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Trump plans $11bn tariffs aimed at EU's aircraft, cheese and wine – business live Trump plans $11bn tariffs aimed at EU's aircraft, cheese and wine – business live
(about 3 hours later)
If you have just shy of eight minutes free, Carlos Ghosn’s pre-recorded video (see 08:06) is definitely worth a watch for an insight into one of the most dramatic corporate bust-ups of recent times. Britain is likely to be offered a final long extension ending on 31 December after the EU’s chief negotiator, Michel Barnier, failed to convince the bloc’s capitals that Theresa May has a plan to break the Brexit impasse.
Ghosn’s lawyer has said that the video was edited to remove the names of individuals, according to Agence France Presse, but he has not pulled many other punches. He had intended to give the message in person at a press conference, but was rearrested before being able to appear. A number of member states, most prominently France, along with Slovenia, Greece, Austria and Spain, remain sceptical about a lengthy extension, citing the risks to the EU of Britain behaving badly, Daniel Boffey reports.
The former Nissan boss accused unnamed former colleagues of plotting to overthrow him to prevent the Japanese carmaker from losing control in its alliance with Renault. Barnier tried to push for a shorter extension to keep pressure on MPs to back May’s deal, according to a leaked note on discussions. The full story is here:
But an important – and geopolitically interesting – point from analysts at Deutsche Bank’s macro strategists, led by Jim Reid: tariffs will only be implemented after the World Trade Organization (WTO) gives a final ruling on the EU’s subsidies this summer. UK likely to be offered Brexit extension until end of year
Reid, and his colleagues Craig Nicol and Quinn Brody, wrote: After early worries about the potential impact of Trump’s tariffs, European stocks have recovered on the major stock indices as we reach the halfway point in London trading.
The Trump administration hasn’t always trusted the WTO on these matters so its interesting that they are here. Proposed items in the list include new passenger helicopters, various cheeses and wines, ski-suits and certain motorcycles. The FTSE 100 is up by 0.1% at 7,459 points, although the mid-cap FTSE 250 is faring slightly worse, down by 0.2%.
This news might also remind investors that the US report on the national security risk of auto imports was delivered back in February without any official response yet. Having said that the US first complained to the WTO about Airbus subsidies 15 years ago so this has been a long-running dispute. Sterling is flat against the euro, and up by 0.2% against the US dollar.
Relying on the WTO at this point seems like a strange move, given Trump’s almost systematic dismantling of its legitimacy and his obvious distaste for the trading world order it presides over. Some more analysis of the Debenhams administration.
But given that the US has had some genuine success with the WTO’s ruling on the EU’s Airbus subsidies, perhaps they believe that it makes sense to pursue the traditional rules-based approach – even as they try to undermine the WTO fundamentally. We probably won’t have details of possible store closures for weeks, but Debenhams’ failure is still hugely significant given the size of its property estate (many in town centres) and the number of employees it has, said Richard Lim, chief executive at Retail Economics.
As a side note it’s worth noting the timeframe over which these disputes play out as well: trade negotiations are hard. Debenhams has fallen victim to crippling levels of debt, which has paralysed its ability to pivot towards a more digital and experience-led retail model.
Let’s get some reaction to the possibility of $11bn in US tariffs on EU goods. Put simply, the business has been out manoveured by more nimble competitors, failed to embrace change and was left with a tiring proposition. The industry is evolving fast and it paid the ultimate price.
Neil Wilson, chief market analyst at Markets.com, said the tariff threat looks like a relatively contained problem, but added that there is a “risk of contagion if the EU decides to respond in kind” – as well as doing nothing for business confidence in the EU. Debenhams has been taken over by its lenders, wiping out shareholders including Mike Ashley’s Sports Direct and paving the way for store closures that put thousands of jobs at risk.
We are now back to where we were before the Juncker visit to Washington – there is a real risk of a tit-for-tat trade battle between the EU and US, and therefore ought to weigh on risk. Ashley, who spent at least £150m on building up a near 30% stake in Debenhams, lost out after the company and its lenders rejected a last-ditch offer of a new £200m cash injection as it was dependent on him becoming chief executive, writes Sarah Butler.
Meanwhile, we are still waiting for a breakthrough between the US and China – despite warm words, so far nothing has materialised. Full story here:
The decision does not augur well for EU-US trade, with the looming threat of tariffs on cars – which would represent a big blow to the relations and likely to the world economy. Debenhams is taken over by lenders; Mike Ashley loses stake
Lee Hardman and Fritz Louw, currency analysts at MUFG, said a move back towards an EU-US trade war could damage the prospects for the euro. An interesting story on bitcoin (remember that?) has hit the wires. Reuters reports that China is planning to ban “mining” of the cryptocurrency.
