China's Chip Industry Prepares for Trump Presidency | Business Matters (November 8)

Welcome back. It's time for Business Matters with Don Ma. Don, good to see you. What's happening in the world today? Clearly, after the elections, a lot of things seem to be going up and to the right. Yeah, exactly. So, potential update or news regarding Trump's potential future cabinet. So, according to the Financial Times reporting today that Robert Lighthizer, a former supporter of tariffs, has been asked to return as trade representative. In President-elect Donald Trump's administration, Lighthizer was one of the leading figures in Trump's trade war with China. He was also involved in the renegotiation of the North American Free Trade Agreement, or NAFTA, with Mexico and Canada during Trump's first term. But besides that, Tesla's market cap reached $1 trillion mark today for the first time in more than two years. Rally comes following Trump's victory Tuesday. Tesla's CEO Musk was a prominent supporter of the Trump campaign in the closing months of the presidential race. Analysts expect favorable regulatory approval of Tesla cars and its autonomous driving technology. Today, the electric automaker's stock rose over 10 percent to more than $320 a share. Tesla has been the world's most valuable automaker for years. Japan's Toyota, China's BYD and others are behind by hundreds of billions of dollars. And the Internal Revenue Service released its 2024 financial reports this week. During the fiscal year, the IRS collected more than $5 trillion in tax revenue, more than $98 billion in enforcement revenue, and it distributed $553 billion in federal tax refunds. This year's tax revenue was an increase from fiscal year 2023. Last year, the IRS collected nearly $4.7 trillion. Mortgage corporation Freddie Mac is saying climbing rates are pushing homebuyers to the sidelines. A new report says mortgage rates are nearing 7 percent. The report also says that homebuyer applications dropped 5 percent last week. Freddie Mac's chief economist said buyers have been becoming very sensitive to mortgage rates. According to the report, rates have been climbing since mid-September. They're back up again after a decline over the summer. In September, the Federal Reserve cut interest rates, leading to a spike in mortgage rates. And Sony said on Friday its operating profit rose 73 percent in the July-September quarter, with strong sales in its game and network business helping to offset a weakness in the production of TV shows. Here's more. Operating profit at Sony soared 73 percent in the second quarter. Strong sales in its game and network business helped offset weakness in movies. Sony's businesses also include music and chips. The Japanese firm on Friday maintained its profit forecast of over $8.5 billion for the year to March. The bumper second-quarter profit was also helped by solid sales of image sensors and improvement in its game hardware business. Sony generates more than a third of its revenues from the game and network service segment, where profit nearly tripled. It comes just a day after it released an upgraded version of its flagship PlayStation console with better graphics. Although Sony's sales of its PlayStation 5 were down 22 percent from the second quarter a year earlier, it maintained a sales forecast of 18 million units for this financial year. The industry is grappling with the rising cost of creating games, and Sony said last month it was shutting down two PlayStation developers. Its movie sector profit slid to around $1.2 billion for the quarter from around $1.9 billion a year ago after the delayed release of movies due to strikes in Hollywood last year. Shoe and fashion accessory company Steve Madden is exiting China. The company has been planning for possible tariffs from the next Trump administration. TD Sharma Marshall has the details. Steve Madden, a $3 billion shoe company, announced Thursday that it would rapidly cut its Chinese production by half to avoid tariffs from the incoming Trump administration. We have been planning for a potential scenario in which we would have to move goods out of China more quickly. We've worked hard over a multi-year period to develop our factory base and our sourcing capability in alternative countries like Cambodia, Vietnam, Mexico, Brazil, etc. During Thursday's earnings call, Steve Madden executives mentioned that, like all footwear companies, the majority, about two-thirds, of their business relies on goods that are imported into the United States. And of those imports, 70% are from China. Economic analyst John Dunham believes that tariffs would impact consumers. So a tariff basically ends up costing more than the government collects at the consumer level. The National Retail Federation said in an analysis last week that the price of a $50 pair of sneakers could rise to between $59 and $64 under Trump's tariffs. And Americans could pay as much as $24 billion more for apparel each year because of anticipated increased costs. The one thing that's interesting is that the president-elect said that he wanted to increase tariffs while at the same time lowering other taxes, which sounds like a good idea. We get less income taxes, so we have more money to pay for the higher cost goods. The thing is that income taxes tend to fall on different classes of people than do sales taxes. And again, a tariff is a sales tax. So it would lead to some tax shifting from people with high income to people who tend to purchase a lot. It's what we would call a regressive tax in the economics business. Param Jaggi, a CEO of Agora, a search engine for e-commerce, says, This is an adapt-or-die moment. Retail and e-commerce companies like Steve Madden have to quickly change their global supply chains to adapt to Trump's prospective tariffs or get left behind. Steve Madden CEO Edward Rosenfeld said the company worked for many years to get a new network of factories in place that would relieve the worries over tariffs on China. Rosenfeld also said that the company over the next year will reduce the percentage of goods sources from China to between 40% and 45%. Sean Marshall, NTD News. Officials in Beijing are looking for ways to revive the struggling Chinese economy. On Friday, Beijing's financial body announced a plan to resolve a 10 trillion yuan in debt held by local governments to lower levels of China's communist regime. 