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Brazilian Judge Seizes $2.8 Million in Silva’s Pension Funds

A judge in Brazil on Thursday ordered the seizure of more than $2.8 million in pension funds from former President Luiz Inacio Lula da Silva in connection with his corruption conviction.

The funds were in one of Silva’s individual accounts and in another linked to his company LILS, which administers assets from his lectures, according to the ruling released by the office of federal judge Sergio Moro.

Last week, Moro sentenced Silva to 9 1/2 years in prison in connection with a graft probe involving state-run oil giant Petrobras.

A spokesman for Silva confirmed Thursday’s decision, but did not make comments to The Associated Press. The former president will remain free until his appeal of the conviction is heard by a group of magistrates.

None of Silva’s pension funds can be used until there is a final ruling in the case.

On Wednesday, Brazil’s central bank froze four of Silva’s bank accounts amounting to more than $190,000. Judge Moro also barred the ex-president from using three apartments, a piece of land and two cars linked to him.

With the seizure of the pension funds, Silva’s assets frozen by Moro amount to almost 10 million Brazilian reals, or $3 million. That is the figure requested by the judge in Wednesday’s ruling “for the reparation of damages” for crimes committed.

Last week the judge also seized a beachfront apartment in the city of Guaruja, Sao Paulo state, that is the centerpiece of the corruption and money laundering case against Silva. The apartment is valued at about 2.2 million Brazilian reals ($700,000), according to investigators.

Silva denies any wrongdoing and says the trial is politically driven. Recent polls put him as the front runner for the 2018 presidential elections, but electoral law says the former president will be barred from running if the corruption conviction is upheld.

Silva’s Worker’s Party scheduled a series of protests against his conviction and the unpopular reform of labor laws approved last week by President Michel Temer.

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No Trump Slump in Tourism, but There Could Be a Trump Bump

Last winter, the U.S. tourism industry fretted that Trump administration policies might lead to a “Trump slump” in travel.

But those fears may have been premature. International arrivals and travel-related spending are up in 2017 compared with the same period in 2016.

There might even be a “Trump bump,” says Roger Dow, CEO of the U.S. Travel Association, a nonprofit representing the travel industry.

A few months ago, Dow and others warned that President Donald Trump’s anti-immigrant rhetoric and ban on travel from a handful of mostly Muslim countries could send an anti-tourism message.

But “impending doom hasn’t manifested itself,” Dow said in an interview. “Right now we cannot identify a loss. It’s contrary to everything we’ve heard, but travel is in slightly better shape than it was a year ago. Everyone wants me to tell the story of the sky is falling, but for the travel industry, the sky is not falling.”

Latest numbers from the U.S. Travel Association’s Travel Trends Index showed 6.6 percent growth in international travel to the U.S. in April and 5 percent growth in May compared with the same months last year. The Travel Trends Index uses hotel, airline and U.S. government data.

Individual sectors have good news, too. Hotel occupancy for the first five months of 2017 was “higher than it has ever been before,” said Jan Freitag, senior vice president with STR, which tracks hotel industry data. American Express Meetings & Events has “not seen a slowdown in either domestic U.S. meetings or international meetings from the U.S. in the past six months,” according to senior vice president Issa Jouaneh. Even New York’s National September 11 Memorial and Museum has more international visitors: 554,381 at the museum Jan. 1 to July 11, up from 517,539 the same period last year.

Florida’s Orlando International Airport, a gateway for theme park visitors, reported growth for domestic and international passengers year to date, though Visit Orlando CEO George Aguel said it was “still premature to determine a specific impact” from Trump administration policies.

Economy over politics

International trips are often planned months in advance, so decisions made this year about travel may not be evident yet.

“For us, we already planned before the election,” said Alban Michel, waiting with a group of Swiss tourists to see One World Trade’s observatory in New York on Monday.

Companies that track online behavior say searches for U.S. travel are down. Yet tour companies that bring foreigners here are “not only holding year over year, but in many cases they’re having a record year,” according to Chris Thompson, CEO of Brand USA, which markets the U.S. to the world. Thompson thinks it’s “too early to tell” how the industry will fare, adding that the travel industry’s ups and downs may have “little or nothing to do” with Trump and more to do with the strong dollar and lackluster economies elsewhere.

