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DealBook Briefing: Trump’s Big Economic Headache

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The economy could complicate Trump’s re-election

As the U.S. economy starts to flash warning signs, President Trump’s early attempts to supercharge it are faltering — and may not even have worked as well as we thought. That could be a problem next year.

• The federal budget deficit is growing faster than expected as Mr. Trump’s spending and tax cut policies require more borrowing. It’s now expected to hit $1 trillion for the 2020 fiscal year.

• The sugar rush of corporate tax cuts is fading: U.S. companies are buying back their own shares at the slowest pace in 18 months, the WSJ reports, calling it “a potential sign of more volatility.”

• And the Labor Department reported that employers added a half-million fewer jobs in 2018 and early 2019 than previously reported, “the latest evidence that the economy got less of a jolt from President Trump’s tax cuts than it initially appeared,” Ben Casselman of the NYT writes.

There’s little room to maneuver if an economic slowdown becomes a recession, the WSJ notes. The Fed’s interest rates are already low, and the chances of bipartisan agreement on ways to juice the economy are slim.

That could be a problem for Mr. Trump. Nearly 60 percent of respondents to a New York Times survey said they were worried about the economy. And that group “cuts across party lines and encompasses a large group of voters who could collectively sink Mr. Trump’s re-election chances,” Mr. Casselman and Jim Tankersley of the NYT write.

But the president is adamant that everything is O.K. When asked yesterday whether he was pursuing tax cuts — something he said on Tuesday that he’d been considering — Mr. Trump said, “I just don’t see any reason to.” He added: “We don’t need it. We have a strong economy.”

More: Could immigration help revitalize America’s economy?


Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York, and Michael J. de la Merced and Jamie Condliffe in London.


ImageCreditManuel Balce Ceneta/Associated PressThe Fed was torn over its rate cut

Federal Reserve officials were sharply divided when they voted to cut interest rates by a quarter of a percentage point last month, Jeanna Smialek of the NYT reports.

• “ ‘A couple’ of participants at the meeting — not all of whom get to vote on monetary policy — would have preferred a half-point cut.”

• “But ‘several’ wanted to hold rates steady, noting a strong job market and low unemployment.”

Officials viewed the cut as a “recalibration” of their policies, rather than the start of a campaign to cut rates further, the WSJ notes. The decision was ultimately driven by concerns about slowing business investment, inflation and risks to the economy, which “highlighted the need for policymakers to remain flexible.”

But those reasons “look even sharper” now, Craig Torres of Bloomberg writes. The U.S.-China trade war and the gloomy global economic picture are creating more downward pressure on the American economy.

That suggests another rate cut is in the cards at the Fed’s policy meeting next month. Fed officials “seem fully aware that accommodative financial conditions are dependent on their own expectation of cutting,” Michael Gapen, the chief U.S. economist at Barclays, told the WSJ.

It will no doubt be a hot talking point for Fed officials as they gather at the Kansas City Fed’s annual conference in Jackson Hole, Wyo., today.

ImageCreditMads Claus Rasmussen/Agence France-Presse — Getty ImagesTrump’s feud with Denmark over Greenland

It turns out President Trump may have been pretty serious about trying to buy Greenland from Denmark. Yesterday he attacked the Danish prime minister, Mette Frederiksen, after she called the idea “absurd.”

Mr. Trump called Ms. Frederiksen “nasty,” one of his preferred insults for women who offend him, for dismissing the idea of the U.S. buying the island. That was after he canceled a state visit to Copenhagen.

Then he attacked Denmark itself, a NATO ally, for not spending enough on its military. And then he turned on NATO as a whole, on the same grounds. (Secretary of State Mike Pompeo later reassured his counterpart in Denmark about the strength of the U.S.-Danish alliance.)

If you think this is ridiculous, you’re not alone. The FT editorial board said that “the era when big countries could trade territories and people is long over.” Henry Mance of the FT drew up a satirical term sheet for a Greenland deal. And George Hay of Breakingviews jokingly suggested that Mr. Trump should buy Britain instead.

Yet Mr. Trump’s offer has raised two potentially important issues:

• It was another instance of erratic behavior by the president in recent days, which unnamed former administration officials worry reflects rising pressure on Mr. Trump as the economy falters, according to the NYT.

• And it highlighted how Denmark has been slow to figure out its strategy for the Arctic, as the U.S., Russia and China all vie for supremacy over the region and its natural resources, according to the FT.

Quitting China is harder than it sounds

Manufacturers want to dodge the U.S.-China trade fight by moving more of their production to Vietnam. But that isn’t an easy task, the WSJ reports.

• “The specialized supply chains that made China a production powerhouse for smartphones and aluminum ladders and vacuum cleaners and dining tables are nowhere near as developed in Vietnam,” the WSJ reports.

• “China has a 15-year head start — whatever you want, someone’s doing it,” Wing Xu, the operations director for Omnidex Group, an Asian manufacturer, told the WSJ. “You can’t just shift your business to Vietnam and expect to find what you’re looking for.”

• “Vietnam, with less than one-tenth China’s population, is already running into labor shortages as global manufacturers rush to set up shop here to avoid U.S. tariffs.”

• “Some companies are relocating parts of their production lines to Southeast Asian countries or elsewhere, while continuing to manufacture in China for the Chinese and non-U.S. markets, a strategy they call ‘China+1.’ ”

ImageCreditHector Retamal/Agence France-Presse — Getty ImagesHow Huawei misled big banks

New documents in the U.S. case against Huawei over its business dealings in Iran — which the Trump administration says violated American sanctions — reveal how it misled several Western banks, according to Dan Strumpf of the WSJ.

