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CEO Daily: Tuesday, 25th April

Good morning.

The big news this morning is that President Trump has told the Treasury Department to cut the corporate tax rate to 15%. That makes clear we are no longer talking about tax reform, but rather tax cuts—Reagan circa 1981 rather than 1986. There’s no indication the administration has plans to offset the cost of that $2 trillion tax cut by closing loopholes, adopting a border adjustment tax, etc. Rather, they will rely on the argument that the tax cuts will increase growth and thus increase revenues enough to offset the loss. (I’m sure a corporate tax cut could spur growth; but if anyone has any evidence that it will “pay for itself,” please send my way.)

Can such a plan pass Congress? The obstacles are significant:

—The plan will get no Democratic support, which means it will have to be passed as part of budget reconciliation, so it can avoid filibuster.

—The Joint Committee on Taxation won’t agree that such a tax cut pays for itself, which means under budget reconciliation rules it will have to expire within ten years.

—Republican deficit hawks in Congress, who have been struggling to do an honest tax reform plan, will be hard-pressed to swallow this one. Can Trump make them do it? Stay tuned.

News below.

Alan Murray

Top News

Trade Skirmishes on the Wisconsin Border Spread to Lumber

The U.S. is imposing anti-dumping duties on imports of Canadian lumber, in the latest sign of the administration’s willingness to escalate disputes over trade that it considers unfair. The tariffs, averaging 20% by value on nearly $6 billion of imports, marginally pushing up the cost of a key material for the housing market. Commerce Secretary linked the action to Canada’s decision to restrict imports of highly filtered milk protein products from the U.S., used by cheesemakers. The actions on both sides are essentially saber-rattling ahead of much broader talks expected later this summer on adjusting the terms of NAFTA (a deal that doesn’t cover either Canadian cheese or softwood lumber). Fortune

• ‘They Need to Adore Me, So Christian Dior Me,’ Says Arnault

Bernard Arnault, the billionaire behind French luxury giant LVMH, announced plans for his family to take full control of Christian Dior SE by paying 12 billion euros ($13 billion) for the 25.9% stake that they don’t already own. The deal aims to simplify LVMH’s shareholder structure and fully integrate the Christian Dior Couture fashion and accessory business into LVMH, which will end up a more highly geared company after paying 6.6 billion euros for CDC. LVMH’s shares rose by more than 4% on the news, extending a run of new record highs, while Christian Dior’s rose 12%. Reuters

Albertsons Wants Something Healthy

Albertsons, the U.S.’s third-biggest food retailer after Wal-Mart and Kroger, is considering a bid for Whole Foods, the Financial Times reports. Coming only a month after news of talks with Sprouts Farmers Market, the news is further evidence of Albertsons desire to make a splash in the organic food business. The underperforming organic food store has been targeted by activist investor Jana Partners, which announced earlier this month it had built a 9% stake and wanted radical change. The FT suggested that others such as Kroger or international groups like Germany’s Metro could also be interested—if they can look past Whole Foods’ net debt of $14 billion. FT, metered access

Saudi’s Vision for the Future Gets Blurred

Saudi Arabia’s plan to wean itself off the oil business by selling stakes in its national oil company and reinvesting the money in other direction is running into trouble. The government backtracked over the weekend on planned cuts in public-sector pay after stiffer-than-expected resistance. Meanwhile, The Wall Street Journal reports that bankers working on the Saudi Aramco privatization are arguing that it is probably worth 25% less than the $2 trillion valuation that the Kingdom initially sought. The temptation to pump up Aramco’s valuation by keeping oil prices higher in the short run is strong, and will be a key factor as it decides whether to support an extension of the OPEC deal on output restraint that is due to end in June. Wall Street Journal, Subscription required

Around the Water Cooler

THE Key to Online Security?

Fortune’s May edition takes a look at Yubico, a company whose hardware promises a big improvement in online security. Yubikeys, as they’re known, essentially make it impossible for bad actors to log on to password-protected accounts from unfamiliar devices, without making life too awkward for legitimate users. As such, they’re an effective defense against phishing. Highly-regarded by security pros, the company appears to have one major problem: its technology doesn’t work with Apple mobile devices. Fortune

Dispatches From the Protein Frontier

Another item in this month’s Future of Startup Innovation package looks at the spreading use of technology to create proteins from vegetable matter that more closely mimic the taste of real meat. Everyone knows the problem: there isn’t enough useable agricultural land in the world to make as much meat as humanity would like to eat (Americans eat 210 pounds a year, double the world average). Fortune’s Beth Kowitt, fresh from detailing the travails of trying to find the perfect sugar substitute, identifies three companies making big strides towards sustainable replacements for beef, chicken, and salmon. Fortune

Uber’s Battle for Europe Reaches Its Endgame

Some of Uber’s biggest legal battles are approaching their endgame. Its appeal against a French law that designated it a taxi service, rather than a digital one, has opened in the EU’s highest court in Luxembourg, as has a similar dispute with Barcelona’s main taxi operator. The designation issue is central to Uber’s business model as it allows it to escape much of the regulatory and tax burden that traditional taxis are subject to. Meanwhile, other legal challenges are just getting started. A former Lyft driver has filed a class action seeking damages for lost business due to the use of its so-called “Hell” software that allowed it to track the location of Lyft drivers. Fortune

Wells Fargo Shareholder Meeting

Wells Fargo’s shareholders have their annual meeting later Tuesday, and will pass judgment on the bank’s board after a year in which it fell dramatically from grace. A dozen of the 15 directors on the ballot face negative recommendations from influential proxy adviser Institutional Shareholder Services (ISS), which argued the group, including Chairman Stephen Sanger, failed in their oversight duties. There’s a big gap between the 95% approval rate that S&P500 directors typically get, and the minimum 50% level laid down by Wells’ statutes. The lower the results fall into that gray area, the sterner the test of the board’s conscience will be. Fortune

Summaries by Geoffrey Smith; @geoffreytsmith