Asked if there’s a “Trump slump” in travel to the 12 Southern states marketed by Travel South USA, CEO Liz Bittner said, “The truth of the matter is, no. I think it was a lot of media hype.” Bittner agreed that the challenge for U.S. tourism “isn’t so much Trump. It’s the strong U.S. dollar against some of the other currencies,” which makes the U.S. an expensive destination for foreigners. 

Daniele Biron, an Italian visiting the 9/11 memorial Monday while in New York for a conference, agreed that “the value of the dollar” is a factor for many travelers, but “I don’t know if the politics” matter to most visitors.

Isabelle Bornemann, owner of Alaska Travel Connections, said her international group bookings are down 30 percent, mainly because of the strong dollar. But some European travel agencies tell Bornemann the decision to stay away is political, based on the perception that foreigners aren’t welcome in the U.S.

Agencies predict dip ahead

Charlie Mallar, owner of the 1785 Inn in Conway, New Hampshire, had his busiest July 4th weekend in 34 years, but says “foreign visitors were off a bit — Trump effect. We have to assure foreign visitors that they are welcome in America.”

The Travel Trends Index predicts slower growth for the rest of 2017, but still nearly 2 percent higher than last year through November. 

New York City’s tourism agency, NYC & Company, predicts that 300,000 fewer international travelers will visit the city this year than last, according to spokesman Chris Heywood. Concerns about Trump administration’s policies include “rhetoric surrounding the travel ban, laptop bans on certain airline carriers and the threat of having visitors reveal social media accounts,” along with “the lack of a proactive welcome message on behalf of the nation,” Heywood said. New York has put up its own signs saying “New York City — Welcoming the World” in England, Germany and Mexico.

Comprehensive international arrivals data from the U.S. Commerce Department takes seven months to compile, so it will be next year before definitive 2017 statistics are available. But the Commerce Department has seen a 5 percent increase January-March over the same period last year in collections from ESTA fees, which are electronic travel authorization fees paid by foreigners who don’t need visas to enter the U.S. That suggests increased visitation from visa-waiver countries like the United Kingdom, Japan, Germany and Australia. 

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Indian Builders Pledge ‘Green’ Homes in Race to Meet Climate Goals

India’s top builders have pledged to make at least a fifth of their new housing developments sustainable by 2022, as the country looks to tap sectors other than renewable energy to meet its ambitious climate goals.

The campaign is led by the Sustainable Housing Leadership Consortium (SHLC) comprising builders Godrej Properties, Mahindra Lifespaces, Shapoorji Pallonji, Tata Housing and VBHC Value Homes. It is backed by the Ministry of Housing.

Builders will use mainly local and recycled material, and design homes that conserve water and electricity and make best use of natural light and wind patterns, while also pursuing more energy-efficient methods of construction.

“The construction industry has one of the biggest carbon footprints, so it’s really important for us to take action to minimize the impact,” said Jainin Desai, head of design and sustainability at developer Mahindra Lifespaces.

“This initiative pushes us to incorporate sustainability right from the selection of the site to the design, the use of materials and in increasing awareness in the industry, as well as among our clients,” he told the Thomson Reuters Foundation.

India is the world’s third-biggest emitter of greenhouse gases that cause global warming.

As a signatory to the 2015 Paris Agreement on climate change, India is committed to reducing its carbon emissions by a third by 2030.

It is doing so with tougher emission norms, more electric vehicles and giant solar power plants to replace energy generated by coal.

The real-estate sector is responsible for nearly a quarter of the country’s carbon dioxide emissions. Those emissions come mainly from energy-intensive processes in making construction materials such as steel, cement and bricks.

As India’s economy grows at a fast clip, demand for homes, offices, roads, airports and factories is also rising. The demand for homes is particularly acute: in urban areas alone, there is a shortage of about 20 million homes.

Prime Minister Narendra Modi has made affordable housing a priority, with incentives such as subsidized loans to meet a 2022 target of “Housing for All.” This has led to a boom in construction across the country.

The effort by SHLC – an initiative of the World Bank’s International Finance Corporation under the eco-cities program of the European Union – will add 110 million sq ft of green housing by 2020.

Green homes the norm?

