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World readies for Trump tariffs even before his White House return

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Donald Trump’s inauguration promises to usher in an era of upheaval in global commerce, forcing governments around the world to scramble in preparation for a tariff onslaught even before he’s back in the White House. 

Soon after calls to congratulate the president-elect on his Nov. 5 victory, officials began quietly looking for ways to appease him while simultaneously mapping out ways to retaliate if needed. 

The threat to China is longstanding, meaning its leaders have had ample time to prepare defenses and retaliatory strategies. But this time around, Trump and the trade hawks he’s enlisted are broadening their scope in what threatens to be a more prolonged and unpredictable trade war than during his first presidency. not supported.

Mexico and Canada have borne much of the brunt of Trump’s trade threats since election day, prompting leaders from both American neighbors to publicly warn of retaliation. Others are making preparations behind the scenes — Vietnam’s officials have promised to buy more U.S. goods, the European Union has bolstered its ability to counter tariffs, while Indian officials aim to negotiate their way through the coming storm.

“Trump 2.0 trade policy seems to be much more radical compared to 1.0,” says Yeo Han-koo , senior fellow at the Peterson Institute for International Economics and former South Korean trade minister. “It’s like a prisoner’s dilemma — the best scenario for all these countries is to band together and then resist, but there’s a motivation for each country to race to get a better deal compared to your competitors.”

If implemented, Trump’s threats to increase levies on Chinese goods to 60% and to 20% for the rest of the world would transform the structure of global trade flows away from the U.S., according to Bloomberg Economics. Retaliation would exacerbate the shock. 

Behind the scenes

In Mexico, President Claudia Sheinbaum warned of the hit to U.S. inflation in response to Trump’s 25% tariff threats. The country has been quietly rolling out a strategy to reduce reliance on China. Developed over the last few months, the government’s plan includes tapping major automakers about sourcing components elsewhere. 

Law enforcement kicked off a country-wide “cleaning operation” with a raid on a Mexico City shopping complex filled with Chinese goods in November. The following week, Mexico announced its biggest-ever seizure of fentanyl pills, a drug Trump says is being smuggled into the U.S. from its southern neighbor. 

Mexico is set to scale up such efforts, carrying out searches for goods that entered the country without proper taxation. To that end, Mexico slapped 19% tariffs on goods imported through courier companies, a move that analysts said targets major e-retailers Temu and Shein. 

“If we coordinate on this, there won’t be any tariffs,” Sheinbaum said about working with the US in late November.

In Canada, outgoing Prime Minister Justin Trudeau flew to meet with Trump days after his 25% tariff threat. Following Trump’s suggestion that its northern neighbor become America’s 51st state, Trudeau shot back there’s not a “snowball’s chance in hell” of that happening. 

How the country approaches Trump has been thrown in limbo with Trudeau’s resignation. Behind the scenes, officials are examining export taxes on major commodities it sends to the U.S. in a move that would drive up American prices. 

When Trump enacted levies on $200 billion in imports from China in 2018-2019, Vietnam was one of the biggest beneficiaries as exports to the U.S. more than doubled. Up to 16% of the increase in 2021 alone was a result of rerouting of goods to avoid U.S. tariffs on China, according to a Harvard Business School white paper

Now, Vietnam — which has the fourth-biggest trade surplus with the U.S. after China, Mexico and Canada — appears to be in Trump’s sights. His trade advisor Peter Navarro called out the country by name in Project 2025, a right-wing policy blueprint. 

Vietnam’s leaders in recent months have made efforts to balance the relationship between China and the US. The country’s deputy minister of foreign affairs has vowed to buy more aircraft, liquefied natural gas and other products while Prime Minister Pham Minh Chinh has emphasized the need to “remove all remaining obstacles” with the U.S. 

Similarly, South Korea and Taiwan are considering plans to boost energy imports from the US to avoid Trump’s ire. 

Balancing act

Increased dependency on the U.S. as a source of demand makes economies such as Vietnam more exposed should Trump decide to apply a universal tariff on all imports, by undercutting the business case to build new factories. Apart from China, economies such as South Korea, Taiwan, Malaysia and Thailand would be more exposed considering their high trade orientation, economists at Morgan Stanley led by Chetan Ahya wrote in a November note.

South Korea was forced to revise down its growth outlook, partly as a result of the growing geopolitical tensions contributing to weaker demand for the country’s exports. A top national security adviser to Japanese Prime Minister Shigeru Ishiba said the country should be prepared for the U.S. following through on tariff threats, meeting with Trump’s team during a visit to the U.S. late last year. 

Then there’s the blow from second-round consequences.  

“If Trump’s tariffs lead to China’s exports redirecting to the rest of Asia — and they’re very competitive — it’s very difficult for countries to compete,” said Sonal Varma, chief economist for India and Asia-ex Japan at Nomura Singapore Ltd. “That is something a lot of governments are thinking about.”

Among those economies that are increasingly worried about unfair competition from China is the EU, which faces twin concerns of an influx of cheap Chinese goods — particularly electric vehicles — and a new wave of tariffs from the U.S. Officials there have already prepared a list of American goods it could target with tariffs in the event Trump follows through with his threats. 

Since Trump’s first term, EU member states have agreed to a new set of trade powers that will allow the bloc to strike back at third countries that use economic restrictions for political retribution. The EU’s new anti-coercion instrument strengthens trade defenses and enables the commission to impose tariffs or other punitive measures in response to such politically motivated restrictions.

