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U.S. wades deeper into its trade war
President Trump escalated his trade war with Beijing yesterday by imposing tariffs on $200 billion worth of Chinese goods, many of them consumer products. The levies, scheduled to go into effect on Sept. 24, will start at 10 percent and climb to 25 percent on Jan. 1. The staggered increase will reduce the impact to American consumers over the holidays, though Apple has dodged the tariffs.
A refresher on why this is happening: The tariffs aim to pressure China into changing longstanding trade practices that Mr. Trump says hurt the U.S. The administration says China could win relief by giving U.S. companies more access to its markets, among other things.
China’s stock market opened at a four-year low today, and its currency slipped on the news. (One upshot: The tensions appear to be making Chinese businesses more competitive.) A Foreign Ministry spokesman said that equal and respectful talks were the only way to settle the dispute, but added that the U.S. hadn’t shown any kindness. So Beijing says it must retaliate at an “appropriate time.”
Broadly, however, markets shrugged off the latest tariffs. Why? Suggestions from Bloomberg: Markets have already accounted for the levies; the economic impact is some ways off; and the staggered increases suggest room for negotiation.
Brace for a wave of health care mergers
The Justice Department has approved Cigna’s $52 billion takeover of the pharmacy benefit manager Express Scripts. The decision suggests that the industry will be free to consolidate even further.
In approving the deal, the Justice Department decided that combining an insurer and a pharmacy benefit manager wouldn’t reduce competition. It appears to be another sign that vertical mergers, where two companies in different industries combine, are acceptable to the Trump administration. (Its effort to block AT&T from buying Time Warner increasingly looks like a political anomaly.)
The move augurs well for CVS’s bid to acquire the insurer Aetna — and for many more potential tie-ups. With Amazon looming over the sector, other companies may be tempted to take the merger plunge.
Coke might turn to cannabis
The beverage giant is reportedly in talks with Aurora Cannabis to develop cannabis-infused drinks, according to BNN Bloomberg. It would be the biggest sign yet that corporations are eager to explore mainstream uses for marijuana-based products.
Shares in cannabis companies have risen 30 percent on average since August. Investors hope that the companies will continue to garner interest from consumer-products giants. Constellation Brands and Heineken have already taken the plunge.
Coke would be a different player. The company is openly pushing into new markets to offset slowing soda sales. (See: its $5.1 billion deal for Costa.) The company says it’s watching the growth in cannabis-infused drinks for now, but it’s not hard to imagine buzz-inducing Coke products hitting store shelves.
More marijuana news: Teens are increasingly vaping weed, according to the C.D.C.
The day ahead
The European Central Bank’s president, Mario Draghi, will discuss banking supervision. At an event in Paris, he will defend the decision to centralize eurozone banking oversight after the financial crisis.
We’ll get insight into the health of the U.S. housing market. A survey by the National Association of Home Builders is expected to show a decline in confidence among homebuilders. More figures are set to be published this week.
Oil companies are back in court over corruption charges. The trial of Royal Dutch Shell and Italy’s Eni will resume in Milan over a deal for an exploration tract off Nigeria.
How to break up Amazon
The company is a dominant force in e-commerce, and its cloud-computing division is a juggernaut. That success is why the company should split itself in two, a Citigroup analyst says.
In a note to clients, the analyst, Mark May, said that breaking up the company could yield two successful businesses: a retail company with an enterprise value of $400 billion and a cloud-computing business worth $600 billion. It would also help Amazon avoid antitrust scrutiny at a time when President Trump appears to be focused on the company.
So far, investors appear uneasy with the idea. Amazon shares fell 3 percent after the report was published.
A newly flush Tesla rival
The sting isn’t necessarily that Lucid secured funding from the Saudis when Elon Musk couldn’t (though that has to hurt a little). It’s that Tesla, already grappling with competition from traditional carmakers like General Motors and Daimler, must now contend with a well-funded upstart that wants to grab the luxury end of market.
Tesla investors can only hope that Mr. Musk, who has seemed distracted lately, can focus on beating the competition.
SpaceX reveals its first Moon tourist
Yusaku Maezawa, the founder of the online Japanese clothing company Zozo, will be the first customer for a trip around the moon on one of the company’s rockets.
The timing of the trip is uncertain: Elon Musk, SpaceX’s C.E.O., said that the so-called B.F.R. spacecraft would not be ready until 2023 at the earliest.
Neither Mr. Musk nor Mr. Maezawa would talk about the cost. But Mr. Musk did say that developing the rocket would cost $2 billion to $10 billion, and that Mr. Maezawa’s ticket was a significant investment in the project.
More Musk news: He is being sued by the cave rescuer whom he accused of being a pedophile.
How men respond to a female- and minorities-only V.C. firm
Jana Bakunina runs the venture capital firm Silvergate Investment, which invests only in companies founded by women or by men from minority backgrounds. Writing in the FT, she explains the responses she gets:
First: “So you are a charity?” This view suggests that women need help from altruistic donors to get their businesses going. Second: “Ah! You are a social impact fund!” This response insinuates that women cannot possibly make you rich, so there needs to be a social mission attached to give an investor something virtuous to talk about at dinner parties. Third: “Great, but why would you limit yourself?” This may seem like a fair comment, but if you asked me about my deal flow I would tell you that I reviewed more than 100 opportunities in six months and was blown away by the quality of applications.
In fact, she writes, she wants to make money, and the firm’s approach allows her to identify opportunities that “are largely overlooked — and therefore attractive.”
What do you think about Silvergate’s approach? Let us know.
Ed Breen will become executive chairman of DuPont when it is spun off from DowDuPont next year.
• President Trump capped the number of refugees allowed into the U.S. next year at a record-low 30,000. (NYT)
• Ajit Pai, the chairman of the F.C.C., said that California’s net neutrality bill is illegal. (Verge)
• Netflix and HBO each won 23 Emmy Awards. (NYT)
• Rumors suggest that Amazon might build an Alexa microwave. (CNBC)
Best of the rest
• The average Wall Street salary climbed over 10 percent last year, to $422,500 in New York. (WSJ)
• The European Banking Authority says that “back-to-back” trading, a technique questioned by other banking regulators, is indispensable. (FT)
• The Narrow Bank has a business model that is theoretically super-safe — but spooks the Fed. (Bloomberg)
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