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Trump’s tariffs spark national security concerns

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The U.S. is on shaky ground with its allies following President Donald Trump’s proposed tariffs on steel and aluminum.

While fears of a trade war ripple through the global economy, experts are assessing the potential impact on national security, private sector industry and America’s relationship with partners.

“We’ve seen that oftentimes trade is political and security cooperation is political and the two intertwine,” Remy Nathan, vice president for international affairs at the Aerospace Industries Association, told CNBC.

“When we are enjoying good trade relations with other countries we have positive foreign relations, positive security cooperations, and they are oftentimes more interested in purchasing U.S. defense equipment and working with our militaries,” Nathan said. “The opposite is also true, and so those are real concerns that we have.”

He added: “It all depends on how those countries evaluate the steps that we take and what measures they choose to retaliate in some fashion towards us.”

On Friday, Canada’s prime minister, Justin Trudeau, called U.S. tariffs on steel “unacceptable.”

The bilateral relationship between the U.S. and Canada has suffered from the bitter trade dispute between aircraft manufactures Boeing and Bombardier as well as NAFTA renegotiations.

“The U.S. and Canada are about as close partners on defense industrial activities as you can imagine,” Andrew Hunter, Director of the Defense-Industrial Initiatives Group at the Center for Strategic and International Studies, told CNBC.

“The U.S. law actually treats Canadian entities as being part of the national technology industrial base on equal footing with U.S. suppliers in many respects,” he said. “In the current situation, you already have these large pain points in the relationship and this decision is only going to exacerbate that.”

“This is clearly bad for our allies and partners,” Hunter added.

Speaking further to the international ramifications, Seth Cropsey, former Deputy Undersecretary of the Navy under the Reagan and Bush administrations, was concerned that the U.S. was moving toward a protectionist economy.

“If we head down the road of protectionism, then yes, this will certainly affect the cost of American defense goods and that’s a matter of concern,” said Cropsey, who is currently the Director of the Center for American Seapower at the Hudson Institute.

In a shock announcement Thursday, Trump said the U.S. will set a new tariff of 25 percent on steel and 10 percent on aluminum imports. The tariffs are slated to take effect as early as next week and will be applied broadly, which counters Secretary of Defense James Mattis’ recommendation of targeted tariffs.

In a Department of Defense memo related to the proposed tariffs, Mattis said that while the Pentagon “concurs with the Department of Commerce’s conclusion that imports of foreign steel and aluminum based on unfair trading practices impair the national security” the U.S. military requirements for steel and aluminum each only represent about 3 percent of U.S. production.

Mattis cited concerns about the “negative impact on our key allies” and said that therefore “targeted tariffs are more preferable than a global quota or global tariff.”

“While it is true what the DoD said about being able to rely on U.S. domestic sources of supply, I think the analysis didn’t get down to the supply-chain level,” Nathan noted.

“Throughout the supply chain you’ve got companies that make products for both the civil market and the military market. The contracts on the civil side tend to be higher volume and higher profit margin, and it helps them underwrite their investments, hiring and innovation on the military side of the market,” Nathan said. “So when you do things that impact the success of their commercial enterprise, and putting tariffs on steel and aluminum would certainly do that, then [there is] the big question mark about what pressure are you going to put on the defense side of their business.”

Echoing similar sentiments, Eric Fanning, CEO of the Aerospace Industries Association and former secretary of the Army in the Obama administration, told CNBC that the proposed tariff will “impact companies big and small in the aerospace and defense world.”

“The aerospace and defense industry generates the largest net surplus in the manufacturing sector at over $86 billion a year. We’ve got 2.4 million people who work in the aerospace and defense industry, they are paid almost double the national average, and these companies thrive on the exports of their products,” Fanning said.

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Apple CEO Tim Cook rips EU’s proposed Digital Markets Act

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Tim Cook, chief executive officer of Apple, speaks at the 2019 Dreamforce conference in San Francisco on November 19, 2019.

