Good morning. David Meyer here, filling in for Alan.
I certainly didn’t enter this week thinking I’d be writing every day about the U.S.-China trade war, but the issue just won’t stop turning the markets upside-down.
Asian indices plummeted today—Nikkei 225 down 1.9%, Hang Seng down 2.5%, Shanghai Composite down 1.7%—and Europe’s Stoxx 600 is down 1.9% at the time of writing. The main catalyst for the continuation of this week’s selloff was the arrest in Canada of Sabrina Meng Wanzhou, the chief financial officer of Huawei and the daughter of company founder Ren Zhengfei.
Meng faces extradition to the U.S., where investigators are probing Huawei’s alleged non-compliance with sanctions on Iran. Is the timing of the arrest deliberate? That’s an open question at this point—but either way, it could not be more tumultuous in effect. China, which has spent the week thus far making conciliatory gestures to the U.S. in an attempt to bring the trade war to an end, is furious and is demanding Meng’s release.
“China should be fully prepared for an escalation in the trade war with the U.S., as the U.S. will not ease its stance on China, and the recent arrest of the senior executive of Huawei is a vivid example,” thundered the state-run Global Times in a tweet bearing an image of flag-emblazoned fists.
Meanwhile, the substantially more independent South China Morning Post reported today that Meng and her father recently told Huawei employees that strict compliance with regulations was sometimes not financially feasible and could be avoided. Not a good look at this time.
The Meng arrest wasn’t the only thing roiling the Asian markets today—Apple suppliers’ shares have tumbled again after camera-lens supplier Largan Precision revealed a 28% fall in year-on-year monthly revenues.
The end of iPhone sales growth is a major factor here—Apple was this year displaced as the world’s second-biggest smartphone producer by, you guessed it, Huawei—but again the trade war is lurking in the periphery. Key contractors whose stock fell, Pegatron and Foxconn, were reported this week to have been planning factories outside China in order to mitigate the impact of tariffs.
Nobody will blame them for scrambling. At this point it’s fair to say most of the goodwill coming out of last weekend’s G20 meeting between Presidents Trump and Xi has evaporated. Hold onto your hats.
More news below.
Old internal emails from Facebook have been exposed by the U.K.’s Parliament, which (deep breath) seized them from a travelling businessman who had squeezed them out of Facebook via a lawsuit about a bikini-picture-finding app. The emails show Mark Zuckerberg really considered selling users’ personal data to outside developers, that Facebook tried to hobble competitors by cutting off their access to its systems at strategic moments, and that it may have also misled users about data collection. Recode
It seems the switch to renewable energy is too slow. Global carbon emissions are heading for record levels this year, according to a new study that pegs the U.S. as the worst offender. China and India are also pumping out more CO2, while the EU’s emissions are actually expected to fall slightly in 2018. Fortune
President Trump wants to cut oil prices, but Russia and OPEC (including Trump’s good friends in Saudi Arabia, of course) aren’t playing ball—over the next couple days, they’re expected to cut production instead, to keep prices up. Oil has recently had its worst price plunge since the financial crisis. CNBC
Nine months into the Trump administration’s tariffs on imported steel, how’s that going? Turns out U.S. businesses are just as dependent on foreign steel as they always were, and domestic producers have jacked up their prices to match or even exceed the price rise imposed on imported alternatives. So the domestic producers are getting richer—but U.S. businesses are simply paying more for steel than they used to. Wall Street Journal
Around the Water Cooler
The Chinese electric car firm BYD, which is backed by Warren Buffett, is planning to spin out and publicly list its battery business. Local rival CATL IPO’d in Shenzhen in June, and it’s tripled in value since then. BYD is apparently looking to build factories in Europe and the U.S. Bloomberg
Alphabet is preparing to test its Wing drone delivery service in Europe—Finland, to be precise. Wing has apparently already made 55,000 deliveries during tests in Australia, and now Google’s sister company wants to know what Finns want delivered by drone. According to the BBC, “suggestions including breakfast, lunch, painkillers and household essentials.” BBC
Tesla in China
Tesla has started the tendering process for the construction of its first Chinese Gigafactory, according to Reuters, which also says one contractor—China Minmetals—is already preparing materials for the factory’s foundations. Reuters
Facebook isn’t just currently embarrassed by the aforementioned email exposure. It’s also being criticized as the vector for the spread of outrage in France that led to the “Yellow Jackets” riots. The rioters appear to be coordinating their actions on local pages that were given a boost by Facebook’s recent algorithm change, intended to promote local news. Buzzfeed