Trump Exits With Trade Push, Digital-Tax Accord: Davos Update

This content was published on January 22, 2020 - 17:30

(Bloomberg) -- The rich and powerful are in Davos, Switzerland, for the World Economic Forum’s 50th annual meeting, and the gathering is being closely watched to see how the global elite aims to tackle problems they helped create, above all climate change.

U.S. President Donald Trump dominated proceedings for a second day, touting his economic achievements, attacking political opponents and calling the impeachment trial, which began on Tuesday, a “hoax.”

Before heading back to the U.S., Trump said he is aiming to agree on a trade deal with the European Union by the next U.S. election in November and announced a new push to reform the World Trade Organization. The U.S. and France also struck a deal on a global framework for digital taxation, averting a transatlantic trade war.

To get all the highlights delivered to your inbox, sign up for the Davos Diary newsletter. Here’s the latest (time-stamps are local time in Davos):

Iraq ‘In the Eye of the Storm’: President Salih (6:15 p.m.)

The Iraqi parliament’s call for U.S. troops to leave the country is not a “sign of ingratitude or hostility” but a reaction to what many Iraqis see as violations of their country’s sovereignty, according to President Barham Salih.

“For the Middle East to become stable, no country should seek to dictate to Iraq whom we should have relations with and how,” Salih said in a speech. “Our policies and our diplomatic and economic ties must be driven by our own national interests not by those of others.”

Salih said Iraq is “truly in the eye of the storm” but that he remains “confident Iraq can rise to these challenges rather than fall prey to them.” “We can still emerge a better, stronger, more cohesive and more prosperous country,” he added.

QIA CEO: Wealth Fund Won’t Invest More in Coal (5:50 p.m.)

Qatar’s sovereign wealth fund plans to shift into greener assets, according to Chief Executive Officer Mansoor bin Ebrahim Al Mahmoud.

“We’re not going to invest more in the coal business,” he told Bloomberg TV. The $328 billion Qatar Investment Authority also doesn’t plan to significantly expand its holdings in oil and gas.

“We have some investment in oil and gas companies; this is a fact, and this is a sector that you cannot ignore,” Mansoor Al Mahmoud said. Given that Qatar relies heavily on income from natural gas, the fund needs to diversify beyond the energy sector, he added.

Ukraine to Offer Tax Breaks to Buyers of State Firms (5:30 p.m.)

Ukraine President Volodymyr Zelenskiy offered tax breaks to investors as he seeks to drum up interest in sales of state assets.

“Come and we’ll protect your investments,” Zelenskiy said in a speech. Five-year holidays for corporate tax will apply to those spending $10 million or more in privatization tenders in 2020 or 2021, he said, adding that the sale of major assets will start in the spring.

Kenya’s Njoroge Pushes Private-Sector Partnerships (5:25 p.m.)

Kenya should consider partnerships with the private sector to help fund government spending because it doesn’t have much room to increase debt, according to Patrick Njoroge, governor of the nation’s central bank.

The East African nation’s debt is about 62% of gross domestic product, Njoroge said in an interview with Bloomberg TV. While the increase in debt in recent years was mainly to finance significant infrastructure spending, “we don’t have much headroom for additional debt financing “ he said.

Google CEO: AI More Profound Change Than Fire (4:50 p.m.)

Google’s chief executive officer left no doubt about how important he thinks artificial intelligence will be to humanity.

“AI is one of the most profound things we’re working on as humanity. It’s more profound than fire or electricity,” Alphabet Inc. CEO Sundar Pichai said in an interview.

“AI is no different from the climate,” he added. “You can’t get safety by having one country or a set of countries working on it. You need a global framework.”

France Agrees on Digital Tax Framework With U.S. (4:20 p.m.)

The U.S. and France struck a deal on a global framework for digital taxation to avert a transatlantic trade war, French Finance Minister Bruno Le Maire said.

