Trump stays the course
Even President Trump has acknowledged that his pugnacious economic agenda is looking increasingly risky. Asked on Fox News this weekend if he expected a recession this year, he allowed only, “I hate to predict things like that.”
That dodge comes as his trade war continues to escalate and companies warn that his steep government cuts and immigration crackdown may cost them financially. The question is: Will the president stick with his plans?
The latest: Beijing has begun imposing tariffs on U.S. agricultural goods — including key exports like chicken, wheat, soybeans and pork — as well as blocking or limiting some American companies’ access to the Chinese market.
Stock futures are pointing to another rough market open. Last week, the S&P 500 suffered its worst one-week fall in six months.
China’s tariffs may actually take a while to kick in, but they represent the latest consequences of a battle that Trump has actively sought. Meanwhile, Canada’s new leader has promised to fight back, including by supporting retaliatory tariffs. (More on that below.) For now, Mexico is holding off on similar counterpunches, but its president, Claudia Sheinbaum, said on Sunday that she would act if need be.
The outlook for tariffs looks cloudy. While Trump abruptly gave Canada and Mexico a reprieve late last week, he is set to impose a 25 percent tariff on steel and aluminum imports starting Wednesday, and more levies next month.
Other Trump policies are hitting corporate America as well. C.E.O.s have started to complain about the effects of the widespread Elon Musk-led cuts to the federal bureaucracy, including losses of government contracts and delays for drug approvals. “Right now, there is a lot of uncertainty, and I don’t know when that’s going to tip,” Carl Eschenbach, the C.E.O. of the H.R. services provider Workday, said last week.
Other executives worry that businesses, including the home-building, hospitality and agriculture sectors, could be hit by Trump’s threats of “mass deportation.”
Trump doesn’t yet appear to be deterred, even as economists worry about the unintended consequences of trade wars. “They always say that we want clarity,” he said of business executives, adding that his policies would eventually yield results: “It takes a little time, but I think it should be great for us.”
Wall Street has wondered whether, if approval ratings aren’t yet enough to restrain any excesses in Trump’s policies, the stock or bond markets will be. For now, it’s an open question.
HERE’S WHAT’S HAPPENING
Key inflation data and a possible government shutdown are in focus this week. On Wednesday, investors will pore over the latest Consumer Price Index report as fears of tariff-fueled inflation grow. On Friday, Washington may shut down unless Congress approves a stopgap funding measure; the vote is expected to be tight.
President Trump says a TikTok deal could come soon. Trump said that four groups are in contention to buy the U.S. operations of the video platform from its Chinese parent, ByteDance, but provided few new details. The future of the popular video app is in limbo with a ban required by federal law set to take effect next month.
Google won’t be forced to sell its A.I. investments, but still faces breakup calls. The Justice Department said it would allow the tech giant to keep its stakes in artificial intelligence companies, including in Anthropic. But that may be cold comfort to Google, as the department, maintaining the position of the Biden administration, is still requesting the company be split apart.
Musk’s Starlink takes heat in Europe
Elon Musk’s growing political power and his unapologetic shift to the political hard right has ignited protests in the U.S. that are hitting his companies, including Tesla.
Much the same is playing out in Europe, where antipathy to Musk is denting Tesla sales — and, perhaps more important, his Starlink satellite internet business. That raises questions about whether the tech mogul’s politics are damaging his global business empire.
A recap: Musk raised alarm bells this past weekend when he wrote on X that Ukraine’s front line “would collapse” against Russian forces if Starlink were shut off. European officials have long feared that the world’s richest man appears to have outsize power over a technology vital to national security.
Radoslaw Sikorski, Poland’s foreign minister, on Sunday called out Musk’s post as a provocation and suggested that his country “will be forced to look for other suppliers” if Starlink proved “unreliable.” Secretary of State Marco Rubio demanded that Sikorski apologize. Musk later said that “Starlink will never turn off its terminals” in Ukraine — but told Sikorski to “be quiet, small man.”
A key Starlink contract now appears in limbo. Italy is reportedly having second thoughts about awarding a $1.6 billion contract to the company. Musk said this past weekend that he would like to meet with the country’s president, Sergio Mattarella, to try to save the deal.
