The Morning Risk Report: U.S. Could Delay 50% Rule Again. Exporters Are Preparing for It Anyhow By Richard Vanderford | Dow Jones Risk Journal
Good morning. Businesses anticipate the U.S. will further delay a regulation
that would massively expand its trade blacklists beyond a start date this fall. Even so, they are preparing for it to go on the books at some point in the coming months and years.
Hitting pause: The Commerce Department agreed to a one-year delay of the effective date of its so-called 50% rule-which would extend U.S. export restrictions beyond people and businesses on government trade blacklists to companies they majority-own-during last October's trade negotiations with China. Although Washington and Beijing appear to be working on extending the agreement, experts who spoke with Risk Journal said they are preparing for an inevitable increase in export restrictions.
Chinese backlash: When Commerce's Bureau of Industry and Security abruptly enacted the rule last fall, China responded with tighter export restrictions on rare earth magnets vital to U.S. technology manufacturing. The two sides agreed to mutually lower the measures, with BIS pushing back the effective date of the 50% rule, in a move some criticized as the Trump administration using a national security program as a negotiating lever. A Chinese trade official said in May the two sides were working to extend the truce.
More delay coming? The U.S. may want to delay the rule beyond November because China still possesses rare earth dominance over the U.S., experts said. Exactly if and when the U.S. could catch up is unclear. In January, Treasury Secretary Scott Bessent said the U.S. could achieve independent rare earth refining capabilities in as little as 18 months. In April, he adjusted that estimate to four years.
The Morning Risk Report won't be published Friday in observance of the Fourth of July holiday. We'll be back in your inbox Monday.
Compliance
Alibaba, U.S. payment processor to pay $600 million in DOJ settlement over illegal drug sales.
Alibaba Group and a U.S.-based payment processor agreed to pay $600 million to resolve allegations from the Justice Department that they allowed merchants to sell and import illegal pharmaceuticals
and other restricted items into the U.S.
The operator of Chinese e-commerce site Alibaba.com admitted that it failed to prevent merchants from engaging in around 80,000 sales that involved importing illegal items into the U.S. as part of a non-prosecution agreement, the DOJ said.
FTC looks to take on 'ideological' AI.
Risk Journal reports: Artificial intelligence tools that inject ideological bias into their output could run afoul of U.S. law against deceiving consumers, the Federal Trade Commission said ( free link ).
The FTC began soliciting public comment on a proposed policy statement that would treat chatbots with undisclosed ideological bias as a violation of Section 5 of the FTC Act, which bars unfair or deceptive conduct.
McKinsey is shaking up its board
and appointing a new chair from within its partner ranks, the latest in a yearslong effort to change how it is managed after several scandals involving past clients.
Alphabet's Google lost a lengthy battle
to overturn a fine of about $4.69 billion imposed by the European Union over requirements for device manufacturers deploying the tech giant's Android operating system.
Alibaba Group and a U.S.-based payment processor agreed to pay $600 million
to resolve allegations from the Justice Department that they allowed merchants to sell and import illegal pharmaceuticals and other restricted items into the U.S.
The U.S. Equal Employment Opportunity Commission filed a lawsuit against FedEx alleging it discriminated against four blind workers .
A U.S.-Gulf coalition jointly sanctioned
Hezbollah's two main financial institutions and 16 of senior officials, targeting a shadow banking system that authorities say moved more than $500 million through Lebanese banks over the past decade. Risk
U.S. plunges trade pact with Canada and Mexico into doubt.
The U.S. declined to extend its signature trade pact with Mexico and Canada on Wednesday, setting up a decadelong review process that casts uncertainty
over businesses that move goods across the world's busiest export borders.
The U.S. decision came as no surprise. President Trump has effectively ripped up parts of the U.S.-Mexico-Canada trade agreement that he signed in his first administration, imposing tariffs on a range of goods. He has mused about terminating the agreement altogether.
The pact remains in effect, but now the U.S. refusal to renew means American trade representatives will have to meet every year for a decade with Mexican and Canadian officials to continually review the deal. Negotiations can continue in the meantime.
Europe is hot as hell. Why doesn't it want air conditioning?
Europeans have long shunned air conditioning. That resistance, however, is colliding with the realities
of a continent where temperatures are rising faster than any other region on the planet.
Years of record-breaking heat waves have placed strains on the continent's health systems as well as its economy. Businesses closed; factories cut back production; rail lines were suspended.
The fight over the future of air conditioning is now shaping political debates across the continent, pitting politicians on the right, who want a massive plan to install air conditioning, against those on the left who fear the environmental impact.
Fuel shortages across Russia have triggered a new political challenge
for President Vladimir Putin, as a relentless Ukrainian drone campaign aimed at the country's oil refineries has brought the war home for most ordinary Russians.
The European Union will limit the amount of tariff-free steel its member states can import from Wednesday, as part of officials' efforts to protect its steel industry from oversupply
from countries like China
A top Cuban official acknowledged that pressure from Washington has isolated the island, forcing foreign investors to leave the country, but warned the Trump administration against underestimating the Communist government's resolve .
A dispute over opening the Strait of Hormuz is driving a wedge
into U.S.-Saudi relations. What Else Matters President Trump's forays into cryptocurrency delivered him a windfall
of more than $1 billion last year, according to his latest financial disclosure report.
Michael Burry's big short
on AI just got a whole lot bigger.
France's CMA CGM, the world's third-largest container line by capacity, is acquiring FedEx Supply Chain for $1.4 billion in a deal that extends its reach
into the growing market for third-party logistics services.
Her family took over her dating profile. Now she's engaged . About Us
Follow us on LinkedIn . Send tips to our reporters Max Fillion at [max.fillion@dowjones.com], Clara Hudson at [clara.hudson@wsj.com], Yusuf Khan at [yusuf.khan@wsj.com] and Richard Vanderford at [richard.vanderford@wsj.com].
You can also reach us by replying to any newsletter, or by emailing our editors Perry Cleveland-Peck at and David Smagalla at [david.smagalla@wsj.com].
This article is a text version of a Wall Street Journal newsletter published earlier today.