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Mar 7, 2018

DealBook - Business & Policy on March 7, 2018.


The New York Times


  Brendan Smialowski/Agence France-Presse — Getty Images
The markets don’t want Gary Cohn to go
S. & P. 500 futures are down this morning after President Trump’s top economic adviser finally announced he would leave, in a sign that the nationalists have won the White House debate on tariffs.
The news prompted Tom Nides, Morgan Stanley’s vice chairman, to utter aloud, “Oh, that’s a problem.”
More on Mr. Cohn’s decision from Kate Kelly and Maggie Haberman of the NYT, who broke the news yesterday:
It leaves Mr. Trump surrounded primarily by advisers with strong protectionist views who advocate the types of aggressive trade measures, like tariffs, that Mr. Trump campaigned on but that Mr. Cohn fought inside the White House. Mr. Cohn was viewed by Republican lawmakers as the steady hand who could prevent Mr. Trump from engaging in activities that could trigger a trade war.
Potential replacements, according to Axios: Peter Navarro, the trade adviser who pushed for the tariffs; Kevin Warsh, the former Fed governor; Shahira Knight, a deputy of Mr. Cohn’s; and the pro-free-trade economist Larry Kudlow. (We can rule out Austan Goolsbee.)
Peter Eavis’s take: Even if there is no plunge, now is a moment for investors to make up their minds about populism.
Critics’ corner: The WSJ editorial board said Mr. Cohn’s departure was “a significant blow” to Mr. Trump’s presidency. The NYT editorial board said Mr. Cohn had done “an awful job,” which still probably represented “the high-water mark for economic thinking” for this White House. And his former boss, Lloyd Blankfein, said he had served his country “in a first class way.”
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Today’s DealBook Briefing was written by Andrew Ross Sorkin on the road, and Michael J. de la Merced and Amie Tsang in London.
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A steel factory in Chungcheongnam-do, South Korea.
A steel factory in Chungcheongnam-do, South Korea.   Shin Dong-Jun/Epa-Efe/Rex/Shutterstock/
Europe unveils its Trump tariffs response
The political bloc formally announced its plan to counterattack, including taxing American goods like Harley-Davidsons and bourbon and filing a challenge with the World Trade Organization.
Meanwhile, allies continued to fret. South Korea worries that tariffs will complicate its efforts to denuclearize the North. Christine Lagarde of the I.M.F. warned of the perils of a trade war. And fellow Republicans in Washington continued to lobby the White House.
The aluminum industry doesn’t want tariffs either
In a letter to the White House yesterday, the Aluminum Association (which represents both U.S. and foreign suppliers) said that the move would be a bad idea.
Complaints can be heard around the sector. The C.E.O. of Novelis, a big aluminum producer, criticized Commerce Secretary Wilbur Ross for saying predictions of price increases were “hysteria.” And DowDuPont said it might now build plants in Canada or Argentina rather than the U.S.
  Alex Wong/Getty Images
Chuck Rosenberg is going to Crowell & Moring
Mr. Rosenberg had a long career in government: twice U.S. attorney, he’s been a longtime senior official at the Justice Department (including as chief of staff to James Comey) and acting head of the Drug Enforcement Administration. Now he is heading to Crowell and Moring as senior counsel in the firm’s white-collar and regulatory-enforcement practice.
Philip Inglima, the chairman of Crowell, said of Mr. Rosenberg in a statement:
“ Through his experience operating at the highest levels of the Justice Department, he gained unsurpassed insight into the government’s enforcement priorities and processes.”
The policy flyaround
• Some Senate Democrats joined with Republicans to send an overhaul of Dodd-Frank to the floor, setting up a battle over loosening banking regulations. (NYT)
• The former C.E.O. of a payday lender investigated by the Consumer Financial Protection Bureau asked Mick Mulvaney, the regulator’s acting director, for a senior position there. (AP)
• An adviser to the U.A.E. with ties to associates of President Trump is cooperating with Robert Mueller, suggesting that the special counsel is looking into whether Emirati money was funneled into his campaign, unnamed sources say. (NYT)
• The adult-film star Stormy Daniels asserted in a lawsuit that the president never signed a nondisclosure agreement about the affair she says they had. (NYT)
• The Justice Department has sued California over its sanctuary city policies. (NYT)
• Smith & Wesson’s parent company said it was wary of smart-gun proposals. (WSJ)
  Yves Herman/Reuters 
 