Notably, Musk didn’t mention Prime Minister Giorgia Meloni, a Musk confidante who has come under fire from opposition lawmakers for the potential Starlink deal.
Could European rivals gain ground? Shares in Eutelsat are up more than 20 percent on Monday and have more than tripled in the past week, amid word that the French rival to Starlink is now in the running for the Italy contract.
Beyond Sikorski, other European officials have spoken about supplanting Starlink. Andrius Kubilius, the European Union commissioner overseeing defense and space, told Bloomberg Television last week that “there is a possibility to replace” Starlink, and to do so quickly if necessary.
And other European aerospace companies are exploring a potential tie-up to create a Starlink rival, perhaps betting on E.U. leaders relaxing the bloc’s merger rules to allow it.
Carney takes on Trump and trade
Canada has a new leader, in the form of Mark Carney, the former central banker who navigated his country through the 2008 financial crisis and Brexit.
But the incoming prime minister, who has never held elected office, faces a crucial new challenge: squaring off against President Trump, with Canada’s economy — and, perhaps, its sovereignty — on the line.
Voters appear to believe Carney is better placed to battle Trump. He soared to victory with nearly 86 percent of votes cast by Liberal Party members, far outpacing Canada’s former finance minister, Chrystia Freeland.
As Carney’s star has risen, so too have the prospects of the Liberal Party in polling. Canada must hold federal elections by October. Recent opinion polling suggests that the Liberals have largely erased a 20-point deficit against the Conservative Party, whose leader is seen as too ideologically close to Trump.
Carney has gold-plated credentials, including as a Goldman Sachs banker, the head of the Bank of Canada and the Bank of England and as an international advocate for green investing. “Carney has an international profile and an undeniable gravitas when it comes to dealing with economic matters, though he has no electoral experience,” Dimitry Anastakis, a professor in the Rotman School of Management at the University of Toronto, told The Financial Times.
That said, many major banks have left Carney’s green-finance alliance amid a broader backlash against environmentally minded investing. And some political opponents have questioned whether his role in managing Canada’s response to the 2008 financial crisis was overstated.
But taking on Trump will be a huge test. Carney struck an unapologetically patriotic tone in his victory speech, saying, “America is not Canada. And Canada never, ever will be part of America in any way, shape or form.”
Carney decried what he said were Trump’s efforts to bully Canada into giving up key natural resources including oil, gas, coal, potash and uranium: “The Americans want our resources, our water, our land, our country,” he said, adding, “In trade, as in hockey, Canada will win.”
But Canada’s economy is deeply enmeshed with that of the U.S. in many areas, including car manufacturing, and an escalating trade war with tariffs and countertariffs could inflict pain on Canadians, making Carney’s job even harder.
Trump goes after Big Law
President Trump has put America’s elite law firms on notice, telling Fox News’s Maria Bartiromo: “We have a lot of law firms that we’re going to be going after because they were very dishonest people.”
That pronouncement came after Trump issued executive orders seeking to punish firms with strong Democratic ties including Perkins Coie and Covington & Burling, the latter which has represented Jack Smith, the former special counsel.
Taken together, the moves have shaken the world of Big Law, The Wall Street Journal reports:
In private conversations, partners at some of the nation’s leading firms have expressed outrage at the president’s actions. What they haven’t been willing to do is say so publicly. Back-channel efforts to persuade major law firms to sign public statements criticizing Trump’s actions thus far have foundered, in part because of retaliation fears, people familiar with the matter said. …
Legal observers say some of the industry’s caution is out of concern for losing corporate clients, many of whom have cozied up to Trump, including by attending the inauguration and rolling back diversity initiatives. Lawyers said they are also concerned about taking public steps that could undermine their ability to provide effective legal representation.
Along those lines, DealBook has heard that other law firms have started weighing whether working with some of the firms under fire, including Covington, could hurt clients with matters before government regulators.
THE SPEED READ
Deals
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Bain and the advertising giant WPP reportedly plan to break up the research firm Kantar, which they own jointly, and sell its businesses, instead of taking it public. (FT)
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Panama has requested the paperwork behind CK Hutchison’s plan to sell a controlling stake of its ports business in the country to a group led by BlackRock in a deal supported by President Trump. (Reuters)
Politics, policy and regulation
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