Downside risks for the euro from escalating trade tensions would heighten more significantly if the Trump administration also decides to raise tariffs on imports of autos. China’s state planner has published a draft list of industrial activities the agency is seeking to stop in a sign of growing government pressure on the cryptocurrency sector. China is the world’s largest market for computer hardware designed to mine bitcoin and other cryptocurrencies, even though such activities previously fell under a regulatory grey area.
May will have to persuade her EU counterparts that she can secure actual progress, whether that be a compromise with Labour or if she can somehow get her withdrawal deal through the Commons with another heave. The move may have something to do with the truly horrendous amount of energy used in creating the currency. Read more about that here:
Andrea Leadsom, the Brexiter leader of the house of commons, has just now said that getting the May/EU deal through parliament would be the best possible outcome – if the EU supports measures on the troublesome backstop, the insurance policy for the Irish border. Another thing you may not know about Bitcoin: it's killing the planet | Ethan Lou
You can read more Brexit detail here: It’s time for Mike Ashley to bow out and accept that his near 30% stake is going to be wiped out, according to some City analysts.
May risks wrath of Tory Brexiters to plead with EU for more time AJ Bell investment director Russ Mould likened Ashley to “a greedy child who wants a new toy” – even after gaining a string of goodies in the past year. He said:
With the flurry of early news, we’ve got three posts into the live blog without mentioning the “B” word. But Brexit is only three days away, unless something comes up. While Mike Ashley seems to like the thrill of the chase, it is time for him to admit defeat with his pursuit of Debenhams and adding another string to the bow of his retail empire.
The early signs, ahead of the crucial summit of European leaders tomorrow, suggest we could be in for a bumpy ride in the next few days. Someone needs to tap him on the shoulder and remind him that he’s already got a core business to run and a bit more attention wouldn’t go amiss.
Prime Minister Theresa May will go to Paris and Berlin to plead with Angela Merkel and Emmanuel Macron for a Brexit extension today, but France’s EU minister said that it will want the UK to give a good reason for a longer negotiation period. The equity sales team at Berenberg investment bank agreed: the risks are high around Sports Direct’s strategy even if it were successful, with a lot of work to turn around Debenhams. They said:
Entering a meeting of EU ministers in Luxembourg today, France’s Amélie Montchalin said: “We want to understand what the UK needs this extension for.” We still believe this long-running saga is a significant management distraction at a time when the core Sports Direct business is under structural pressure.
Then come the questions of the conditions; what role the UK wants to play during this extension time, in what kind of decisions it wants to take part. Let’s get some more on another of today’s big stories: the endgame in Mike Ashley’s pursuit of Debenhams.
Bruno Le Maire, France’s finance minister, earlier said that France needs a clear reason for any Brexit delay. Ashley’s Sports Direct has offered Debenhams a £200m cash injection in a last-ditch attempt to strike a deal that would prevent its stake in the business being wiped out, writes the Guardian’s Sarah Butler.
Europe’s main stock markets have all fallen at the open as investors take into account the threat of $11bn in tariffs from the US. But the department store group is expected to reject the latest offer, as it is still tied to Ashley being appointed chief executive, which the group’s lenders oppose.
London’s FTSE 100 is down by 0.2% in early trading, while Germany’s Dax and France’s Cac 40 both fell by 0.3% as markets opened. Debenhams remains on course to be handed to its lenders on Tuesday via a “pre-pack” administration that would enable stores to continue trading but render shares worthless.
Shares in Airbus, the Franco-German planemaker at the centre of the trade dispute, fell by 2.3%, making it the worst performer on the Cac 40 in early trade. Debenhams on brink of administration despite Mike Ashley's last-ditch £200m offer
Carlos Ghosn, the former Nissan boss, has blamed a “conspiracy” for his arrest and continued detention in Japan. Britain’s retailers this morning blamed Brexit for holding back larger purchases – with consumer reticence thought to be an important factor in the UK’s recent sub-par growth record.
Ghosn faces multiple charges from Japanese prosecutors, including underreporting his income to authorities. He has also been accused of ethical violations by Renault, the French carmaker whose alliance with Nissan has come under pressure since Ghosn’s arrest. The British Retail Consortium (BRC) and the accountancy firm KPMG said sales growth dropped to 0.5% in the year to March, down from an annual growth of 2.3% a year ago, as consumers held back from spending on big-ticket items, writes Richard Partington.
In a video message recorded before his rearrest on fresh charges in Tokyo last week, Ghosn said he was the object of plotting by Nissan employees who thought that plans for a closer alliance with Renault would threaten the Japanese carmaker’s autonomy. He said: While the timing of Easter likely produced distortions in the figures, uncertainty is holding back consumers, the BRC said. You can read more here:
This is a conspiracy. This is not about specific events, this is not about greed, this is not about dictatorship. This is about a plot, this is about conspiracy, this is about backstabbing. Shoppers avoiding big buys due to Brexit uncertainty – retailers
Ghosn said that he has been unfairly painted as a dictator in an effort to discredit him. The EU’s Brexit negotiator, Michel Barnier, is holding a press conference at the moment.