The tech behind Cfius’s Qualcomm intervention
It’s 5G, the superfast wireless standard that Washington, Beijing and business think will be transformative. So important is 5G that Cfius disclosed serious national security concerns about Broadcom buying Qualcomm.
More from Cecilia Kang and Alan Rappeport of the NYT:
“It is the new paradigm,” said Paul Triolo, head of global technology policy at Eurasia Group, a geopolitical risk consulting company. “That implies technologies with 5G, artificial intelligence, biotech and automation are now considered more sensitive and part of a national innovation base that needs to be protected.”
As Michael points out, however, much of Cfius’s letter to the two companies focused on how Broadcom could manage Qualcomm if it took over. Its “private equity” cost-cutting could lead to Qualcomm reducing investment in R. & D. and ceding its 5G lead to Huawei of China, according to the letter.
Broadcom said this morning that it was committed to advancing 5G and that it is an American company in everything but legal headquarters.
More on Huawei: It’s the Chinese tech company that Washington fears the most, even if other companies don’t.
Another take, from DealBook’s friend Steven Davidoff Solomon:
  Regis Duvignau/Reuters
BlackBerry is alive, and suing Facebook
The onetime king of messaging devices has accused Facebook of violating its patents in Facebook Messenger, Instagram and WhatsApp.
More from Ahmed Farhatha of Reuters:
Litigation over patent infringement is part of BlackBerry chief executive John Chen’s strategy for making money for the company, which has lost market share in the smartphone market it once dominated.
Facebook says that it will fight the lawsuit and added, “BlackBerry’s suit sadly reflects the current state of its messaging business.”
Today in virtual currencies: Coinbase is creating an index fund including Bitcoin, Bitcoin Cash, Ether and Litecoin. A federal judge ruled that the Commodity Futures Trading Commission can regulate digital money. And rich people are investing in Bitcoin without understanding it.
The tech flyaround
• Conservatives are increasingly targeting tech giants: The man behind “Clinton Cash” is producing a documentary on Facebook and Google. (NYT)
• Uber’s self-driving trucks have been making deliveries around Arizona, but they’re not ready to replace human drivers. And European automakers are preparing for an electric future, but skepticism remains.
• Scientists are trying to figure out how machines learn on their own. The vast majority of Americans expect artificial intelligence to lead to job losses in the coming decade, but, like bricklayers, few see it coming for their own position.
• The idea of Facebook paying us for our puppy pictures may sound crazy, but it’s gaining momentum. (NYT)
• Data centers have helped revitalize cities like Prineville, Oreg. (NYT)
• UiPath, an automation software company, has raised $153 million in a Series B round of funding led by Accel, CapitalG and Kleiner Perkins. (UiPath)
• HQ Trivia raised new funding at a $100 million valuation, and its co-founder, Colin Kroll, apologized for his behavior when he worked at Vine. (Recode)
  Earl Wilson for The New York Times
Why the Weinstein Company deal is off again
The investor group that had walked away, only to come back, took a look at the company’s finances and got a nasty surprise about its debt — up to an additional $65 million in liabilities, according to the NYT.
Maria Contreras-Sweet, who was leading the investor group, said that it would “consider acquiring assets that may become available in the event of bankruptcy proceedings.”
The Weinstein Company’s response: “The company has been transparent about its dire financial condition.”
The deals flyaround
• CVS Health sold $40 billion of bonds, the biggest such deal in two years, to help pay for its takeover of Aetna. (WSJ)
• J.M. Smucker called off its deal to buy the Wesson cooking oil brand after federal regulators sued to block it. (WSJ)
• International Paper’s bid for the European cardboard-box maker Smurfit Kappa is worth about 8.64 billion euros, or $10.7 billion. (FT)
• Spotting an M&A dud: the bigger the deals, the harder they fall. (Bloomberg)
• A proposed change in Japan’s tax law could encourage more all-stock deals. (FT)
• UnitedHealth is among the bidders for a unit of Envision Healthcare, a health services provider under pressure from activist investors, unnamed sources said. (Bloomberg)
• S.&P. Global is buying Kensho Technologies, which provides A.I.-based data analysis to financial institutions, for $550 million. (WSJ)