Markets catch their breath
Investors are breathing a bit easier on Monday, with markets rallying in Asia and Europe on hopes for a reprieve on tech tariffs. The optimism seems to contradict President Trump’s own words.
The president has signaled that yet another round of levies are on the way, sowing more confusion among business leaders about what’s on, what’s off — and how to deal with their new reality.
Is Trump undermining his own position? If the tariffs are in fact being watered down, that could erode his bargaining power — not to mention his argument that high-tech imports fall into a special national security category — as he seeks to bring back manufacturing to U.S. shores.
The latest: Companies are bracing for new Trump tariffs as soon as this week on the chips and tech components that power phones, computers and other consumer gadgets. The president also played down a Friday announcement by his administration sparing many of the same popular electronics from punishing levies. “NOBODY is getting ‘off the hook,’ ” Trump posted to Truth Social, adding, “especially not China which, by far, treats us the worst!”
Tensions are rising with Beijing. Xi Jinping, China’s leader, took a shot on Monday at Trump’s increasingly protectionist policy ahead of his tour of Cambodia, Malaysia and Vietnam — countries that have become essential suppliers to American businesses — to shore up regional trade ties. “The tariff war will produce no winner,” Xi said.
A protracted standoff could destabilize the global supply chain, analysts warn. Xi “can wait out the United States,” Nouriel Roubini, an economist and senior adviser at the hedge fund Hudson Bay Capital, told Bloomberg Television on Monday. “In the short term, China has a lot of leverage,” he added, including placing trade restrictions on companies like Apple and Tesla.
Markets are bouncing back. Nasdaq futures look set to open in the green on Monday, with Apple rallying in premarket trading. But last week’s big loser — the dollar — was selling off again, hitting a six-month low and adding to U.S. importers’ concerns.
The rally belies a growing list of questions: When will the tariffs escalation stop, and is there enough time for trade partners to strike deals? Would the White House agree to carve-outs for specific industries or products? In the meantime, how do companies price their products, and plan investments?
Business leaders are fretting. A poll by Chief Executive magazine conducted last week found that C.E.O. confidence is at its lowest level since spring 2020, the early days of the coronavirus pandemic, DealBook is first to report. Of the 329 corporate chiefs surveyed:
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76 percent see the tariffs adversely affecting their business;
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26 percent plan to increase capex spending, down from 37 percent in the March survey;
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62 percent forecast a slowdown or recession in the next six months.
“Although I am in support of moving more manufacturing back to the U.S., this is not how to do it,” Peter Ensch, the C.E.O. of Sani-Matic, a manufacturer of cleaning systems in Wisconsin, said in the survey. “Initiating a trade war with our closest allies and business partners is simply bad business.”
HERE’S WHAT’S HAPPENING
Shares in Goldman Sachs surge on buyback plans and solid first-quarter results. The Wall Street giant said its board had approved buying back up to $40 billion worth of shares as it beat analyst estimates on profit and revenue. Strong trading revenues gave Goldman a boost, offsetting declines in its investment banking unit, which was hit by weak deal flow and a moribund I.P.O. market.
The police have arrested a suspect after the Pennsylvania governor’s mansion was set on fire. The 38-year-old man was charged with attempted murder, arson and terrorism after the home of Gov. Josh Shapiro went up in flames while he and his family slept there early Sunday morning. The fire adds to voters’ growing concerns about violence against elected officials.
A new suitor reportedly emerges to buy the port assets of Li ka-shing. The bidder is Geneva-based Terminal Investment, Bloomberg reports. It would negotiate to buy 43 ports from the Hong Kong billionaire’s company, CK Hutchison, and take a minority stake in the two others around the Panama Canal that BlackRock is negotiating to acquire. That deal has drawn intense scrutiny from Beijing and Washington.
Facebook goes to court in antitrust trial
A landmark case against Meta, Facebook’s parent, begins as a federal judge determines whether the social network broke antimonopoly laws. C.E.O. Mark Zuckerberg could testify as soon as Monday.
Here’s what to know: The federal government has charged Meta with illegally applying its monopoly power when it acquired Instagram and WhatsApp. Regulators call it a “buy and bury” strategy.
Meta argues that Facebook already competes against popular apps like TikTok and Snapchat, and that the ever-shifting forces of the internet often breed new competitors. Artificial intelligence has already upended how people interact with technology. The company also says it has invested heavily to develop the apps, which have become bigger than most people would have imagined.
The case, which is expected to last several weeks, is being heard in the U.S. District Court for the District of Columbia by Judge James E. Boasberg, who was appointed under George W. Bush and is considered a moderate.
What is Zuckerberg doing about it? The Facebook founder, who has become much friendlier toward President Trump (contributing, for example, $1 million to his inaugural fund), has lobbied for a settlement. He’s made frequent trips to Mar-a-Lago to present his case and promoted Joel Kaplan, a Republican, as the company’s policy chief to strengthen ties to Washington. He also named former Trump adviser Dina Powell McCormick to its board. Zuckerberg’s political efforts thus far have not ended the case, though a settlement is always possible.
Stakes are high. Meta could be forced to spin off or sell Instagram and WhatsApp. And that could have a chilling effect on mergers altogether. The flow of M&A activity has quieted under Trump, the opposite of what investors had anticipated. A government victory could reshape the merger landscape, setting a much tougher standard for deals.