While “green” homes were built at a premium earlier and therefore had a niche appeal, newer technologies and greater demand have narrowed the cost differential between them and traditional housing to “almost nothing” now, Desai said.

Developers and buyers are also able to tap financing more easily for sustainable projects, as banks and investors look beyond renewable energy. The SHLC campaign is backed by HDFC Bank and PNB Housing Finance.

“India has huge funding requirements in … sustainable housing, metro rail networks, urban waste management and infrastructure development, that can be met through green financing options,” said Sanjeev Jha, India head of Global Capital Markets at Bank of America Merrill Lynch.

India, a relatively new player to green financing, has issued nearly $4.5 billion worth of green bonds so far, he said.

For homeowners, green homes will create savings of 198 million kWh per year in electricity consumption, and 108 billion liters in water savings, according to SHLC.

This will reduce India’s carbon footprint by approximately 0.2 million metric tons of carbon dioxide, it estimates.

“Our long-term goal is to make green homes 100 percent of the industry portfolio,” Desai said. “We see green homes becoming the default choice.”

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In China, Ford Cars Pass ‘Golden Noses’ Test Before Sale

While Western drivers like the “new car smell” of a vehicle fresh off the production line, Chinese would rather their cars didn’t smell of anything — a cultural divide that’s testing carmakers seeking an edge to revive sales in the world’s biggest auto market.

At Ford Motor Co., for example, 18 smell assessors, dubbed “golden noses,” at its research plant outside the eastern city of Nanjing test the smell of each material that goes inside a Ford car to be sold in China and around Asia.

The China smell test isn’t unique, but illustrates the lengths automakers go to to attract buyers in markets where consumer attitudes vary widely.

Smell matters

“In North America, people want a new car smell and will even buy a ‘new car’ spray to make older cars feel new and fresh. In China it’s the opposite,” says Andy Pan, supervisor for material engineering at the Ford facility, which employs around 2,300 people.

The smell of a new car in China can have an outsized effect.

A J.D. Power report last year showed that unpleasant car smells were the top concern for Chinese drivers, ahead of engine issues, road noise or fuel consumption.

The smell assessors at Ford, whose China sales are down 7 percent this year, carry out 300 tests a year, a third more than their counterparts in Europe. They rate the odor of all materials used in a car from “not perceptible” to “extremely disturbing.”

Pungent materials, from carpets to seat covers and steering wheels, are noted as smelling of anything from “burnt tire” and “bad meat” to “moth balls” or “dirty socks”. Some are sent back to the supplier.

Seats for Ford cars in China are stored in perforated cloth bags to keep them ventilated before being installed, as opposed to plastic wrapping in the U.S. market where consumers are less concerned about chemical smells.

“The smell inside the car can often be pretty pungent,” said Tom Lin, a 24-year-old high-school teacher in Zhejiang province, who bought a local Roewe brand car last October. He said there was still a bit of an odor six months later.

“With the next car I buy, I’m going to take more care to check out any odd smells,” he said.

Looking for an edge

To be sure, smell is just one factor for automakers to get right in China, where picky buyers are always looking for fresh car models and Beijing is making a big drive toward new energy vehicles.

In a slower market — consultancy IHS forecasts vehicle sales will slip slightly this year — firms are looking for an extra edge to appeal to consumers, beyond price discounts, says IHS analyst James Chao.

Local rivals Geely Automobile and BYD Co. Ltd. tout their in-car air filters to protect drivers from China’s harmful air pollution, and BMW says it is adding larger touch screens and tweaking colors to appeal to Chinese buyers.

Concern about chemicals, pollution

Smell is key though, reflecting a wider concern in China about chemicals and pollution.

“When I lived in the United States I might look at the suspension or the engine,” said Don Yu, China general manager at CGT, which makes materials to cover car seats and dashboards for General Motors, Volkswagen and Ford.

“In China, though, people open the car and sit inside, if the smell isn’t good enough they think it will jeopardize their health.”

For Ford’s “golden noses” that means a strict routine.

Testers undergo a tough selection process, proving themselves on blind smell tests before being chosen.

“We have to have very healthy habits; we can’t smoke, we can’t drink,” says one of the team, 33-year-old Amy Han, adding she avoids spicy food and doesn’t wear nail polish, strong perfume or even a leather jacket to keep her smell sense sharp.

