Author Archives: D. Iane

Trade tensions escalate as US rivals target Trump’s heartland

Trade tensions escalate as US rivals target Trump’s heartlandAt the moment, it’s a war of words with a side order of sabre-rattling. But as tensions between the US and its overseas rivals rise, the President’s crusade to make what he sees as a long-overdue ‘correction’ to the country’s trade deficit is beginning to have unintended consequences in America’s – and his own – heartland.

Since he took office, President Trump has been committed to the idea of righting the wrongs he believes have been perpetrated by trading partners looking to make gains at the expense of US interests. After dabbling with tariffs on solar panels and washing machines, a new set of curbs on steel and aluminum imports was introduced in spring of this year, swiftly followed by import duties designed to target billions of dollars’ worth of Chinese imports.

But, while China may have borne the brunt of the action, America’s traditional allies certainly haven’t escaped scot-free. Initially exempting Canada, Mexico and the EU from the steel and aluminium tariffs, Washington later confirmed that it would impose the duties across the board – special relationships notwithstanding.

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Ant Financial rips up rule book as Big Tech targets banking sector

Ant Financial rips up rule book as Big Tech targets banking sector Alibaba spin-off Ant Financial is making history. The four-year-old Hangzhou-based fintech ‘lifestyle platform’ is purported to be raising funds that would value the company at $150bn, making it the world’s most valuable startup – bigger, even than Goldman Sachs.

As traditional financial models are giving way to digital disruptors, there’s plenty of scope for agile, tech-based companies to change the way people think about banking services. Enter Ant Financial, the brainchild of Alibaba founder Jack Ma.

Established in 2014, the company is a hybrid internet business, bank and payment platform that evolved from a payment service (AliPay) originally conceived to bridge the gap between shoppers and sellers on Alibaba’s Taobao marketplace. At Ant’s last funding round in 2016, the company commanded a valuation of around $60bn.

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Amazon doubles down on profits

Amazon doubles down on profitsWith the release of Amazon’s Q1 earnings, its share price has soared to a record high and the company’s trajectory towards overtaking Apple as the world’s largest company seems assured.

The brainchild of CEO Jeff Bezos, Amazon appears to be an unstoppable force. In the first three months of 2018, Amazon more than $550m a day from Amazon.com sales and other ventures, including Whole Foods, the premier grocery chain acquired just last year. There was also strong growth in Amazon Web Services (AWS), which delivered an impressive $1.4 billion in profits – the bulk of Amazon’s profits over the quarter.

Interestingly, these results were achieved, despite President Trump’s determination to make the company pay more tax and higher postal rates – changes that experts believe would have negligible impact on Amazon’s status.

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Could Trump’s tariffs spark a trade war?

China has responded to Trump’s protectionism with tit-for-tat tariffsWhile many presidential promises evaporate on entering the Oval Office, Trump has certainly proved to be a man of his word when it comes to honouring his campaign trail commitment to pursuing a more protectionist trade policy.

Within just a few days of acceding to the presidency, Trump drove a truck through the emerging Trans-Pacific Partnership (TTP) and agreed to take a fresh look at the North America Trade Agreement (NAFTA) to try to squeeze a better result for the United States. Next, hot on the heels of his announcement of the imposition of tariffs on solar panels and washing machines, a new set of curbs on steel and aluminum imports was introduced. Most recently, Trump has announced the introduction of a wider swathe of tariffs that will slap a 25% tax on an as-yet-unspecified $60 billion-worth of Chinese imports.

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Cryptocurrencies – flying high or dead in the water?

Venezuela has launched its own cryptocurrency – the petro – but will it fly?Another week, another cryptocurrency. Venezuela’s president Nicolas Maduro is the newest convert to the crypto cause with the announcement of the country’s own digital coin, the petro. In a country that’s on its knees, few locals were able to join the celebrations – most are hard-pressed to buy food, let alone to consider the pros and cons of the latest investment opportunity.

