Iran Threats, Fiat Chrysler, Tesla Cash: CEO Daily for July 23, 2018
Good morning. David Meyer here, filling in for Alan this week from Berlin.
The U.S. and Europe continue to be at loggerheads over the taxation of digital giants such as Amazon and Google—an argument that was on display at yesterday’s meeting of G20 finance ministers in Argentina.
Back in March, well before the Trump administration launched a metals tariff offensive against the U.S.’s European allies, the European Commission proposed new tax rules that would see big tech firms pay 3% on their European revenues, rather than on their profits as is traditionally the case. That’s an interim measure; in the long term, the Europeans want such companies to be taxed on the profits they earn in the locations of their customers and users, rather than the location of their headquarters.
According to a Euractiv report, EU economic chief Pierre Moscovici said at yesterday’s meeting that “what we are talking about here is fairness”—the bloc wants a new international taxation agreement for dealing with digital companies that know no borders, and that are effectively taxed at a far lower rate than the smaller, local companies they displace.
U.S. Treasury Secretary Steven Mnuchin has previously set out American opposition to proposals that “single out digital companies,” as these firms are a big part of the U.S. economy. And the Europeans are very conscious of the fact that the Americans may see the further taxation of big tech as an anti-American move.
Some see that as a reason for caution, but one European official told Euractiv that the stance could be a way of “proving that Europe is united and strong” at a time when President Trump is threatening to escalate the U.S.’s trade war with the EU.
All this demonstrates how Trump’s trade war is sucking a variety of issues into its orbit. Just on the subject of the digital economy, the EU’s taxation proposal falls into in a long-running and urgent discussion about how to levy taxes fairly when dealing with highly globalized, competition-slaying online giants.
Yes, today’s online giants are American, but tackling the problem shouldn’t be filed under anti-U.S. aggression. The same goes for the EU’s big antitrust fine against Google, over its anticompetitive Android ecosystem practices—Trump seems convinced that this is a demonstration of the EU “taking advantage” of the U.S., but the case was largely based on complaints from a group funded by Oracle, an American company. And in any case, it is only fair for the EU to crack down on a company that flouts its laws, no matter where it comes from.
The new reality may be that regulatory moves affecting the U.S. tech giants—particularly if Europe is involved—now either go on hold or risk being sucked into the vortex of Trump’s trade war. As the former option may itself be seen as weakness, escalation becomes ever more likely.
President Trump threatened Iranian President Rouhani on Twitter last night—in all-caps, so excuse the shouting: "NEVER, EVER THREATEN THE UNITED STATES AGAIN OR YOU WILL SUFFER CONSEQUENCES THE LIKES OF WHICH FEW THROUGHOUT HISTORY HAVE EVER SUFFERED BEFORE. WE ARE NO LONGER A COUNTRY THAT WILL STAND FOR YOUR DEMENTED WORDS OF VIOLENCE & DEATH. BE CAUTIOUS!" Why all the yelling? Rouhani, who has recently become more hawkish, threatened Trump with "the mother of all wars" if the U.S. doesn't stop escalating tensions by blocking Iranian oil exports. A++ peacemaking, everyone. Fortune
Fiat Chrysler has suddenly replaced Sergio Marchionne as CEO, due to his failing health. "It is with great sadness that I have to tell you that our CEO Sergio Marchionne, who recently underwent surgery, unfortunately experienced complications that have worsened in recent hours and will prevent his return to FCA," chairman John Elkann wrote to employees Saturday. The new CEO is Mike Manley, a long-time Marchionne lieutenant. Wall Street Journal
Tesla has reportedly started asking suppliers to refund some of its payments to them, in order to help make the auto firm profitable. According to the report, Tesla has been telling suppliers that it needs them to return the cash to enable Tesla's "continued operation." Fortune
BHP Billiton is facing a class action suit in Australia over a 2015 disaster in Brazil that killed 19 people. The dam collapse at the Samarco iron ore mine, which is co-owned by the mining giant, caused a mudslide that destroyed villages and polluted a river. The suit alleges that BHP Billiton did not disclose the risks of the dam failure to the stock market, and that it misled shareholders over safety. BBC
Around the Water Cooler
Steven Mnuchin used last weekend's G20 meeting to reiterate the U.S.'s support for a strong dollar, to ease fears of a currency war after President Trump said the strength of the U.S. currency was hurting the country. Trump also accused China and the Eurozone of currency manipulation. Mnuchin insisted there was no policy change on the U.S. side, and the administration would not try to interfere in the dollar market. Bloomberg
Amazon and Brexit
Amazon's U.K. manager reportedly warned the government that the country will quickly face "civil unrest" if it crashes out of the EU without a deal. Doug Gurr apparently issued this warning to new Brexit minister Dominic Raab during a meeting between Raab and business leaders on Friday. If there is no deal with the EU by the time the Brexit deadline arrives in March—an eventuality that some hardline Brexiteers are actually hoping for—then the results may include grounded flights and food shortages. Guardian
Sierra Club vs Pruitt
How did Scott Pruitt become so engulfed in scandal? A large part of the Environmental Protection Agency administrator's downfall was due to freedom of information requests made by the Sierra Club, the environmental organization. The Sierra Club made the requests in order to find details that might help win over judges in lawsuit by the group against the EPA, but what they found turned out to be game-changing in its own right. Slate
Russian lawmakers are threatening yet another crackdown on social networks, with a proposal for an anti-fake-news law. Under the bill, if social media companies don't remove "inaccurate" comments within 24 hours, they will face fines of up to $800,000. What does "inaccurate" mean? That's not clearly defined in the proposal. CNBC