At a meeting with U.S. Treasury Secretary Steven Mnuchin on the sidelines of the forum, Le Maire agreed to delay collecting a tax on multinational digital companies until the end of 2020. In exchange, the U.S. will refrain from imposing the punitive tariffs on French goods it had threatened as retaliation.

“We now agree on a shared global framework,” Le Maire told reporters.

Pakistan’s Khan Sees Economy on Right Track (4:15 p.m.)

The Pakistan government’s reforms have inflicted pain on the nation’s citizens but the economy is now on the right track, according to Prime Minister Imran Khan.

“Naturally when you do stabilization you squeeze the economy,” Khan said in a speech. “But we have gone through this very tough period and mercifully our economy stabilized. We are going in the right direction although I have to say we still have a lot of hard work to do.”

Khan said Pakistan has enough reserves of natural resources “that we can pay off all of our foreign debt” and that “the whole of the government’s attention now is to develop these resources.”

BP CEO: ‘Unbelievable’ How Shale Boom Damped Volatility (3:30 p.m.)

The U.S. boom in shale oil and gas has significantly dampened price volatility, according to BP Plc’s top executive.

“I’ve been in the industry for 40 years and we’ve always seen this huge volatility, particularly with tension in the Middle East,” Bob Dudley, chief executive officer of the London-based energy giant, said in a Bloomberg TV interview.

“When the attack on Saudi Arabia’s oil fields happened and crude went up $5 then settled back down. That’s when I realized the unbelievable impact of the United States on energy markets.” The same thing happened after the confrontation between the U.S. and Iran this month followed by the sudden disruption to Libyan output, Dudley said.

Polish Premier Plays Down Banks’ FX-Loan Risks (3:05 p.m.)

Provisions taken by Polish banks for mounting legal risks linked to foreign-currency mortgages aren’t “scary” and won’t destabilize the country’s financial industry, Prime Minister Mateusz Morawiecki said.

The government isn’t planning any moves to help resolve the situation and it’s ultimately up to Polish courts to determine if mortgage holders were subject to abusive clauses, Morawiecki said in an interview.

“The figures I saw in terms of new provisions are not scary, they are not very high,” Morawiecki, a former chief executive officer at Banco Santander SA’s Polish unit, said on the sidelines of the forum. “They will of course reduce overall profitability by several hundred million zloty but this is no do-or-die for the Polish banking sector.”

Carlyle’s Youngkin Says Asset Prices to Stay High (3 p.m.)

Asset prices are high and unlikely to come down in the current interest rate environment, according to Glenn Youngkin, co-chief executive of Carlyle Group Inc. That means Carlyle is taking more risk and must hold investments longer, Youngkin told Bloomberg TV.

“To get the same returns that we used to get you have to go up the risk curve,” he said. “The reality is in today’s world returns are coming down. Where we used to underwrite things in excess of 20% returns, we’re underwriting them in the high teens today.”

Morgan Stanley Blames Lack of Attrition for Job Cuts (2:56 p.m.)

Morgan Stanley had to cut jobs last year because not enough employees made the leap on their own.

“We’ve had no attrition,” Chief Executive Officer James Gorman said Wednesday in a Bloomberg TV interview. “Nobody’s leaving, and we got to the end of the year and we said, ‘Does this really add up?’ We just promoted 130 new managing directors. You’ve got to create capacity for these folks.”

Impeachment, Strong Economy Hard to Reconcile (2 p.m.)

Carlyle Group Inc. Co-Executive Chairman David Rubenstein said it’s “hard to understand” that the U.S. economy can be performing well at the same time a president is being impeached for only the third time in history.

“It’s a very strange situation,” Rubenstein said in an interview with Bloomberg TV. “It’s a hard thing to explain to outsiders that the economy is doing so well, and the president has a lot of support in the business community for sure, yet he’s being impeached and tried in the Senate.”

Bridgewater’s Prince: Boom-Bust Cycle Is Over (1:50 p.m.)

