down’ in the escalating trade war with the United States.

Tension between Beijing and Washington over a trade deal has caused concern among North Korean watchers wondering if the dispute will affect the U.S. effort to denuclearize North Korea. 

China, as North Korea’s largest trading partner, is responsible for approximately 90% of its imports and exports. As such, Beijing could play a pivotal role in denuclearizing the nation on its southeastern border, because according to William Overholt, a senior research fellow and Asia expert at Harvard’s Kennedy School of Government, “China is very determined to eliminate North Korea’s nuclear weapons.”

The consuming battles in the U.S.-China bilateral trade agreements could distract China from the North Korean nuclear issue, said Scott Snyder, director of the U.S.-Korea policy program at the Council of Foreign Relations.

“The main impact of trade tensions between the U.S. and China is (lowering) the priority of North Korea as an issue on the agenda of U.S.-China relations,” said Snyder. “And so, it’s going to be harder to get China to cooperate as much as the United States would like because they’re focused on other issues in the relationship.”

The biggest role China could play in denuclearizing North Korea is enforcing international sanctions issued since 2016. Targeting Pyongyang’s key export commodities such as coal and seafood, the sanctions were designed to cut off foreign income that could be used to support its nuclear weapons and missile programs.

Joseph DeTrani, a former U.S. special envoy for nuclear talks with North Korea, emphasized China’s role in enforcing sanctions, saying, “Failure to work in concert (with China) in sanctions implementation would weaken our efforts to succeed with North Korea and its nuclear and missile programs.”

But a drawn-out trade war could make Beijing do less to enforce the sanctions, according to Ryan Hass, who served as the director for China, Taiwan and Mongolia at the National Security Council from 2013 to 2017. 

“The level of rigor that sanctions are enforced (with) depends upon the level of manpower and the level of resources that are devoted to the task,” said Hass.“It isn’t necessarily the case that China would turn its back on the sanctions, but it may just choose to allocate its resources and its manpower to other priorities.”

After all, Beijing is more concerned with achieving its chief objective of stability than it is with sanctions, said Robert Manning, a senior fellow at the Atlantic Council.

“While the sour climate and rising tensions in U.S.-China relations complicates U.S. diplomacy on North Korea, China’s cooperation was never a favor to the U.S.,” said Manning. “Beijing’s interests on the Korean Peninsula toward North Korea (have) been based on a sober assessment of China’s desire to see a non-nuclear Korea and stability on the Korean Peninsula.”

China, as one of five permanent members of the United Nations Security Council (UNSC), joined the rest of the UNSC members in issuing stronger sanctions on North Korea in response to multiple missile and nuclear tests it conducted in 2016 and 2017. 

When Washington and Pyongyang began engaging diplomatically in 2018, culminating in their first historical summit in Singapore in June 2018, Beijing suggested international sanctions on North Korea be eased. Several months after the Singapore summit, a report by the U.S.-China Economic and Security Review Commission came out indicating China has relaxed enforcing sanctions on North Korea.

Diplomatic efforts have been stalled since the breakdown of their second summit in Hanoi in February. At issue were conflicting demands and expectations: Pyongyang wanted all sanctions lifted before undertaking a step-by-step denuclearization process, while Washington wanted full denuclearization before lifting sanctions. Given that, the trade disagreements between Washington and Beijing could push China to truncate its support on sanctions, said Stapleton Roy, former U.S. ambassador to China during the George H.W. Bush and Bill Clinton administrations.

“Under those circumstances, it’s not clear whether China will be as willing as it was before to support very strong sanctions on North Korea,” said Roy.

Bruce Klingner, former CIA deputy division chief for Korea and current senior research fellow at the Heritage Foundation, said Beijing could not threaten outright to refuse to implement sanctions as a trade negotiations tactic since doing so would be defying the U.N. But “Beijing could, however, be less vigilant in implementing and enforcing U.N. sanctions,” said Klingner.

Complicating the matter, Snyder said if Beijing views Washington attempting to prevent China’s economic ascendency over the U.S. while engaged in the trade war, its interpretation of the U.S. attitude could induce it to curtail “the amount of cooperation that (it could) provide the United States on North Korea.”

 
…

Vietnam is likely to make concessions to the United States so it can escape a U.S. watch list of possible currency manipulators and head off a hit to its fast-growing economy led by exchange rate-sensitive exports, analysts who follow the country say.

The Southeast Asian country, they forecast, will probably talk to the U.S. side over the next six to nine months, consider approving fewer changes in its foreign exchange rate and accept more high-value American imports.

Those measures would help Vietnam get off the U.S. Treasury’s list of nine countries that Washington will examine further for whether those states are currency “manipulators.” Manipulation implies deliberate state-driven currency rate changes that favor a country’s own exporters and make trade more costly for importers. The U.S. list released in late May added Vietnam, Malaysia and Singapore.

The policy changes might place a speed bump in the economy, which has grown around 6% every year since 2012, but a “manipulator” label could lead to tariffs on Vietnamese goods shipped to the United States and choke economic expansion.

