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Trade talks are stuck in a rut

Revived trade negotiations between the U.S. and China are said to have stalled again. One big problem, according to William Mauldin and Chao Deng of the WSJ: how much Washington should ease up on Huawei.

• Though President Trump has allowed companies to resume selling some American technology to Huawei, his administration still considers the Chinese tech giant a threat to national security.

• “So far administration officials haven’t reached consensus on which semiconductor chips and other products can be provided to Huawei without triggering security concerns or giving the company a strategic edge,” the WSJ reports, citing unnamed sources.

• “Beijing is waiting to see what the U.S. does on Huawei before making commitments.”

There are other issues as well, including that the Chinese aren’t buying the huge amount of U.S. agricultural products that Mr. Trump says President Xi Jinping of China promised.

Mr. Trump repeated his threat of further tariffs on Chinese goods yesterday at a cabinet meeting, saying, “If we want, we have another $325 billion we can put a tariff on.”

Government officials are pessimistic about the prospects for a deal. “With the conflict dragging on, reaching a comprehensive trade deal as Trump gears up for re-election next year increasingly seems like a remote possibility,” Jenny Leonard of Bloomberg writes, citing unnamed sources.

Netflix learns the limits of customer devotion

The streaming giant said yesterday that it had lost U.S. subscribers for the first time in 12 years, after it raised prices several months ago.

The company lost 126,000 domestic subscribers in the three months ended June 30. And it signed up 2.7 million new customers globally in the quarter, well short of the five million that investors had been expecting.

Its shares fell 10 percent in after-hours trading as investors fretted about the news. That erased around $17 billion in market value.

Netflix didn’t seem worried. Its C.E.O., Reed Hastings, declared on an analyst call that the company’s position was “excellent,” and suggested that an absence of fresh episodes of major hits like “Stranger Things” and “The Crown” was behind the slump. The company expects numbers to improve in the current quarter.

But there is reason to worry. The company raises prices about every 18 months, largely because it’s spending billions of dollars to buy new content. If more people walk out on Netflix, Shira Ovide of Bloomberg Opinion writes, “that isn’t a great sign for the company’s pricing power” or its ability to keep customers from straying to streaming rivals.

This will be “one of the pivotal moments in the Netflix story,” the analyst Gene Munster told CNBC. “As much as I love the company, I just think its best days, unfortunately, are in fact behind it.”

Facebook limped through another Capitol grilling

A day after a contentious Senate hearing, David Marcus, the Facebook executive leading the company’s Libra cryptocurrency initiative, was back in the hot seat for four hours of questioning by the House Financial Services Committee, Nathaniel Popper and Mike Isaac of the NYT write.

Lawmakers criticized Facebook, again. “I think before you move on to Libra, you ought to clean up the messes of the past,” Representative Madeleine Dean, Democrat of Pennsylvania, said at the hearing.

But there was more interest in practical hurdles yesterday.

• “Facebook’s plans raise serious privacy, trading and monetary policy concerns,” said Representative Maxine Waters, the committee’s chairwoman, a Democrat.

• The system would “yield immense economic power that could destabilize government,” she said.

• “We think you’re a bank, but you’re not quite like a bank,” said Representative Ed Perlmutter, Democrat of Colorado. “If you’re bank, we regulate the heck out of you. That is the resistance you’re feeling.”

Mr. Marcus was conciliatory but firm. He said that Facebook was “owning” its past mistakes and “working to remedy them.” And he reiterated for a second day that the company wouldn’t launch Libra until regulators signed off. Yet he refused to agree to a moratorium on the project, or to running a small-scale pilot beforehand.

His ambitions aren’t diminished. “We would like for Libra to be a digital, global currency, and to be one unit of digital currency for the whole world,” he said.

More: Despite the ire targeted at Big Tech in Washington this week, there seems to be little consensus among lawmakers on how to fix things.

Trump tax cuts swelled bank profits

Five of America’s biggest banks collected tens of billions of dollars in profits in the first half of the year. That was because of the strong economy — and President Trump’s 2017 overhaul of the tax code, Emily Flitter of the NYT writes.

Tax rates for major banks are now below 22 percent, compared with 30 percent three years ago. JPMorgan Chase’s is currently just under 15 percent; Wells Fargo’s is 17 percent; Bank of America’s is 18 percent.

That “helped offset a general decline in Wall Street trading revenue and added some pep to what would have otherwise been unremarkable quarterly performances by most of the banks,” Ms. Flitter writes.

But this quarter may have been a peak, bank executives suggested, warning that the slowing global economy could affect trading, M.&A. and consumer spending, according to Bloomberg.

The field of potential I.M.F. leaders is narrowing

Finance ministers from the Group of 7 nations have been discussing who will lead the International Monetary Fund on the sidelines of a meeting in Chantilly, France, according to the WSJ and the FT.

One name keeps popping up: Jeroen Dijsselbloem, the former Netherlands finance minister and former Eurogroup president. He’s the early frontrunner, according to the FT, with support from Germany and France. But he is opposed by southern European countries, according to the WSJ.

And one has fallen out of favor. Mark Carney, the Bank of England governor and an early favorite to assume the role, is not on the short list, according to both publications. One unidentified European diplomat told the FT that Mr. Carney was “not European enough for the Europeans.”

If opposition against Mr. Dijsselbloem grows, there are other names on the shortlist, according to the WSJ. They include: Mário Centeno, the current head of the Eurogroup and Portugal’s finance minister; Olli Rehn, the governor of Finland’s central bank; and Nadia Calviño, Spain’s economy minister.

