Good Monday morning.
The finance ministers of Canada, France, Germany, Italy, Japan and the U.K. teamed up against Treasury Secretary Steven Mnuchin at a G-7 meeting in Whistler this weekend, saying U.S. trade actions “could undermine economic confidence and threaten the effectiveness of the Western alliance.” The ministers requested that Mnuchin communicate “their unanimous concern and disappointment” to the president.
In response, Council on Foreign Relations President Richard Haass—who was a Republican in some long-forgotten prior world—tweeted: “The Trump administration has achieved the unthinkable: turning the G7 into the G6, with the U.S. as the odd man out.”
Meanwhile, Commerce Secretary Wilbur Ross ended two days of trade talks in China with little sign of progress. After the talks ended, the state-run news agency Xinhua posted a statement from the Chinese government saying “all economic and trade outcomes of the talks will not take effect if the U.S. imposes any trade sanctions including tariffs.” President Donald Trump last week ordered his administration to move ahead with 25% tariffs on $50 billion of imported Chinese goods.
A CEO Daily reader castigated me on Friday for suggesting AI is a “heck of a lot more important” to keeping America great than tariffs on aluminum and steel. “Before you dis Trump again,” D.R. wrote, “why don’t you at least admit that he’s accomplished a lot more than you have in life.”
Hereby acknowledged. Moreover, regular readers of CEO Daily can attest that I try to avoid Trump political and character issues in this newsletter, and have been positive about the tax bill’s effects on the economy in the short run, and on its potential to address some long run problems. Moreover, the administration’s efforts to force China to play by international rules are long overdue.
But it’s hard to see the value of a trade spat with our G-7 allies on some very old-economy issues at this moment in history. It would be best if this turns out to be just another negotiating ploy that the president quickly reverses.
President Trump’s tariffs could take a quarter off the world’s economic growth rate if they turn into a trade war, according to S&P’s chief economist. “One could imagine a scenario where rather than global growth in the threes we have global growth in the twos, where you get the U.S. and Europe and China all pulling back at the same time,” Paul Gruenwald told CNBC. The current growth rate is projected at 3.8%, per OECD figures. The European Central Bank also warns of a 1% contraction in growth in the first year of the tariffs. CNBC
The International Air Transport Association has knocked 12% off its profit forecast for this year, citing trade tensions and rising interest rates as the causes. “We haven’t faced any significant decline in numbers of passengers or cargo related to trade wars or protectionist barriers up to now, but if it continues it will happen,” director-general Alexandre de Juniac warned. “Generally, we think…that all these barriers to trade are bad news from an industry standpoint.” BBC
Facebook has been hit with a new data-sharing scandal, this time involving its partnerships with companies such as Apple and BlackBerry that allowed those companies’ apps to access the data of Facebook users’ friends, allegedly without their knowledge. Facebook says what happened does not violate its 2011 consent decree with the Federal Trade Commission, in which it promised to respect people’s privacy settings for their data on the social network. New York Times
Microsoft and GitHub
Microsoft is reportedly buying GitHub, the world’s biggest computer-code repository—it’s where programmers collaborate on developing new apps and services. GitHub is particularly big in the world of open-source software development, which stands in contrast to the proprietary approach traditionally taken by Microsoft. If the report is correct, it could be a good way for Microsoft to better connect with the developer community. Bloomberg
Around the Water Cooler
Google faces threats of congressional hearings after its search service listed Nazism as an ideology of the California Republican Party, ahead of state primaries. The company blamed the episode on Wikipedia vandals—it pulls information from the crowdsourced encyclopedia. But Congressman Devin Nunes is not amused, saying that if Google and other tech giants continue to “get involved in politics and…censor conservatives and Republicans… we’d have to move, obviously, to hearings on these issues.” Fox Business
Elon Musk’s SpaceX was going to send space tourists hurtling around the Moon this year, but the flight is now postponed until at least mid-2019, according to a new report. The company told the Wall Street Journal: “SpaceX is still planning to fly private individuals around the moon and there is growing interest from many customers.” However, the paper suggests the delay may point to technical challenges for the firm. WSJ
Screw King vs. Trump
Reinhold Würth, the patriarch behind one of the world’s biggest suppliers of fasteners and assembly equipment, says the Würth Group won’t invest any more in the U.S. while Trump remains president. The company’s North American operations have made five transactions in the last three years, but no more for now, thanks to the political situation in the U.S. “Würth returns when he goes,” the billionaire “screw king” said of Trump. Fortune
Is Biden Back?
Joe Biden may be preparing to run for the top spot in 2020, according to an NBC report. The former vice president has been stumping hard for Democratic candidates ahead of this year’s midterms, and he will decide by the end of the year whether or not to step up himself. “He’ll have competition, obviously. But that field’s going to get narrow if Joe Biden’s in it,” said New Hampshire state Senator Lou D’Allesandro. NBC