The boom-bust economic cycle is over, according to Bob Prince, who helps oversee the world’s biggest hedge fund at Bridgewater Associates.

Central-bank policy tightening “wasn’t intended to cause the downturn, wasn’t intended to cause what it did,” Prince, Bridgewater’s co-chief investment officer, told Bloomberg TV. “But I think lessons were learned from that and I think it was really a marker that we’ve probably seen the end of the boom-bust cycle.”

Some Witnesses Would Raise Security Concerns (1:20 p.m.)

Trump said some potential witnesses in the impeachment trial would raise “national security” concerns but the Senate will decide whether any of them will testify.

Trump would “love” for his acting chief of staff, Mick Mulvaney, and Secretary of State Michael Pompeo to testify, he told a news conference. But he said Mulvaney has already “expressed himself very well” in a Fox News interview and that Pompeo presents “a national security problem.”

“He knows some of my thoughts” on foreign leaders, Trump said, expressing concern his views might become public in the trial.

China Weighs Lifting Cap on Foreign Holdings (1:10 p.m.)

China’s securities regulator is looking at the potential to raise the cap on foreign ownership in the nation’s listed companies, according to a senior official.

Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said there’s potential to lift the limit to “more than 30%” given that other countries in the region have higher caps.

“So why shouldn’t China do similar things,” he told Bloomberg TV. “Now of course, this has to go through a quite long process in our decision making system, but I think in principle that it’s possible.”

U.S., China Discussing Hong Kong Human Rights (1:05 p.m.)

The U.S. and China are discussing human rights in Hong Kong as part of negotiations for a phase-two trade deal, Trump said.

“We are discussing that already,” Trump says when asked about the role of human rights in the talks. “Phase one is done, phase two is being discussed.”

Trump Tells Greta to Focus on Big Polluters (1 p.m.)

Trump said Swedish climate activist Greta Thunberg should focus on the most-polluting countries and that the U.S. is “clean and beautiful.”

“We want to have the cleanest water on Earth, we want to have the cleanest air on Earth,” Trump told a news conference.

“We have to do something about other continents, we have to do something about other countries,” he added. “When we’re clean and beautiful and everything’s good but you have another continent where the fumes are rising at levels that you can’t believe. I think Greta ought to focus on those places.”

Spain’s Sanchez Warns of ‘Climate Disaster’ (1 p.m.)

Spanish Prime Minister Pedro Sanchez earlier focused on climate change in a speech to the forum, one of the top priorities of his recently formed government.

“The climate emergency is a disaster that knows no borders and we are the last generation that will be able to address it effectively,” he said.

Trump to Discuss WTO Reform With Azevedo (12:35 p.m.)

Trump invited World Trade Organization Director-General Roberto Azevedo to appear at his news conference and announced that they plan to discuss reforms to the international commerce body in coming weeks.

“The World Trade Organization has been unfair to the United States for many, many years,” Trump said. “We’re going to do something that I think will be very dramatic.”

Oil Chiefs Debate Tougher CO2 Cuts (12:30 p.m.)

The bosses of some of the world’s biggest oil companies discussed adopting much more ambitious carbon targets at a closed-door meeting, a sign of how much pressure they’re under from activists and investors to address climate change.

The meeting included a debate on widening the industry’s target to include reductions in emissions from the fuels they sell, not just the greenhouse gases produced by their own operations, according to people familiar with the matter.

Talks between the chief executive officers of companies including Royal Dutch Shell Plc, Chevron Corp., Total SA, Saudi Aramco and BP Plc showed broad agreement on the need to move toward this broader definition, known as Scope 3, the people said, asking not to be named because the session was closed to the press. The executives didn’t take any final decisions.

Von der Leyen Targets Climate Transgressors (12:30 p.m.)

European Commission President Ursula von der Leyen reiterated the bloc’s plans to propose levies on imports from countries not abiding by the Paris agreement on climate change and not adhering to the highest environmental standards.