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Venezuelan Business Leader Slams Maduro’s Congress Plan

Venezuela’s severe economic crisis will worsen if President Nicolas Maduro presses ahead with a controversial new congress that would further undermine investor confidence in the OPEC nation, the head of the country’s biggest business guild said.

Despite months of protests by the majority-backed opposition and widespread international condemnation, the ruling Socialist Party is holding a vote on July 30 to set up a legislative superbody known as a Constituent Assembly.

The assembly would have powers to rewrite the constitution and abolish the existing opposition-controlled legislature in what foes fear would enshrine a leftist dictatorship.

“What country in the world has a successful socialist model? None!” Carlos Larrazabal, 60, president of Fedecamaras told Reuters on Tuesday during its annual meeting in the sweltering western city of Maracaibo.

“In a constituent process, with the characteristics that are being proposed, there is no legal certainty and that does not attract investment but rather scares it away,” added the U.S-educated economist.

Fedecamaras has long been at odds with the government after

a former head briefly became interim president in a 2002 coup against late socialist leader Hugo Chavez.

Though officials have given few details on what the Constituent Assembly – which the opposition is boycotting – might do, investors fear its legal and economic ramifications.

Comments by a Socialist Party candidate that the assembly could rewrite parts of the constitution that allow joint ventures with foreign companies have spooked some in the country’s oil sector – though state energy company PDVSA later reassured partners that would not happen.

The political showdown comes amid a brutal economic crisis: inflation is in triple digits, the currency has fallen 99 percent against the dollar since Maduro was elected in 2013, and millions are struggling with food shortages.

A Reuters poll of economists on Wednesday forecast Venezuela would shrink 6 percent this year and another 3.0 percent in 2018.

“The forecasts are catastrophic. We have no positive expectations,” Maria Uzcategui, president of retailers’ guild Consecomercio, told Reuters at the Maracaibo conference.

‘Real Solutions’

Consecomercio estimates almost a million jobs in the private sector were lost in the last 18 months, and 1,150 businesses looted amid this year’s violent anti-Maduro protests.

Venezuela’s private sector wants to see an end to currency controls, enacted by Chavez in 2003 to curb capital flight, and price controls, which crimp production.

“Those would be the real solutions,” said Uzcategui.

Some 100 people have died in nearly four months of anti-Maduro unrest. On Sunday, Venezuela’s opposition capitalized on anger and held an unofficial vote in which they said 7.5 million participated and 98 percent rejected the Constituent Assembly.

The campaign is due to escalate on Thursday with a national strike, recalling events prior to a short-lived coup against former leader Chavez in 2002.

Fedecamaras’ line on the strike is that each employer and employee must decide for themselves whether to follow the opposition call for a 24-hour shutdown.

Maduro says the July 30 vote is necessary to achieve peace in the volatile South American nation, and also defeat an “economic war” being waged against his government by the opposition and Washington.

“Here, there is no economic war… They’ve expropriated more than 1,500 businesses, taken more than 5.2 million hectares… The economic war is in fact against all these companies that were private that now don’t produce!” said Larrazabal.

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Asia’s Richest Man Comes Under Pressure in China

Asia’s richest man, Wang Jianlin, suddenly finds himself cornered. The giant Dalian Wanda Group, which he heads, is facing a range of regulatory investigations and actions from the Chinese authorities. 

The latest move involves asking banks to stop financing overseas forays of the Wanda Group, which owns an array of foreign assets, including a Hollywood studio and AMC Theaters, the biggest exhibitor of movies in the U.S. 

The Group faced a regulatory probe into its financial deals in early June, which was followed by an announcement that Wanda had sold off part of its business to a Tianjin based real estate developer for $9.3 billion.

The government action against a businessman known for his strong connections with the Communist Party has caused a stir in the business community, with many asking if the government is sending out a political message to all privately owned businesses, informed sources said. 

Role of politics

“That is a surprising development in a lot of different ways. Wang Jianlin has many friends all through the political establishment in China,” said Christopher Balding, an associate professor of finance and economics at Peking University HSBC Business School. 

The industry in China is debating about whether the Wanda Group has been hit by a policy measure or Wang has fallen from the grace of the political establishment. 