David Paul Morris | Bloomberg | Getty Images

Apple CEO Tim Cook said that he believes a proposed European law known as DMA would “not be in the best interest of users,” signaling the iPhone maker’s opposition to European legislation that would force it to allow users to install software outside of Apple’s App Store.

“I look at the tech regulation that’s being discussed, I think there are good parts of it. And I think there are parts of it that are not in the best interests of the user,” Cook said on Wednesday through videoconference at the Viva Tech conference in France.

The European Union proposed two laws regulating big tech companies, the Digital Services Act and the Digital Markets Act, earlier this year. The DSA focuses on the online ad industry, but the DMA focuses on companies with large numbers of customers — like Apple, Google and Amazon — and sets rules requiring them to open up their platforms to competitors.

One of Cook’s issues with the law is that it would force Apple to permit sideloading apps on the iPhone, which is manually installing software from the internet or a file instead of through an app store. Currently, Apple’s App Store is the only way to install apps on an iPhone, which has made it the focus of lawsuits and regulators around the world. Apple has claimed that its control over the App Store ensures high-quality apps and helps prevent malware.

Cook noted that the iPhone’s market share in France is only 23% and said that permitting sideloading on iPhones would damage both the privacy and security of users, citing increased malware on Android phones versus iPhones. Google’s Android allows sideloading.

“If you take an example of where I don’t think it’s in the best interest, that the current DMA language that is being discussed, would force sideloading on the iPhone,” Cook said. “And so this would be an alternate way of getting apps onto the iPhone, as we look at that, that would destroy the security of the iPhone.”

Cook said that Apple would participate in the debate over the proposed regulation, and said that he thought that some parts of the DSA are “right on,” citing that it would regulate platforms with disinformation pushing issues like vaccine hesitancy.

Some projects never ship: ‘Failing is a part of life’

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Biden and Putin speak after Geneva summit

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Russian President Vladimir Putin (L) shakes hands with US President Joe Biden prior to the US-Russia summit at the Villa La Grange, in Geneva on June 16, 2021.

Brendan Smialowski | AFP | Getty Images

Russian President Vladimir Putin said he and President Joe Biden agreed Wednesday that their respective ambassadors will return to their foreign posts, marking a resumption of diplomatic operations between the two adversaries that had been suspended since April.

Currently, neither Russia’s ambassador to the U.S., Anatoly Antonov, nor Washington’s ambassador to Moscow, John Sullivan is stationed at his post.

They were both recalled this spring after Biden announced a fresh round of U.S. sanctions aimed at punishing Russia for a massive cyberattack last year on American government agencies. 

As a result, consular operations, visas and other diplomatic services in both countries effectively ground to a halt. This breakdown had a ripple effect on industries, families and aid groups that maintain ties in both countries.

The return of the ambassadors was one of the few concrete outcomes to emerge immediately after the two leaders met face to face in Geneva on Wednesday.

The summit began with a 90 minute meeting featuring only Biden, Putin and their top foreign policy aides, Secretary of State Antony Blinken and Russian Foreign Minister Sergey Lavrov.

Following the meeting, the two sides moved on to an expanded bilateral session with more aides. 

Officials had previously agreed that Putin would give the first press conference following the talks, and Biden would speak afterward.

Topping the agenda were nuclear arms control, cyberwarfare and security, Syria’s civil war and Iran’s nuclear program. 

Nuclear talks

In February, the Biden administration extended a crucial nuclear weapons treaty with Russia for five more years.

But the New Strategic Arms Reduction Treaty, or New START, is currently the only arms control treaty in place between Washington and Moscow.

Former President Donald Trump withdrew from the Intermediate-Range Nuclear Forces, or INF treaty. Similar to the INF treaty, New START limits the nuclear arsenals of Washington and Moscow.