Officials in Brazil appear less concerned about any U.S. tariffs, believing the nation can ramp up sales to other markets including Asian countries in the case it’s targeted. Indian officials are also allaying apprehensions for now, betting Prime Minister Narendra Modi’s good relations with Trump during his first presidency will continue and they have room to lower import duties for U.S. goods as part of any forthcoming negotiations. 

“Economies are just stuck between a rock and a hard place in many ways,” said Frederic Neumann, chief Asia economist at HSBC Holdings Plc in Hong Kong. “It’s a very, very difficult course to navigate to appease both US demands to decouple from China, but at the same time to remain economically engaged with China.”

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Accounting

Trump blasts EU regulators for targeting Apple, Google, Meta

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President Donald Trump blasted European Union regulators for targeting Apple Inc., Alphabet Inc.’s Google and Meta Platforms Inc., describing their cases against American companies as “a form of taxation.”

The EU has established a reputation globally for its aggressive regulation of major technology companies, often sparring with major social media platforms, such as Facebook and X, over content moderation, and the likes of Apple and Google over antitrust concerns. 

“These are American companies whether you like it or not,” Trump said in comments at the World Economic Forum in Davos. “They shouldn’t be doing that. That’s, as far as I’m concerned, a form of taxation. We have some very big complaints with the EU.”

Trump specifically referenced a court case that Apple lost last year over a €13 billion ($14.4 billion) Irish tax bill. The EU’s Court of Justice in Luxembourg backed a landmark 2016 decision that Ireland broke state-aid law by giving Apple an unfair advantage, requiring Ireland to claw back the money that had been sitting in an escrow account pending the final ruling.

Trump’s comments mark the beginning of a long-anticipated clash between Trump and the EU over the bloc’s big tech crackdown. Apple, Google, Meta and the X platform owned by Trump confidant Elon Musk may all be facing billions in fines — or even mandatory divestment orders — from dozens of separate ongoing EU investigations.

Trump’s relationships with U.S. tech have been complex. He has publicly feuded with Meta Chief Executive Officer Mark Zuckerberg and Google, but he’s had a closer relationship with Apple CEO Tim Cook. Musk is now a fixture of his inner circle and other tech executives have improved relations with him.

Musk, Amazon.com Inc.’s Jeff Bezos and Zuckerberg were all seated prominently behind the Trump family for his swearing-in on Monday. Also spotted in the crowd were Alphabet co-founder Sergey Brin and Cook.  

In 2024, Google faced its fourth abuse of dominance case in the EU, Apple was hit with a €1.8 billion penalty for blocking music streaming apps from informing users of cheaper deals and Meta was slapped with a €798 million fine for tying its Facebook Marketplace service to the social network.

All three companies are also being subjected to ongoing investigations under the EU’s Digital Markets Act — which has the power to levy fines of as high as 10% of global annual revenue for violations. The rules set out dos and don’ts for the world’s most powerful tech platforms – all of them American.

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Tax-slashing ETF trailblazer preps for a fresh $5B haul

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Four years after handling the first conversion of a hedge fund to an ETF, Wes Gray is gearing up to lead a surge of tax-busting deals aimed at investors.

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Accounting

SEC withdraws accounting guidance on crypto assets

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The Securities and Exchange Commission has rescinded a Staff Accounting Bulletin on safeguarding cryptocurrency assets that had been criticized by the industry and even by some of its own commissioners. 

In Staff Accounting Bulletin 122, the SEC essentially withdrew some of the interpretive guidance in Staff Accounting Bulletin 121, which had been issued in 2022. The move is another sign of a more crypto friendly environment in the Trump administration. Trump has named Paul Atkins, a former SEC commissioner who has been a strong crypto proponent, as the next SEC chairman after the departure on Inauguration Day of Gary Gensler, who had led an enforcement crackdown on the industry.

SAB 121 had provided guidance for companies holding crypto assets on the risks they faced, including technological, regulatory and legal risks, and how they should account for their obligations to safeguard crypto assets for their users, along with the disclosures they should provide to the SEC staff. The guidance said companies should present a liability on their balance sheet to reflect their obligation to safeguard the crypto assets held for their users.

The new Staff Accounting Bulletin, SAB 122, rescinds the interpretive guidance and says an “entity that has an obligation to safeguard crypto-assets for others should determine whether to recognize a liability related to the risk of loss under such an obligation, and if so, the measurement of such a liability, by applying the recognition and measurement requirements for liabilities arising from contingencies” citing the Financial Accounting Standards Board’s standard on loss contingencies, as well as an applicable international accounting standard. The rescission could be done on a fully retrospective basis in annual periods beginning after Dec. 15, 2024, or companies can elect to effect the rescission in any earlier interim or annual financial statement period included in filings with the SEC after the effective date of the latest SAB. The guidance says entities should include clear disclosure of the effects of a change in accounting principle upon initial application of this rescission.

The original Staff Accounting Bulletin had drawn opposition in Congress, with both the Senate and House voting to repeal it last year. However, President Biden soon vetoed the bill.

SEC commissioner Hester Peirce has opposed the Staff Accounting Bulletin. She was named Monday to head a new crypto task force at the SEC by acting chair Mark Uyeda and posted on X about the withdrawal. “Bye, bye SAB 121! It’s not been fun,” she wrote, linking to the new Staff Accounting Bulletin.

A banking group also praised the move. “We welcome the SEC’s decision to rescind Staff Accounting Bulletin 121,” said Paige Pidano Paridon, senior vice president and co-head of regulatory affairs at the Bank Policy Institute, in a statement. “Today’s decision restores banks’ ability to serve as a trusted and secure option for clients that choose to custody digital assets.”

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