10 trillion yuan is equivalent to about 8% of China's GDP and about 1.4 trillion dollars. Analysts say the move would prepare for potential trade penalties from the US when Trump takes office next year. Bloomberg reported Thursday that Morgan Stanley is slated to remove 20 companies from its China index just days before Thanksgiving. Those include a Tesla supplier and the country's leading firm production company, Wanda. China still holds the position in Morgan Stanley's emerging market index at 27%. The move is seen as a reflection of declining foreign investor confidence in China despite Beijing's attempts to stimulate the economy. After President-elect Trump returns to the White House, he will likely follow through on his plan to place higher tariffs on China. That's according to strategic advisory firm, the Asia Group. Take a listen. I believe that Trump's threat of 60% tariffs will likely happen, at least in terms of the US trade policy towards China. My guess is that they'll look back at where the last trade discussion went during the first Trump administration, and I suspect the Trump administration will say that we still have unfinished business here. So certainly the signals we've gotten so far are a lot more tariffs, or at least the threat of that. In his first term, which ended four years ago, Trump began imposing punitive tariffs of up to 25% on Chinese imports, targeting what he called Beijing's unfair trading measures. President Biden kept most of the tariffs, but Trump wants more. He vowed to impose a 60% tariff on imports from China. On another front, the European Union is also threatening to increase tariffs on certain Chinese imports. Lin believes that China does not want to fight a two-front war in that trade arena. And my suspicion is the types of strategies they've used in the past, for example, to try to divide opinion between US and Europe and try to divide opinion within the European states will continue to be an ongoing tactic to try to slow down that evolution of higher tariffs. Some experts believe a trade war would harm China even more than it did during Trump's first term, as the country's economy is now much more vulnerable. China's chip industry is preparing for challenging years under Donald Trump. Strategies being considered include doubling down on self-sufficiency, as well as building closer ties with countries that might feel sidelined by the US president-elect's policies. And this is according to a review of more than 30 articles and research notes published by Chinese chip firms, associations and analysts, China has ramped up its purchases of semiconductor equipment from overseas. For the first nine months of this year, China's imports of semiconductor equipment increased by a third. The deputy secretary-general of the Beijing Semiconductor Industry Association urged Chinese chip firms to beef up their overseas business and expand to more countries. In Trump's first term, he went after Chinese telecom giants Huawei and ZTE, as well as chipmaker SMIC. He put them on trade blacklists that curbed their access to crucial US hardware and software. The past year's coverage of the 2024 election suggests that traditional media may be losing some of its influence. Podcasts and independent content creators have been surging in popularity. Here's the story. I want to thank the Nelk boys, Aiden Ross, Theo Vaughn, Bustin' with the Boys, and last but not least, the mighty and powerful Joe Rogan. At President-elect Trump's victory celebration, UFC CEO Dana White gave a shout out to numerous podcasters who had spoken with Trump before the election. Bustin' with the Boys' Trump interview on YouTube got over 440,000 views. Aiden Ross' interview got 2.7 million views, Theo Vaughn's 14 million, and Joe Rogan's over 65 million across YouTube and other platforms. How crazy is that? Meanwhile, Fox News had around 2.7 million primetime viewers in October. MSNBC had 1.3 million and CNN 792,000. There's a lot more options. You know, we're busy and maybe you're spending more time in your car, running your kids around, and now you're able to listen to your favorite podcast host whenever you want. Media expert Greg Linnelli says the legacy media has failed to adjust. The median age of Fox viewers is 69 for MSNBC, 70, and for CNN, 68. Younger audiences are going to other platforms, such as YouTube. I expect to see greater, greater investment in audio and podcast buying, in digital out-of-home buying, in other channels that ought to be included in media plans at an increased allocation. Media expert Molly Hoops expects the trend to continue. People still watch TV during crucial live events like election results. Fox News, MSNBC, and CNN had around 21 million viewers on election night. But the traditional dispensers of political information appear to be losing their clout everywhere else. President-elect Trump apparently resigned from McDonald's. In the mock letter shared by his son, Donald