The F.T.C. faces a difficult task, legal experts say. The agency is in effect trying to prove a hypothetical — that Facebook would not be as dominant if it hadn’t acquired these apps. But it also has rare bipartisan support as lawmakers on both sides think tech giants like Meta are becoming too powerful.
It’s not just Meta. The government won a major antitrust battle against Google last year, and the Justice Department has sued Apple for anticompetitive practices, arguing that its network of devices and apps corners consumers into using only Apple services.
A climate activist hits the pause button
The oil giants will be limping into the start of proxy season this week with battered share prices and with Brent crude, the global benchmark, trading near a four-year low.
But for the first time in nearly a decade, major climate activists won’t be pushing them hard to cut emissions and transition to clean energy, partly because of President Trump’s actions to silence climate action, Vivienne Walt reports for DealBook.
Follow This, the Dutch climate shareholder group that has been hounding energy companies for years to clean up their act, stepped back from its campaign of filing proxy resolutions, predicting a lackluster response from investors.
Tough new S.E.C. guidelines for shareholder proposals have already had a muzzling effect, too. (Morningstar expects a 40 percent drop this year in resolutions aimed at environmental, social and governance matters, the company told DealBook.)
Mark van Baal, the founder of Follow This, spoke with DealBook about his organization’s decision to back off at annual general meetings this year. The group has had big wins, but has also faced a string of dud votes in recent years.
The interview has been edited for brevity.
Why have you paused shareholder resolutions this year?
Since 2016, we’ve managed to get four super majors to set emissions reduction targets. That is something they absolutely didn’t want to do. Then, with the war in Ukraine, with high oil prices, the companies started fighting back. We got 20 percent votes three years in a row. We thought, “OK, it is not effective.”
What factor did Trump play in your decision?
Donald Trump, and the S.E.C. under Trump, makes it impossible to file resolutions. They will call our kind of resolutions micromanaging.
With the Trump election, and states suing investors for considering climate risks, that has added to investor uncertainty. They are afraid of the repercussions, that they could be sued for considering climate risk.
The S.E.C.’s new guidelines force investors into passivity. Investors don’t want to be confrontational with the companies, and they have to confront companies. In Europe, the regulators are not appointed by politicians. We hope that investors will join us.
What is next for activist shareholders like you?
The institutional investors have only one key action — vote at the A.G.M.s.
We’re taking a pause to speak with them. BlackRock, Norges Bank and Legal & General, for example, talk all the time that they want to tackle the climate crisis. But when push comes to shove, they don’t use their vote.
dealbook series: how tariffs are affecting U.S. business
‘Gun to the head of all the American businesses’
We asked DealBook readers how tariffs have affected their companies. Today we’re featuring a response from Danny Muskat, an owner and the S.V.P. at Deer Stags, a family-owned footwear company based in New York.
He writes:
For a company like mine, a small privately held wholesale footwear company, we are completely paralyzed. It is an existential crisis.
We make our shoes in China and cannot bring in our goods with a 145 percent tariff on top of normal duties. We have some planned cost receipts of about $1 million due to ship in the next few weeks. When those were bought, the duty we budgeted for was $60,000. With the new tariffs we’ll need to pay $1,510,000 for those goods to clear customs. That’s simply not possible for us to pay.
We’ve paused our shipments, and most of our retail customers are doing the same. Other brands, too.
We can’t afford the tariff — it could bankrupt us today — and we can’t afford to not have goods, which could bankrupt us tomorrow. We’re trying to move production but that takes time and expense. And how do you do it when nobody knows the conditions for importing from any other country from one day to the next? Manufacturing in the U.S. is completely unrealistic, and would take five to 10 years of national scale investment in any case.
This Trade War of Trump’s is a game of chicken being “negotiated” with a gun to the head of all the American businesses like mine.
DEALBOOK WANTS TO HEAR FROM YOU
We’d like to know how the tariffs are affecting your business. Have you changed suppliers? Negotiated lower prices? Paused investments or hiring? Made plans to move manufacturing to the U. S.? Please let us know what you’re doing.
The week ahead
Bank earnings should offer fresh clues about the state of American households and businesses’ finances. Here’s what to watch.
TUESDAY
Bank of America and Citigroup are the next big banks to report.
Wednesday
Jerome Powell, the Fed chair, is set to give a speech at the Economic Club of Chicago, with questions swirling about inflation and interest rates. Elsewhere, United Airlines releases results.
Thursday
The European Central Bank is expected to lower interest rates, the latest central bank to do so in the wake of President Trump’s trade war. On the earnings calendar: UnitedHealth Group, Netflix and Blackstone.
THE SPEED READ
Deals
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Brookfield is looking to raise more than $2 billion for a fund focused on the Middle East. (Bloomberg)
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Norway’s sovereign wealth fund intends to back Banca Monte dei Paschi di Siena’s bid to buy the Italian lender’s larger rival, Mediobanca. (Bloomberg)
Politics, policy and regulation
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Maya Angelou is out, but “Mein Kampf” stays on the shelves in the U.S. Naval Academy’s library after a review by Defense Secretary Pete Hegseth. (NYT)
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Sarah Palin’s yearslong defamation suit against The Times gets underway in a trial that could test First Amendment protections for journalists. (NYT)
Best of the rest
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