This so-called “Carbon Border Adjustment Mechanism” could open a new front in the transatlantic spat, following France’s digital taxes and prompt retaliation by Donald Trump.

Still, von der Leyen signaled there’s room for compromise, citing California’s emissions trading system as an example of creating “a global level playing field” where “no carbon border tax will be necessary.”

Trump Lauds Musk, ‘Disappointed’ With Boeing (12 p.m.)

Trump praised Tesla Inc. Chief Executive Officer Elon Musk as “one of our great geniuses” but said he’s disappointed in Boeing Co. over its woes around the 737 Max aircraft.

“I was worried about him, because he’s one of our great geniuses, and we have to protect our genius,” Trump said of Musk in a CNBC interview. “You know, we have to protect Thomas Edison and we have to protect all of these people that came up with originally the light bulb and the wheel and all of these things.”

On Boeing, he said: “Very disappointing company. This is one of the great companies of the world, let’s say as of a year ago, and then all of a sudden things happen. I am so disappointed in Boeing-- had a tremendous impact.

‘We Have to Act Now’ on Climate: von der Leyen (11:40 a.m.)

Von der Leyen focused on climate change and geopolitics, the two priorities of her five-year mandate which started last month, when she addressed the forum.

“The window of opportunity is closing” to address the environment emergency but “we have to act now,” she said.

Von der Leyen said there has to be “fairness” when it comes to climate and that included protecting European businesses and workers from unfair competition.

“If you engage with Europe you will find a reliable partner, working for a more sustainable world, but we ask for fairness in return,” she said.

Trump Says Strong Dollar ‘Very Bad’ for Manufacturing (11:20 a.m.)

Trump reiterated his criticism of Federal Reserve policy, saying the central bank “brought up the rate too fast, and they didn’t drop it fast enough.”

“I want this dollar to be strong. I want it to be so powerful. I want it to be great. But if you lower the interest rates, so many good things would happen,” he told CNBC.

“We have a very strong dollar, and that sounds good, and it is good in many ways, but it’s very bad in terms of manufacturing,” he added.

Mnuchin Threatens Auto Tariffs to Counter Digital Taxes (11:16 a.m.)

U.S. Treasury Secretary Mnuchin dangled the prospect of retaliatory tariffs on automobile imports if countries go ahead with digital taxation plans.

“If people want to just arbitrarily put taxes on our digital companies, we will consider arbitrarily putting taxes on car companies,” Mnuchin said during a panel discussion. “We think the digital tax is discriminatory in nature.”

Internet companies have long been the target of complaints that they don’t pay enough in taxes, and France imposed a 3% levy on the digital revenue of companies that make their sales primarily in cyberspace, such as Facebook Inc. and Alphabet Inc.’s Google.

On the same panel, U.K. Chancellor of the Exchequer Sajid Javid said the country plans to go ahead with a tax on digital services in April, with the levy designed to fall away once there’s international agreement on the issue.

Mnuchin said the U.S. will have private talks with the U.K. over the plan, just as Trump had with French President Emmanuel Macron to defuse the spat over digital tax.

Trump Would Be ‘Very Surprised’ to Have to Impose EU Tariffs (11 a.m.)

Trump said that he threatened von der Leyen with “very high tariffs” on “cars and other things that come into our country” at a meeting on Tuesday but that he would be “very surprised” if he had to implement them.

“They’ve taken advantage of our country, the European Union, for many, many years,” Trump told CNBC.

“They’re going to make a deal because they have to, they have to, they have no choice,” he added. “I would be very surprised if I had to implement the tariffs.”

The U.S. leader dismissed worries about a possible pandemic from a a new respiratory virus in China: “It’s one person coming in from China, and we have it under control,” he said. “It’s going to be just fine.”

U.K’s Javid Says EU Trade-Deal Timetable Feasible (10:50 a.m.)

Britain and the European Union have set a “tight timetable” for negotiating a trade deal by the end of this year, but it “absolutely can be done,” according to the U.K.’s Javid.

