TikTok, Trump and the Endless Cycle of Escalation

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Beijing’s sudden imposition of technology export rules, which may delay or even kill the sale of TikTok to an American buyer, is a new front in China’s intensifying economic battle with the U.S. Other companies are preparing for collateral damage.

China’s moves “were widely seen as a potential poison pill for the TikTok deal,” The New York Times’s Mike Isaac and Ana Swanson report, since Beijing is now demanding that technology like the algorithms that underpin the video app be licensed for export. If China blocks a deal, the Trump administration could retaliate in what may become an endless cycle of escalation.

A response is already on the cards. The White House trade adviser Peter Navarro, one of the administration’s top China hawks, threatened yesterday to crack down on more Chinese-made apps. “It is critical that this country not use apps that are made in China, or that can take our data and go to servers in China,” he told Fox Business.

More companies could get hurt. Big American corporations, from Apple to Walmart to Procter & Gamble, are already bracing for a potential ban on their access to WeChat, the Chinese messaging app used by 1.2 billion people. Further crackdowns by Washington and Beijing could hurt both Western companies’ competitiveness in the world’s second-biggest economy and that of their Chinese counterparts in the U.S.

🆕 The latest from inside the TikTok negotiations: People with knowledge of the talks say, wearily, that they are now among the most complex in recent memory, for three reasons: the difficulty of cleaving TikTok from its parent company; the number of parties involved; and unpredictable, sudden political impositions.


Today’s DealBook Briefing was written by Andrew Ross Sorkin in Connecticut, Lauren Hirsch in New York, and Michael J. de la Merced and Jason Karaian in London.


American and Delta jump on the no-change-fee bandwagon. The carriers followed United in abandoning most charges for domestic passengers who amend bookings, as airlines try to win travelers back.

The Midwest and Spain are new coronavirus hot spots. Iowa, Kansas, Minnesota and North and South Dakota are recording surging case counts, even as Covid-19 infections are declining elsewhere in the U.S. In Europe, Spain is showing signs of a second wave.

Samsung heir faces stock manipulation charges. Lee Jae-yong was accused today of illegally trying to tighten his control over the Korean conglomerate, but avoided arrest after a court refused to issue a warrant. In the past, Mr. Lee, who is Samsung’s de facto leader, has denied wrongdoing.

India’s economy plunges. The country’s G.D.P. fell nearly 24 percent in the three months through June, the worst performance among major economies. And many workers aren’t counted in the official data, so that may understate the damage.

Facebook says it might block sharing of news stories in Australia. It made the statement in response to a bill that would require tech giants to pay publishers for content that appears on their sites. The standoff shows how greater tech regulation could create a more divided internet.

J.C. Penney’s advisers warned a bankruptcy judge in Texas on Monday that talks with buyers have hit a stalemate. It now has until Sept. 10 to make a deal with a buyer, sell to its creditors or liquidate.

The retailer’s survival hinges on a plan to carve out some of its best properties into a real estate investment trust and sell its retail business to a buyer that would keep stores open. Its lenders have steered the process since it filed for bankruptcy in May.

It thought it had found salvation in Brookfield Property Partners and Simon Property Group, after Hudson’s Bay Group and Sycamore Partners dropped out of the running, DealBook has heard. Brookfield and Simon both own malls with J.C. Penney stores as tenants, so a liquidation would hurt them. Still, the consortium of mall owners and J.C. Penney’s creditors have butted heads. Key sticking points include valuation and who has the right to redevelop mall space: Brookfield and Simon or the creditors. If creditors lose that right, any REIT would have less value.

Talks have been dragging for weeks. The bankruptcy judge overseeing the case told both sides that they were trying the court’s patience. The rebuke wasn’t enough: J.C. Penney’s lawyer, Kirkland & Ellis’s bankruptcy guru Josh Sussberg, told the court yesterday that the discussions with potential buyers had stalled, and the company would instead focus on a bid by lenders.

• It is unclear whether the hedge funds that own J.C. Penney’s debt want to take over an ailing retail business during a pandemic. Of note: Mr. Sussberg said in the hearing that the retailer would shut even more stores.

