The Roundup: week ending 6/19/2020

The Roundup: week ending 6/19/2020

 

Three things your business should be watching this week:

1. Military tensions building in numerous hotspots and need to be monitored

2. EU moves are showing crisis can sometimes bring the bloc together

3. Brexit hurtling off the cliff-edge, but it might not be as bad as feared

 

 

1. Hotspots of military tension are building around the world:

 

 

Syria’s economic crisis is deepening, new US sanctions could cause a collapse.

 

 

The Takeaway: Amidst rapid currency devaluation and soaring food prices, the Assad regime may run out of money and collapse under new US sanctions. The sanctions are intended to push Assad to begin UN-led peace talks, but many fear that it will trigger an economic meltdown and widespread famine in the country instead. Syrian economy that is tied to Turkey and Russia creates serious conflict potential, especially if a meltdown occurs, and businesses with exposure need to pay attention.

 

 

The never-ending problem on the Korean peninsula is rearing its head again

 

 

The Takeaway: North Korean sanctions relief has fallen far down on the list of immediate priorities Washington is currently busy with and the latest outburst, with North Korea bombing a joint relations office within its own borders, was a keen reminder of that from the North Koreans. The North Koreans are upset that the South Koreans have not been able to convince their American allies to commit to lifting sanctions. While talks here in the US suggest that the current administration is not being hard enough against North Korea, the irony here is that ongoing sanctions seem to be working.

 

 

China and India had a big border brawl, but it’s not likely to lead to any serious conflict for now.

 

 

The Takeaway: A historic border dispute occurred this week that resulted in over 20 casualties on each side. Despite being two big nuclear powers, for now it does not seem that the conflict between the two countries will escalate to war. China looks especially eager to deescalate tensions and is urging investigations. The China-India conflict is very real, but the escalation ladder to war is very long, especially when both sides begin the fight with sticks and clubs.

 

 

2. European consolidation grows and the EU flexes its geopolitical muscles

 

 

The Takeaway: This week, the EU made two made two big moves to counter Chinese businesses at a time when local businesses have been weakened by the Coronavirus induced recession. One move that slipped under the radar was an unprecedented tariff imposed on Chinese exporters and manufacturers based outside of China. The tariff is intended to help European exporters level the playing field against Chinese companies receiving government subsidies that undercut competition. An even broader plan to fend off Chinese businesses is included in an upcoming EU-wide proposal to prevent any government-backed foreign company from acquiring EU firms.

 

 

While many talk of EU disintegration, these sorts of actions show the EU’s erstwhile ability to consolidate and step up in the face of crisis. As we said last week its regulatory muscle continues to show, and its increasingly robust response to China expands the flex.

 

 

3. Last week we talked about Amazon. This week, EU regulators are after Apple.

 

 

The Takeaway: After Amazon last week,  Apple is now under the spotlight  of the European Commission, who are investigating whether subscription prices for apps sold in the App Store are hurting developers. The investigation was launched after a series of complaints from developers including Rakuten, Spotify, and Netflix that Apple’s monopoly over the industry has allowed it to impose an “Apple tax” by taking up to a 30% cut off of subscription revenues.

 

 

This shows the regulatory battle against Big Tech is not going to be slowed by the pandemic, as some pondered (or hoped!). Meanwhile Apple’s response shows how Big Tech might be playing their side of the table. They quickly kicked an offending developer off the app store – not exactly a conciliatory move.

 

 

4. Brexit talks continue, but we’re hurtling towards the cliff-edge – but much has already been taken off the table

 

 

The Takeaway: This week, last-chance Brexit talks were kicked once again further down the road to more last-chance talks. The UK government has decided against extending the transition period which means that the EU and UK remain on a tight timeline to reach a deal.  We think that a hard Brexit is becoming a high likelihood at the end of the year. The only question is whether hard Brexit is really as “hard” as most people think. Much has been taken off the negotiating table altogether, reducing the stakes. And a deal will eventually be reached in the future – so when the softening comes is a question of timing, despite the schedule the negotiations are working towards.

19.06.2020

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