“I think they’ll definitely (take action), because they’re extremely worried about this matter, so they’ll carry out some necessary communications and make some adjustments,” said Tai Wan-ping, Southeast Asia-specialized international business professor at Cheng Shiu University in Taiwan. “If they keep going, to be on this list is disadvantageous for Vietnam.”

Exports and the local currency

Vietnam, a growing manufacturing powerhouse that reels in factory investors from around Asia for its lost costs, posted a $39.5 billion surplus in trade with the United States last year and a $13.5 billion surplus in the first quarter this year.

The same country also adjusts its dong currency exchange rate within a band but trending toward weakness versus the U.S. dollar. That trend favors exporters, a majority of the $238 billion Vietnamese economy.

“The reality is, it’s what we call in economics a dirty float currency. It’s not grossly manipulated — it basically reflects market rate for the dong,” said Adam McCarty, chief economist with Mekong Economics in Hanoi. 

“But it’s sort of controlled to stop big fluctuations, so that the change in the exchange rate month to month is rather small, but it’s always been slowly and steadily in the direction of depreciation of the Vietnamese dong,” McCarty said.

​Inflows of “hot money” into Vietnam, which could hurt exports eventually, sometimes require the country to adjust its foreign exchange rate, Tai said.

Measures to get off the list

Vietnam’s limiting of any further fluctuations would put the U.S. government more at ease, said Rajiv Biswas, Asia-Pacific chief economist at the market research firm IHS Markit.

“The U.S. Treasury did say that Vietnam should reduce its intervention in the exchange rate and let the currency move in line with economic fundamentals,” Biswas said. “If you’re not intervening in your currency, that automatically reduces the risk of being named a currency manipulator.”

But Vietnamese net purchases of foreign currency last year came to just 1.7% of GDP, below the 2% that Washington uses to define “persistent one-sided intervention in the foreign exchange market,” Hanoi-based SSI Research said in a note Monday. Governments can adjust exchange rates by buying or selling foreign currency.

Vietnam, where many of the top companies are state-invested, could reduce the trade balance by buying more “capital intensive equipment” and aerospace goods such as aircraft from the United States, Biswas said.

India left the U.S. list in May after easing a trade surplus, though China – in the thick of a trade dispute with Washington – was kept on it.

There are few other “policy levers” Vietnam can use to answer the U.S. Treasury concerns, said Gene Fang, an associate managing director with Moody’s Investors Service in Singapore.

Negotiations with Washington

Vietnam will probably remain on the U.S. list over at least the next half a year, when the document is due for an update, analysts believe. The two sides are likely to discuss the currency rate and the trade imbalance as Vietnam deliberates its response measures, they say.

Eventually the U.S. government could seek negotiations with Vietnam and place tariffs on Vietnamese exports if it sees fit, Fang said.

“I guess one of the things we could see as a result would be that the U.S. places higher tariffs on Vietnamese exports to the U.S., and that would be certainly negative from a growth perspective,” he said.
…

The U.S. Internal Revenue Service is auditing Uber Technologies’s taxes for 2013 and 2014 and the ride-hailing company expects unrecognized tax benefits to be reduced within the next year by at least $141 million.

In its full quarterly report on Tuesday, Uber said various state and foreign tax authorities were also looking into its taxes and that it was currently unable to put a definite timeline or estimate on the overall adjustments that might result.

The $141 million amount related only to its transfer pricing positions, which refers to the common multinational practice of charging for services between wholly-owned businesses in different countries or jurisdictions to reduce the tax it pays.

Earlier this year, the company had said in a regulatory filing that it expected unrecognized tax benefits related to the audit to be reduced within the next year by at least $127 million.

Industry experts characterize transfer pricing as a relatively risky strategy, which typically is among multinationals’ top tax concerns and has been used by authorities in the past to go after Apple and Amazon.

“Although the timing of the resolution and/or closure of the audits is highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits could significantly change in the next 12 months,” the company said.

The announcement came on a day when at least 11 of the brokerages, whose underwriting arms backed Uber’s Wall Street debut last month, weighed in with “buy” recommendations on the company’s shares as a statutory embargo lifted. Citi, however, initiated coverage with a “neutral” rating.

Uber shares gained 2.8% in afternoon trading as the technology sector bounced back from a sell-off on Monday.

The company’s stock has struggled since its market debut on May 10 and is trading below its IPO price of $45.

Still, the shares have outperformed rival Lyft, which have fallen by a third in value since its own debut in March, and analysts from Deutsche Bank said Uber’s stock remained the best internet IPO for investors since Facebook’s launch in 2012.

“Uber should trade at a premium to LYFT given Uber’s larger global scale and reach, cross product growth opportunity and larger ability for long-term leverage,” said analysts at Morgan Stanley. “It is still in the early innings in its core and emerging opportunities.”

In its first quarterly report as a public company last week, Uber reported a $1 billion loss as it spent heavily to build up its food delivery and freight businesses.

But many of the analysts covering the stock on Tuesday said they believed Uber had the scale and time to develop into another powerful U.S. global tech player.

RBC analysts believe the market under-appreciates Uber’s profit potential while analysts at Mizuho Securities expect the intense competition to rationalize over the next few years due to continued consolidation and listings of private peers.

“…Uber has ample room to gain operating leverage from economies of scale,” analysts at Mizuho said.
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