With Venezuela’s national currency, the Bolivar, worth next-to-nothing, it’s easy to see what’s attracting its government to a new currency concept, especially one that’s linked to a state-controlled commodity like oil. The launch is a response to the social and economic problems that have left Venezuela with no chance of accessing international financing, although many will see it as a cynical move to scare up much-needed funds for the flagging administration. Maduro claims that the initial coin offering (ICO) will raise $6 billion based on the issue of 100 million oil-backed petro tokens.

It’s an idea that’s gaining traction in other struggling economies around the world. Iran’s Technology Minister Mohammed-Javad Azari Jahromi has already announced plans for its own state-backed cryptocurrency, while in neighbouring Turkey, rumours are afoot that the issue of a digital coin is being discussed by the ruling coalition parties. Brazil also appears to have its eyes on the crypto-prize, according to comments by Carlos Costa, planning chief of the country’s national development bank – BNDES – who has intimated it will press ahead with the use of blockchain technology in the near future.

Building the trust and transparency to support an ICO

There’s a gap a mile wide between announcing a coin issue and building the infrastructure to ensure it works, though. As well as blockchain, a massive investment is needed by private companies to buy the equipment and resources needed to mine the coins – money that Venezuela surely does not have.

In some ways, the idea of creating a reliable currency that isn’t dollar dependent and that would help smooth out the boom-and-bust pattern experienced by countries with unstable or inadequate banking options, is a sound one. But, it’s a process that requires trust and transparency – qualities the Venezuelan administration doesn’t appear to possess, based on its hyperinflation of the bolivar. What’s more, if Maduro lost the presidential election this spring, chances are the petro collapse, leaving investors holding the bag.

Opinion is split on the future of cryptocurrencies

Economists, investors and central banks remain split over the future of cryptocurrencies. Naysayers have variously described bitcoin as a ‘Ponzi scheme’, an ‘environmental disaster’ and ‘the mother of all bubbles’, a ‘noxious poison’. Speaking of cryptocurrencies in general, Berkshire Hathaway guru Warren Buffet has been unequivocal: ‘I can say almost with certainty that they will come to a bad end,’ he said.

Market regulators are concerned about the risk to investors, especially regarding the opportunities presented by cryptocurrencies to money launderers looking to rinse their funds, while central banks fear the threat to global financial stability – and to their own money supply monopoly, of course.

In China and Russia, the central banks have taken an unapologetically hawkish approach to cryptocurrencies. The People’s Bank of China has already closed bitcoin exchanges and supressed ICOs, while Elvira Nabiullina, the governor of Russia’s central bank has declared her opposition to the proliferation of non-fiat digital currencies, saying: ‘we don’t legalise pyramid schemes’. Not everyone is anti-crypto, though. Both the Bank of Canada and the Bank of England are investigating the opportunities afforded by a distributed-ledger system like blockchain and are downplaying the associated risks.

Crunch time for crypto?

So far, most of the discussions around the efficacy, or otherwise, of digital currencies have been hypothetical. Few products or services – excepting hackers’ ransoms – are priced in bitcoin and it’s not often used in transactions because of the prohibitive costs of doing so. As an investment, the extreme price volatility makes it super-risky for all but the most reckless of gamblers.

By every standard definition, cryptocurrencies are currencies in name only. Without the backing of a central bank, they simply don’t carry the weight they need to become a usable, tradeable asset in the same way as a fiat currency. And that’s without evaluating the environmental cost of a mining process that consumes vast amounts of energy. But, even if – as is expected – the petro fails, it’s doubtful that it will sound the death knell for cryptocurrencies, in the short term at least.

Will US tax reform tempt Apple back home?

Apple has announced plans to repatriate some of its cash holdingsAnother bite of the Apple

Could times be a-changing for tech giant Apple? After coming under fire for its tax evasion policies, it seems as if the company could be softening its stance towards corporate tax obligations, as CEO Tim Cook announced in January that Apple would be making a payment of $38 billion to repatriate part of its overseas cash holdings. Cook also committed to spending $30 billion in the US over a five-year period, creating 20,000 jobs and a new campus in the process.

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