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Power Sheet: Apple’s EU Fine Is an International Relations Problem

As of 4pm Tuesday, the U.S. Treasury had $273 billion of cash and marketable securities on hand. At the close of business on June 25, the most recent date for which we have figures, Apple had almost as much, $232 billion of cash and marketable securities on hand. Those figures are typical – there are days when Apple has more than the Treasury – and they’re one indication of a new era for the companies that dominate the digital economy, requiring new skills from their leaders. They’ve become world leaders, in some ways playing in the same league as nations.

The latest example is Apple’s tax dispute with the E.U., which threatens relations between the U.S. and the E.U., the world’s two largest economies, and may well influence their tax codes and even their economic growth. U.S. Treasury Secretary Jacob Lew has already attacked the E.U. for declaring that Apple owes $14.5 billion in back taxes to Ireland.

Apple CEO Tim Cook understands the game he’s in. He quickly released a letter disputing the E.U.’s declaration, pointing out its “wide-reaching implications.” He says the E.U. “is effectively proposing to replace Irish tax laws with a view of what the Commission thinks the law should have been. This would strike a devastating blow to the sovereignty of EU member states over their own tax matters, and to the principle of certainty of law in Europe.” Two entities plan to appeal the ruling: Apple and the government of Ireland.

This is just the latest example of what happens as a digital economy enables companies to attain the scale of nations on some dimensions. Apple’s recent market cap ($570 billion) is greater than the GDPs of about 165 of the world’s 190 countries – not strictly comparable measures, but they suggest the scale at issue. Facebook’s 1.7 billion active monthly users exceed the population of any country. Alphabet, through the data generated by Google users, has better real-time knowledge of what’s going on in the world than any government and can predict disease outbreaks and stock market movements with remarkable accuracy, for example. IBM, through its Weather Company business, has more weather data than any government. Bharti Airtel, an Indian telecom that most Americans have never heard of, has more customers than America has people.

Cook cited “the obvious targeting of Apple” in his letter, and he has a point. The E.U. is cracking down on the biggest U.S. technology companies – Alphabet, Amazon, and Facebook in addition to Apple. China, the biggest economy after the U.S. and E.U., has also targeted Apple. This is more than just business. It’s international relations, global politics at the highest level.

The leaders of the world’s largest economies will meet next week at the G20 Summit in Hangzhou, China. How much longer before Cook, Facebook’s Mark Zuckerberg, Amazon’s Jeff Bezos, Alphabet’s Larry Page, Alibaba’s Jack Ma, and their peers get invited?

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What We’re Reading Today

Donald doubles down on immigration plan
After meeting with Mexican President Enrique Peña Nieto and saying that Mexican people are “beyond reproach,” Donald Trump flew to Arizona and outlined his plan to deport illegal immigrants and build a border wall that Mexico would pay for. His speech’s tone and details show he has decided not to weaken his immigration policy for the general election. Fortune

Brazil ousts President Rousseff
By a vote of 61 to 20, the Brazilian Senate removed president Dilma Rousseff from office for manipulating the budget. Michel Temer, who served in her place during her Senate trial, has been sworn in as her successor. Rousseff claimed the impeachment was part of a political coup; Temer says he will “vigorously defend” the government against such accusations. BBC News

Amazon and Wells Fargo end loan partnership…
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Elon’s cash squeeze
As Tesla looks to close its purchase of SolarCity, it has announced it owes $422 million to bondholders and will raise the funds by year-end. Part of that money is to pay for SolarCity, which has had trouble attracting investors. Before Elon Musk‘s deal to buy it, 15 institutional investors had passed on buying or investing in the company. WSJ

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Worth Considering

Tim Cook calls EU tax bill “total political crap”
The Apple CEO came out strongly against the European Union ruling that Apple owes Ireland $14.5 billion in back taxes. Cook said the company would work closely with Ireland to fight the decision, saying he believes Apple was targeted because it’s a U.S. multinational. Fortune

Mylan’s aggressive incentive plan…
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Five tech firms team up to develop AI ethics
Researchers from Larry Page‘s Alphabet, Jeff Bezos‘s Amazon, Mark Zuckerberg‘s Facebook, Ginni Rometty‘s IBM, and Satya Nadella‘s Microsoft are meeting to discuss how artificial intelligence can affect jobs, transportation, warfare, and other domains. The goal is to ensure that AI will help humans, but it’s unclear what will come from the meetings.  NYT

Up or Out

Novo Nordisk CEO Lars Rebien Sorensen will step down by year-end, to be succeeded by Lars Fruergaard Jorgensen.  Fierce Pharma

Mike Andres, president of McDonald’s U.S. business, will retire at year-end, to be succeeded by Chris Kempczinski.  Chicago Tribune

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Quote of the Day

“Today, the Senate made a decision that will go down as one of the great injustices in history…Sixty-one senators subverted the will expressed through 54.5 million votes…The progressive, inclusive, and democratic national project that I represent is being halted by a powerful conservative and reactionary force.” — Former Brazilian President Dilma Rousseff maintaining her innocence after being removed from office. NYT

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Produced by Ryan Derousseau
@ryanderous
powersheet@newsletters.fortune.com