“Both sides recognize that it’s a tight timetable, a lot needs to be put together in the time that we have, but it can be done,” Javid said during a panel on “The Future of Financial Markets.”

“And it can be done for both goods, where we want to see free trade, zero tariffs, zero quotas, but also on services,” he added. Work has also started on a trade agreement with the U.S., which is a “huge priority” for the new government, Javid said.

Mnuchin Says U.K. Trade Pact Is U.S. Priority (10:49 a.m.)

Securing a trade deal with the U.K. is a big priority for the Trump administration this year, Mnuchin said during the same panel discussion with the U.K.’s Javid.

Tariffs provided an incentive for China to sign the phase-one trade deal last week, Mnuchin said, adding that the U.S. is trying to open global markets, not close them. There are no deadlines to start talks on a second phase, which could be pursued in smaller increments.

International Monetary Fund Managing Director Kristalina Georgieva said the world is in a better place than it was a few months ago, as trade and industrial output bottom out and the outlook brightens.

Saudi Aramco’s International Listing Isn’t Coming Soon (10:21 a.m.)

The international listing of Saudi Aramco is “still on the cards” but likely won’t happen soon, Saudi Arabian Finance Minister Mohammed Al-Jadaan told Bloomberg TV.

In the oil giant’s IPO, Aramco opted for a local listing after global investors balked at its hopes of valuing the company at $2 trillion. Instead, Aramco relied heavily on local investors and funds from neighboring Gulf Arab monarchies.

Al-Jadaan said he’s “very confident” that the Saudi economy is picking up. After issuing a $5 billion eurobond, he said the country could borrow another $4 billion more this year and is considering debt in euros, riyals as well as sukuk.

AstraZeneca Sees Climate Change Bigger Risk Than China Virus (9:35 a.m.)

While the spread of the coronavirus is “a threat that must be taken seriously,” it appears to be relatively contained, AstraZeneca Plc Chief Executive Officer Pascal Soriot said in a Bloomberg TV interview.

“I personally think there’s a much bigger threat that is facing the world today, and it’s global warming and climate change,” said Soriot. “We all need to do something about it.”

Thiam Says European Bank Mergers ‘Desirable’ (9:25 a.m.)

Consolidation among top European banks should be pursued, but work is still needed to convince taxpayers that larger lenders won’t be a threat to the financial system, according to Credit Suisse Group AG Chief Executive Officer Tidjane Thiam.

“I think it’s desirable,” Thiam told Bloomberg TV when asked if European banking mergers should take place. “It will happen, but it will take some time. We still have a job to do to convince the public that larger banks can be safe and not endanger the whole economy.”

Thiam said he’s “moderately optimistic” about the euro-region economy and “still very positive” about the global economy. “It’s early days, but I think people are positive about 2020 and so are we. The U.S.-China agreement is very positive for markets,” he added.

Carney Bemoans Lack of U.S. Climate Engagement (9:22 a.m.)

Bank of England Governor Mark Carney warned of mounting risks to the financial sector and the economy from climate change and urged the U.S. to play bigger role.

“Something which was largely on the periphery of finance has come into the mainstream,” Carney said at the Bloomberg Climate Forum. “Transition risk has become more important.”

Asked if the world could contain global warming without the U.S., the governor said: “It’s much more difficult.”

Messina Sees Future European Banking Champions (9:10 a.m.)

Intesa Sanpaolo SpA Chief Executive Officer Carlo Messina says Europe needs to create banks on the scale of JPMorgan Chase & Co. in order to compete with the U.S. and China in geopolitics. That means common rules that could facilitate mergers across the bloc.

“If you look at Europe, U.S.A and China, you need absolutely to create some champions with scale that can compete with U.S.A.,” said Messina in a Bloomberg TV interview. “In the medium term in Europe, we need to have consolidation, but at the same time, we need to have rules of the game that could be the same in all the European countries. That is the problem of Europe.”