Trump Jr., the president said he learned a lot from the restaurant business and the value of hard work. He says his McDonald's skills will likely serve him well in the future. The president-elect was seen working at the fry station and the drive-through of a Bucks County, Pennsylvania McDonald's in October. The letter says his resignation is in effect on January 20th, which is the exact date that his next presidency begins. McDonald's earlier said it doesn't endorse candidates but agreed to hosting Trump as part of the company's core values of having open doors for everyone. And Walmart customers and delivery drivers listen up. The retail giant has new incentives ahead of the holiday season. A spokesperson says the company will offer more earnings opportunities for drivers. The details of those are still unclear. Walmart employs freelance drivers through an app called Spark Driver. But the app has had issues in the past. Some delivery drivers say pay can be unpredictable. The app also suffered a data breach in February. To appeal to shoppers and compete against Amazon, Walmart is also offering U.S. shoppers a one-year membership for $49 through December 2nd. Walmart Plus members receive unlimited free same-day deliveries from stores on orders over $35. Christmas is in the air on Paris's Grand Boulevard. Stores revealed that their animated window displays yesterday. A puppet show for passerbys to enjoy. NTD's international correspondent David Vevez reports from Paris. This is one of the first signs that Christmas is near. Paris's big stores are revealing their brand new decorations on the Grand Boulevard. French cinema icon Juliette Binoche unveiled the Christmas window displays at Paris's Printemps Haussmann on Thursday, marking the official start of the city's holiday festivities. Each year, these enchanting displays draw crowds to the iconic department store, a moment awaited by Parisians who gather around the windows. You've got to keep your childlike soul, unfortunately, with all the ups and downs of life. Debts, vacation, work. People have to work hard. So it's a good thing to lighten the burden. Christmas magic, fortunately, we can get a bit of it here. This season's theme features marionettes and trend-inspired scenes, with figures seated in compartments enjoying whimsical landscapes. Julie Ducat and her team designed 130 marionettes, a long effort that paid off with smiles from passersby. We have four months of full production and three and a half weeks of installation. So we have been at it for three and a half weeks now. Opening tonight, it seems to be well attended, so we're delighted. We have four months of full production and three and a half weeks of installation. We remember our travels at camp, so this theme is a bit comforting. I'd say I hope people can identify with them. Reflecting on the spirit of the holidays, Binoche shared her personal Christmas memory of the simple joys of family gatherings. I remember one Christmas in particular. My mother, my parents had very little money. We lived in a small apartment in the Paris suburbs, and my mother gave me socks, and it was very simple. But I think I came away with a feeling of happiness, real happiness and feeling fulfilled. Printemps' Christmas displays are visible on the bustling boulevard Haussmann, a Paris district flooded with shoppers during the holiday season. David Vives, NTD News, Paris. Starbucks' mobile app had an issue on Thursday. The same day it launched its holiday menu, the app was down for some users. According to DownDetector, which tracks website outages, there was a spike in problems around 8 a.m. on Thursday. It appears the outage continued into Friday morning, with about 2,300 reports of problems. Starbucks acknowledged the issue on social media, telling customers it had a temporary outage of the order ahead and pay feature. In the app, it appears the issue has been resolved. All right, quickly before we go here. S&P 500 briefly surpassed the 6,000 mark and closed with its biggest weekly percentage gain in a year. Donald Trump's election victory and a possible Republican Party sweep in Congress fueled expectations for favorable business policies. S&P 500 and the Dow Industrials were on track for their best weekly percentage jump since early November 2023, with the Nasdaq on pace for its best in two months and second-best week of 2024. Expectations for lower corporate taxes and deregulation under Trump have helped push the benchmark S&P index and the Dow to intraday record highs for the three straight sessions. S&P is on track to secure its 50th record close of the year. All right, that's all for today's Business Matters. Back to you guys. You know, a lot of Trump stories you had on how it's affecting the economy and the markets, but I really thought that that resignation from McDonald's story is kind of clever only because that was one of his most viral moments in the whole campaign, was when he donned the old school apron and started handing out fries. I mean, say what you want about him, but the guy knows how to go viral, doesn't he? Yeah, I mean, yeah, he definitely has a sense of humor, I feel like, with the apron, like you mentioned. And as well, in the resignation letter, he mentioned that the experience at the fry station will help with his future jobs. I think that was pretty funny. I mean, being the president, I wonder how is that going to help him? Yeah, well, I mean, I think definitely a lesson in there for young people out there. Working a job like that could help build some very meaningful experiences. My wife's sisters all worked at McDonald's in high school, and I think a lot of Americans can relate to that.