The U.S. and France clash over a digital tax

Another big topic of debate for finance ministers at the Group of 7 meeting is how to fairly tax big technology companies across national borders. The discussions aren’t going well, according to the FT.

• The Organization for Economic Cooperation and Development is trying to broker an international system for taxing digital profits, though an agreement is not expected until next year at the earliest.

• France voted last week to impose its own digital tax of 3 percent on the revenue that large tech companies earn from providing digital services to French users.

U.S. Treasury Secretary Steven Mnuchin “locked horns” with his French counterpart, Bruno Le Maire, at the meeting, according to the FT.

• “I am ready to wait, but not to wait for eternity,” Mr. Le Maire said.

• “When seven member states are not able to find a compromise,” he said, “I cannot imagine that 129 states would be able to find a compromise at the O.E.C.D. level.”

Is a fun photo app a national security threat?

FaceApp captured the imagination of the social media world this week, with celebrities using its photo-altering feature to post images of how they might look decades from now. But a backlash has erupted, Niraj Chokshi of the NYT reports.

The app was created by Wireless Lab of St. Petersburg, Russia. When users realized that it was uploading more data than they had expected, some people called FaceApp a national security threat.

• The Democratic National Committee urged staff members on presidential campaigns to delete the app immediately, citing its ties to Russia, according to CNN.

• And the Senate minority leader, Chuck Schumer, wrote a letter to the F.B.I. director, Christopher Wray, saying that the app posed “national security and privacy risks for millions of U.S. citizens.”

At least some of those concerns are overblown, several security researchers told Mr. Chokshi. Other than the photograph being edited, the amount of data being uploaded was “very limited.” And the developers of FaceApp insisted that data wasn’t transferred to Russia, but processed on servers owned by Amazon and Google.

Revolving door

Boeing has hired Kenneth Feinberg, the lawyer who oversaw the Sept. 11 victims’ claims fund, to distribute $50 million to families of the victims of two 737 Max crashes.

The speed read

Deals

• San Francisco has delayed a proposed ballot measure to nearly quadruple the tax on stock-based compensation, which is meant to target companies staging big I.P.O.s, like Uber and Pinterest. (WSJ)

• The German online bank N26 raised $170 million in new funding from investors like Tencent and Peter Thiel’s Valar Ventures, at a valuation of $3.5 billion. (FT)

• DouYu, a Chinese rival to the video-game streaming service Twitch, raised $775 million in its Wall Street I.P.O. yesterday. (WSJ)

• Curaleaf, one of the most valuable cannabis companies by market value, agreed to buy a rival, Grassroots Cannabis, for $875 million. (Bloomberg)

• The venture capital firm Fifth Wall has raised $503 million for its latest real estate investment fund. (Fortune)

Jeffrey Epstein

• Footage has emerged of President Trump and Mr. Epstein partying at Mar-a-Lago with N.F.L. cheerleaders in 1992. (WaPo)

• High society in New York City and Washington are braced for more revelations about big names tied to the financier. (Vanity Fair)

• Ohio State University will review more than $5 million in donations linked to Mr. Epstein. (Bloomberg)

Politics and policy

• The House speaker, Nancy Pelosi, set Friday as a deadline for reaching a deal on raising the debt ceiling. But there’s no sign that President Trump is prepared to sign one off. (WSJ, Politico)

• The Senate approved updates to international tax treaties for the first time in a decade. (NYT)

• The House approved a measure to repeal the Affordable Care Act’s tax on high-cost, generous healthcare plans, which was intended to help fund the law. (NYT)

• Federal prosecutors have concluded their investigation into campaign finance violations by the 2016 Trump campaign. It’s unclear whether they will file additional charges. (NYT)

• Mr. Trump repeated his attacks on four Democratic congresswomen at a rally yesterday. The crowd shouted of Representative Ilhan Omar, who immigrated to the U.S. from Somalia, “Send her back!” (NYT)

Trade

• Russia said it was interested in joining an E.U. plan to avoid U.S. sanctions that ban trading with Iran. (FT)

• “What Brexit could mean for the U.S. economy.” (CNBC)

Tech

• President Trump is reportedly interested in looking into the controversial bidding process for the Pentagon’s new cloud computing system, which is likely to be awarded to Amazon or Microsoft. (Bloomberg)

• Google and Facebook are tracking people on sex websites. (NYT Op-Ed)

• South Koreans are unimpressed by the nation’s 5G network, which is the world’s first and largest. (FT)

• Iran, North Korea and Russia have carried out hundreds of cyberattacks on U.S. political groups over the past year, according to Microsoft. And Google’s tool to fight election interference is reportedly flawed. (WSJ)

• Oakland has become the third U.S. city to ban the use of facial recognition by local government and law enforcement. (Gizmodo)

Best of the rest

• Is the Boeing 737 Max crisis a failure of leadership? (NYT Op-Ed)

• The Ebola outbreak in the Democratic Republic of Congo has been declared a global public health emergency. (NYT)

• Why the amount of money that developing countries owe Beijing is worrying. (Bloomberg Opinion)

• The Louvre in Paris has removed the Sackler family name from its walls. (NYT)

• Raj Chetty, the influential economist, says he wants to “revive the American dream.” (Atlantic)

Thanks for reading! We’ll see you tomorrow.

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