I am innocent of all the charges that have been brought against me. I am also innocent of all the accusations that came around these charges, that are all biased, taken out of context, twisted in a way to paint a personage of greed and a personage of dictatorship. He has suggested the EU might not grant a long article 50 extension unless May backs a customs union, Andrew Sparrow reports on the Guardian’s politics live blog.
However, Ghosn said his love for Nissan and Japan is “untainted” since his arrest in November. Sterling is flat against the euro at €1.1609 at the time of writing, but has swung back and forth in morning trading, albeit in the range of yesterday’s movements.
I love Japan and I love Nissan. Nobody spends 20 years in a country, nobody works 20 years in the leadership of a company without love and without attachment. Against the US dollar the pound has gained 0.15% to $1.3087 – after briefly jumping above $1.31 earlier this morning.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. You can follow the press conference and all of the politics developments here:
Donald Trump’s White House has threatened to impose tariffs on EU goods worth $11.2bn, including French cheese, wine and aircraft, in a move which would significantly escalate trade tensions between the world’s biggest trading blocs. Brexit: Barnier suggests EU might not grant long article 50 extension unless May backs customs union - live news
Trump’s US trade representative, Robert Lighthizer, announced a list of goods which could be hit by tariffs late on Monday night in retaliation for EU subsidies to Airbus, the European aerospace manufacturer. Some more tariff reaction: while Donald Trump describes his tariffs as part of his “America First” policies, most economists believe that they mostly serve to raise prices for consumers, the very people the US president says he wants to help.
The 14-page list has some fairly symbolic targets, with “French cheese”, Roquefort cheese, wine, champagne, olive oil and seafood such as oysters. Paul Donovan, chief economist at UBS Global Wealth Management, this morning described the tariffs as “tax increases” which will hit consumers directly.
Airbus and Boeing, the two major civil aerospace operators, have been at the centre of a long-running tit-for-tat battle over subsidies by their respective governments. Lighthizer said: US President Trump has drawn up a little list of things US consumers can be taxed for buying. The latest round of tariffs are directed at the European Union, following a World Trade Organization ruling against subsidies for Airbus.
This case has been in litigation for 14 years, and the time has come for action. The Administration is preparing to respond immediately when the WTO issues its finding on the value of US countermeasures”. Whether the US president’s newfound enthusiasm for the WTO will last if the WTO rules against Boeing in a similar case remains to be seen.
Our ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft. When the EU ends these harmful subsidies, the additional US duties imposed in response can be lifted. The White House’s willingness to abide by WTO processes in this case could actually be beneficial for the embattled organisation, Donovan added.
In the City, Debenhams is likely to reject a last-ditch £200m offer from Sports Direct to take over the ailing department store chain. Let’s take a closer look at the list of products at risk if the US does follow through on its $11bn tariff threats.
The offer still comes with the condition that Sports Direct founder and all-round retail impresario Mike Ashley becomes Debenhams’ chief executive. On past form that is unlikely to fly with Debenhams’ board, meaning a pre-pack administration could still be in the offing. Just like the EU’s previous threats to hit American export icons such as Harley Davidson motorbikes, Levi jeans and bourbon whiskey, the US is targeting some symbolic European products.
You can read much more detail here: Non-military aircraft top the list, in an obvious reference to the dispute’s origin in EU subsidies for Airbus. Airbus shares are down by 1.7% today, although it is worth noting that they are still up by more than 40% year-to-date, as US rival Boeing has been hit by the fallout from two air crashes which have led to the grounding of its 737 fleet.
Debenhams on brink despite Mike Ashley's last-minute offer Beyond aircraft though, there is a cornucopia of culinary delights on which tariffs could be levied. Swordfish steaks, salmon fillets, crabs, scallops, mussels, oysters, octopus, various jams and olive oil are on the list with 12 categories of wine to wash it down.
And later we will hear from the International Monetary Fund on their latest thoughts on their outlook for the world economy. Some 40 categories of cheese are listed, including roquefort, pecorino, and Gouda, as well as British stilton and cheddar – even “american-type cheese” from the EU is included.
The agenda Other more unusual (and non-edible) products include ski suits, swimwear, hunting knives and even wind-up wall clocks.
2pm BST: International Monetary Fund world economic outlook press conference The full list is here.
3pm BST: US JOLTs job openings European stock markets have rallied after falling earlier in the morning.
The FTSE 100 is now only marginally down, by three points or 0.04%. Germany’s Dax is down by 0.14% while France’s Cac 40 is down by 0.1%.
The wider Stoxx 600 index is up by 0.1%.