Some 70,000 jobs are at risk. A liquidation would bring bad publicity for the hedge funds that have funded J.C. Penney’s bankruptcy, which include H/2 Capital. (Mr. Sussberg made sure to list the names at an earlier hearing.) It would also be costly for Brookfield and Simon, but they may simply decide to take the hit and adjust to a new world in which malls are reborn as distribution centers.

Fans of a certain kind of chart have a lot to like in recent market moves.

Tesla’s stock soared yesterday after its stock split. Monday’s five-for-one split had no effect on the company’s valuation, but the electric carmaker’s shares gained more than 12 percent. Tesla is now the seventh-largest listed company in the U.S. Elon Musk is richer than Mark Zuckerberg (and closing in on Bill Gates).

Zoom beat already high expectations — and raised them further. The videoconferencing company reported that revenue more than quadrupled in its most recent quarter, while profit was 30 times higher than a year ago. It also raised its earnings forecast. Zoom’s stock shot up more than 20 percent in after-hours trading, adding billions to the net worth of its C.E.O., Eric Yuan.

The retail giant finally unveiled its subscription service, Walmart+, which starts on Sept. 15.

What’s included: Subscribers pay $98 a year, or $12.95 a month, to get free shipping on 160,000 items, including groceries (Amazon charges $119 for Prime). They’ll also get discounts on gas from affiliated stations.

What’s not included: Equivalents of Prime’s ancillary benefits, such as streaming entertainment. And free shipping only applies to orders of $35 or more; Prime has no minimum.

Why it’s happening: Not only does Prime bring Amazon steady subscription revenues, but those who subscribe consistently spend more and shop more than those who don’t. Walmart’s chief customer officer, Janey Whiteside, pitched the service in a Recode interview as “the ultimate life hack.” Recall that Walmart reported a doubling of e-commerce sales in its latest quarter, so it is starting from a position of relative strength.

The verdict so far: not great. “This is a thin gruel,” Craig Johnson of the research firm Customer Growth Partners told The Times. But if Walmart can at least hang onto customers who might otherwise defect to Prime, analysts say, that’s a win — and the retailer can add perks over time.

As clashes between protesters and the police escalate around the country, President Trump has denounced the Black Lives Matter movement — and companies that support it.

“They’re weak people, led by weak people in many cases,” he said yesterday of corporations that supposedly donated to Black Lives Matter. His interviewer, the Fox News host Laura Ingraham, claimed that businesses had pledged “hundreds of millions” to the movement.

The comments reflect the gulf between Mr. Trump and corporate America on racial injustice. While the president denounced Black Lives Matter as “Marxist,” C.E.O.s like Ramon Laguarta of PepsiCo have publicly expressed solidarity with the movement. And companies have collectively pledged billions to racial justice initiatives, from Bank of America to Netflix.

Fact check: Contrary to what the interview suggested, few if any companies have donated to Black Lives Matter specifically.


• The four-year fight between Anthem and Cigna over their failed $48 billion merger ended with neither winning damages. (WSJ)

• Oil companies invested more than $156 billion during the most recent shale boom. Many of those deals have gone belly up. (Reuters)

• Gogo, the in-flight Wi-Fi provider, agreed to sell its commercial arm to the satellite operator Intelsat for $400 million. (Intelsat)

Politics and policy

• A wave of U.S. small businesses could go bankrupt this fall if there isn’t another round of federal coronavirus aid. (NYT)

• A House panel plans to investigate a $646 million contract for ventilators negotiated by Peter Navarro, the White House trade adviser, that was abruptly canceled yesterday. (The Hill)


• Apple has reportedly asked suppliers to produce at least 75 million 5G iPhones for later this year. (Bloomberg)

• The S.E.C. and FINRA are reportedly investigating Robinhood over its response to trading outages earlier this year. And Robinhood, Vanguard, Charles Schwab and other brokerages had outages yesterday. (Bloomberg, CNN)

Best of the rest

• M.B.A. students are finding job offers hard to come by this year. (WSJ)

• “What Happens if China Gets the Covid-19 Vaccine First?” (Politico)

• How Japan’s karaoke bars are adapting to the pandemic, masked singers and all. (FT)

Correction: Slack reports earnings next Tuesday (Sept. 8), and not this Thursday as we said in yesterday’s newsletter. If we were sending a Slack message to a colleague about the error, the appropriate emoji would be 🤦‍♂️.

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