While these issues will unlikely be resolved this year, he said he expects it to happen in the future. The banking sector in Italy is under control, and Intesa’s non-performing loans are close to European levels, he added.

Staley Sees ‘Extraordinary’ Tech Valuations (8:45 a.m.)

Asset valuations are currently “quite high,” particularly in the tech sector, and vigilance is needed in case of a correction, according to Jes Staley, chief executive officer of Barclays Plc.

Asked in a Bloomberg TV interview what the biggest risk is to the economic outlook, Staley said: “Having been in this industry for some 40 years now, it generally starts with credit somewhere. People may get overextended and if there’s a shock to interest rates that could be quite a correction.”

Staley said there are “extraordinary valuations in some tech sectors, particularly the large tech players in the U.S.”

“When you have zero to negative interest rates almost by definition you’re going to have asset bubbles,” he added. “You want to ride that wave while it’s happening but keep your eyes wide open in case there’s a correction.”

After a tumultuous 12 months, Barclays is sticking to a strategy that keeps Staley in charge of its closely scrutinized investment bank, he added.

ABB Chairman Sees Chance for Smaller Deals (8:09 a.m.)

ABB Ltd. sees potential for smaller divestments and acquisitions ahead as it refines its portfolio of businesses, Chairman Peter Voser said in a Bloomberg TV interview.

The Swiss engineering company has identified units with 3 billion euros ($3.3 billion) in revenue that it plans to fix or sell. As that program continues, ABB is also expanding its reach, such as its purchase of a stake in a Chinese electric-car charging company last year. But bigger deals aren’t planned, Voser said.

“There is no talk about bigger portfolio transactions at this stage,” he said, adding that the focus of the new CEO will be on improving ABB’s operational performance and executing on the board’s strategic plan.

Fake News Is Biggest Risk: Malaysia’s Leiking (7:28 a.m.)

Malaysian Trade Minister Darell Leiking said recent indicators such as purchasing managers’ indexes suggest the economic outlook is positive.

“Continuously, we see encouraging PMI results all over the world, Malaysia as well,” Leiking said in an interview with Bloomberg TV. “We hope that some positiveness will continue throughout this year. The biggest risk for the Malaysian economy is a lot of fake news about things.”

Malaysia is unlikely to suffer any loss in its palm oil business from China, despite Beijing pledging to boost soybean purchases from the U.S. amid the trade war, Leiking added.

UBS Focused on Gaining U.S. Market Share (7:22 a.m.)

UBS Group AG Chairman Axel Weber said the Swiss bank wants to focus on its wealthy clients and expand particularly in the U.S.

“We now want to focus on efficiency in wealth management,” Weber said in a Bloomberg TV interview. “We want to maintain our No. 1 one position globally, and we want to build the market where we’re not among the top four and that is in the U.S. And really build that part.”

Negative interest rates in Europe are more a distortion than a useful tool, Weber added.

Zimbabwe Dealing With Inflation: Ncube (6:50 a.m.)

Zimbabwe is on track in dealing with inflation, even with consumer prices increasing more than 500% on an annual basis, according to Finance Minister Mthuli Ncube.

Annual inflation remains high, “but that’s expected, that happens when you liberalize a currency,” Ncube told Bloomberg TV. “We believe are on our way to deal with inflation. It will take time, but we are headed there,” Ncube said.

--With assistance from Haslinda Amin, Francine Lacqua, Ian Wishart, Nikos Chrysoloras, Javier Blas, Thomas Gualtieri, Heather Perlberg, Andrea Dudik, Michelle F. Davis, James Herron, Saleha Mohsin, William Horobin, Amy Thomson, Stephanie Bodoni, Kateryna Choursina and Simone Foxman.

To contact the reporters on this story: Chris Reiter in Berlin at;Iain Rogers in Berlin at

To contact the editor responsible for this story: Chad Thomas at

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