Huawei controlled Skycom Tech, a company that did business in Iran and is at the heart of the U.S. case, the documents reportedly disclosed. Huawei has called Skycom a “business partner,” but paperwork appears to show that the Chinese tech giant actually owned it through another subsidiary.

Huawei is said to have misled Citigroup and BNP Paribas, with its officials telling the banks that the Chinese company was complying with U.S. sanctions on Iran, according to the documents. The WSJ previously reported that Huawei had made similar claims to HSBC and Standard Chartered.

HSBC and Standard Chartered have cut ties with Huawei. But Citi was still providing banking services to the company at least through the end of last year, according to the WSJ.

ImageCreditTolga Akmen/Agence France-Presse — Getty ImagesThe E.U. may clamp down on facial recognition

The European Commission is investigating how to “impose strict limits on the use of facial recognition technology,” the FT reports, citing unidentified sources.

The aim is to curb “the indiscriminate use of facial recognition technology” by companies and public authorities, one unnamed official told the FT. The new rules would reportedly require that individuals be informed when facial recognition data is used, and exceptions would be “tightly circumscribed,” this person said.

This is set against growing pushback against facial recognition technology. The cities of San Francisco and Somerville, Mass., have both prohibited their authorities from employing the technology. And Britain’s data-protection watchdog is investigating its use around King’s Cross in London.

Such a move would probably have real teeth in Europe. The E.U.’s General Data Protection Regulation notably imposes stiff punishments for data misuse. There’s little reason to think that a ban on facial recognition would be any different.

ImageCreditConor E. Ralph for The New York TimesHow a conservative media company is battling Big Tech

The Western Journal earned popularity and profits by peddling highly partisan stories about national politics online. But as Silicon Valley cracks down on disinformation, the site is fighting back, Nick Confessore and Justin Bank of the NYT report.

• The Western Journal, which is run by the veteran conservative provocateur Floyd Brown and his son, Patrick, has reached an audience as large as 36 million on platforms like Facebook.

• “Social media provided Mr. Brown with a platform unlike any other,” the NYT reports, enabling his company to find alienated conservatives with precision and target them with anti-Democratic content.

• But The Western Journal’s Facebook traffic has declined sharply in recent months, while Google News and Apple News have blacklisted the publication.

• The Western Journal’s parent company has since hired a Washington lobbyist and begun publishing stories and studies claiming bias within Silicon Valley against conservatives. It has also hired Herman Cain, the former presidential candidate and Trump ally, as a representative.

• “We are committed to the truth,” Patrick Brown told the NYT. “We are real people. We are a digital media company,” he continued. “We are not disinformation.”

Revolving door

Mustafa Suleyman, a co-founder of Google’s A.I. subsidiary, DeepMind, has gone on leave for unspecified reasons.

Blackstone has hired Ram Jagannath from Navab Capital Partners as a senior managing director for its new growth equity investing team.

The Carlyle Group has hired Bruce Larson, the former head of human capital for Goldman Sachs’s Asia Pacific and India operations, as its head of human resources.

Goldman Sachs’s trading division plans to hire more than 100 coders.

The speed read


• Goldman Sachs has applied to buy majority control of its Chinese joint venture. (Reuters)

• Simply Good Foods, the producer of Atkins-branded snacks, agreed to buy the protein-bar maker Quest Nutrition for $1 billion. (WSJ)

• The software maker Splunk agreed to buy the cloud computer monitoring company Signalfx for $1 billion. (Reuters)

• SoftBank’s brokerage unit will let Japanese customers invest in I.P.O.s with as little as $10. (Bloomberg)

• The Japanese brewer Asahi has become Asia’s most prolific deal maker, having struck $21 billion worth of takeovers over the past three years. (FT)

Politics and policy

• The White House proposed a new rule that would let it detain migrant families indefinitely, casting aside a 22-year court settlement that prevented it. (NYT)

• The conservative radio host and former congressman Joe Walsh is considering challenging President Trump in the Republican primary. (NYT)

• The Trump administration once said that opening up the Arctic National Wildlife Refuge to oil drilling would raise billions of dollars. Those promises now appear vastly overstated. (NYT)

• The I.M.F. removed an age limit for its leaders, paving the way for Kristalina Georgieva of Bulgaria to take over the lender. (FT)

• Sean Spicer will appear on “Dancing With the Stars.” Our TV critic says that’s a bad idea, and not because of his dancing. (NYT)


• Chancellor Angela Merkel of Germany said that she hopes the E.U. can reach a compromise with Britain over Brexit, but France is assuming the U.K. will leave without a deal. (FT, Evening Standard)

• British businesses remain worried about a no-deal Brexit, despite new preparations by the government. (FT)


• The U.S. and Mexico have resolved their trade dispute over tomatoes. (FT)

• Britain plans to sign a “continuity” trade agreement with South Korea today to keep trading with the country after Brexit. (BBC)


• Palantir has renewed its controversial contract with I.C.E. (Business Insider)

• Facebook shut down dozens of accounts in Myanmar that it said were trying to “manipulate or corrupt public debate.” (Reuters)

• Lyft has been sued at least seven times this month by women who say they were sexually assaulted by its drivers. (Vice)

• DoorDash doesn’t appears to have changed the way it pays workers. (Business Insider)

• Here’s what comes next for Tumblr. (NYT)

Best of the rest

• Walmart’s C.E.O., Doug McMillon, said he was “listening” to a petition from an employee with more than 129,000 signatures that called on the company to stop selling guns. (Business Insider)

• Why markets aren’t panicking about Italy. Yet. (NYT)

• Senator Elizabeth Warren wants Wells Fargo to explain why it continued to charge fees on closed accounts. (NYT)

• The growing divide in retail success is being driven by whether stores offer convenience for shoppers. (WSJ)

Thanks for reading! We’ll see you tomorrow.

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