Putin and Biden have expressed a desire to reestablish a channel for conducting high-level nuclear talks, and both leaders recognize this as an area where the two countries have long maintained a dialogue despite their fractured relations on other issues.

The United States and Russia own the lion’s share of the world’s nuclear weapons.

Cybercrime

Biden also intended to warn Putin that unless he takes action to stop Russian-based cybercriminals, the United States will act instead, potentially disrupting Russia’s digital infrastructure.

Biden’s warning follows two targeted ransomware attacks in the past month that have directly impacted American citizens, both perpetrated by criminals believed to be based in Russia.

The first was an attack in early May on the operator of the nation’s largest gas pipeline, Colonial Pipeline. The attack forced the company to shut down approximately 5,500 miles of fuel pipeline, leading to a disruption of nearly half of the East Coast’s fuel supply and causing gasoline shortages in the Southeast and airline disruptions.

The second attack, this one by a different Russian-based cybercriminal group, targeted JBS, the world’s largest meat supplier. The company ultimately paid $11 million in ransom, but not before it briefly shut down its entire U.S. operation.

Putin has denied any knowledge of the attacks, and recently suggested that if the cybercriminal groups were not breaking any Russian laws, then there was nothing he could do to stop them.

But U.S. officials said the idea that Putin was unaware of the attacks wasn’t credible, given the tight grip he maintains over Russia’s intelligence services, and its murkier, off-the-books network of contractors.

Biden also intended to press Putin on Russia’s illegal annexation of Crimea and arming of separatists in eastern Ukraine, the poisoning and imprisonment of Russian opposition leader Alexei Navalny, and the fate of two American former Marines in Russian custody. 

There was little expectation of a breakthrough from either side. Biden and Putin recently said they believe Russian-American relations are at their lowest point since the Cold War. 

Officials in Moscow and Washington spent months lowering expectations for the summit, and this week aides to both leaders said it was unlikely that any agreements would be reached in Geneva.

Yet from this nadir, the United States saw the summit as an opportunity to build a more stable and predictable relationship between the world’s two biggest nuclear powers. 

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Meme stocks are a ‘false market,’ sees shift in cinema industry

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The rise to prominence of so-called “meme stocks” — those favored by retail traders on forums such as Reddit — is creating “false markets” that should be actively avoided, according to Man Group CEO Luke Ellis.

Meme stocks such as GameStop and AMC Entertainment took markets by storm in January and have continued to grab headlines, as Reddit traders piled into previously unfavorable companies for brief periods of time and sent their share prices skyrocketing, causing a squeeze on several hedge funds with short positions against the stock. Shorting a stock involves borrowing it and selling it on with a view to buying it back at a lower price, hence profiting from a depreciation in the share price.

A recent CNBC analysis found that the typical upward run for an individual stock, often as a result of being championed by 10.5 million-member Reddit thread “Wallstreetbets,” lasted around nine days before its first big drop.

Speaking at CNBC’s Evolve Global Summit on Wednesday, Ellis said Man Group uses technological screening and natural language processing to identify the stocks being touted on sites such as Reddit and “avoid trading the names that they’re super excited about because they’re mostly creating false markets.”

Some of the surging share prices have translated into tangible results for the companies involved. Cinema chain AMC Entertainment recently saw its credit rating upgraded by S&P after using Reddit-fueled share offerings to raise capital and make a debt restructuring program less likely.

“I think it becomes really interesting when companies then take advantage of what are otherwise false share prices and issue stock, and I think we’re going to see a radical shift in the cinema industry because one of the cinema chains has been able to use the pumping of the stocks on ‘Wallstreetbets’ in order to go and raise capital,” Ellis said.

“That’s going to put them at a significant competitive advantage compared to other people in their industry.”

However, Ellis added that his FTSE 250-listed firm, which manages around $124 billion in assets, was interested in up to 10,000 stocks around the world and therefore found it “easy to avoid the ones where we think it’s a false market.”

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