“I don’t think this (action) is particularly targeting Mr. Wang, the chairman of Wanda Group, or purposefully targeting the Wanda group,” said Peng Liu, professor of real estate and hotel management at the Cornell University. “Actually, those (moves) are in line with the government action on control of financial risks.” 

Wanda Group’s recent deals include the $930 million acquisition of the Nordic Cinema Group in January, and the $1.1 billion purchase of Carmike Cinemas, the fourth-largest cinema operator in America. But Wang faced a rare setback early this year when he was forced to abandon a $1 billion takeover of Hollywood-based Dick Clark Productions.

On the face of it, the government is asking companies to cut down on their financial risks and stop adding pressure on China’s foreign exchange reserves. But the signals go deeper than that because the action involves one of China’s best-known companies and comes ahead of a crucial Communist Party meeting which will determine the fate of some of the country’s top leaders. 

“It is not far fetched to say that there is definitely a political message being sent, and they are using Wanda as an example to other companies, (to say) ‘don’t do this’,” Balding said, adding, “And it is also a signal that there is a political fighting going on behind the scenes.”

Corporate vs government power

Giant multinationals are sometimes regarded as the sources of big power, who often influence government policies in different countries. Beijing may not be comfortable with additional power groups during its own influence gathering pursuit through the Belt and Road program, analysts said. 

Yue Su, an economist with The Economist Intelligence Unit (EIU), pointed out the government has been investigating two other companies, Fosun and Anbang, who were engaged in aggressive buying of business assets overseas. 

“The government is also worried that these companies are trying to move asset abroad and keep their debt within the country, which is worsening domestic economic conditions,” he said. 

Wider impact

Besides Wanda, many Chinese companies have been forced to revise their investment plans as the government reversed its earlier policy of encouraging them to acquire foreign brands and assets. Beijing has since intensified its battle against capital flight amid a reduction in foreign exchange reserves early this year. This came as a shock to several companies who were forced to cut down their long range plans for growth in the international market.

“Another thing that needs to be pointed out is it was only 12-24 months ago that Chinese regulators were strongly encouraging Chinese companies to go out and make foreign acquisitions. So, this was not done in a vacuum. So while Wanda may have pushed the limits, they were doing nothing more than what they were being encouraged to do by Chinese regulators,” Balding said.

The government action to cut off funding to Wanda, and possibly to other companies, may have major consequences for China’s industrial economy, Balding said. “So consequently if their access is cut off, that could have a very significant impact on not just their ability to make foreign acquisitions but to do a lot of different things.” 

Peng Liu said the government will make a distinction in the case of its Belt and Road program and allow overseas investments by Chinese companies who wish to do so under that program. “The belt and road program is the government’s strategy. I think that is different. Corporations will find the match in terms (their) business vision and growth strategy and the government’s strategy on infrastructure and global collaboration in development,” he said.

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Uber-style App ‘Careem’ Goes Off Beaten Track in Palestinian West Bank

Careem, a Middle Eastern rival to Uber, has become the first ride-hailing firm to operate in the Israeli-occupied West Bank.

Dubai-based Careem, whose name is a play on the Arabic word for generous or noble, launched in Ramallah in June, aiming to bring digital simplicity to the Palestinian territory.

There is certainly a market for easier ride-hailing among the nearly 3 million Palestinians living in the West Bank, but the fact the mobile network is still 2G, that electronic payments are not the norm and that Israeli checkpoints are common, make using the service somewhat cumbersome.

Yet Careem is optimistic about the potential.

“We are planning to invest hundreds of thousands of dollars within the coming year in the (Palestinian) sector,” Kareem Zinaty, operations manager for the Levant region said. “After the investment, it is also an opportunity to create jobs.”

Careem, which launched in 2012 and now operates in 12 countries and more than 80 cities across the Middle East, Africa, and South Asia, has said it aims to provide work for one million people across the region by 2018.

Careem’s captains

While a version of Uber and Israeli app Gett already operate in Israel, they do not venture into Palestinian territory. Drivers are excited to work with Careem, which they hope will help boost their incomes, especially with unemployment in the West Bank running at nearly 20 percent.

“It’s a very wonderful opportunity,” said one of the more than 100 new drivers, known as “captains” by Careem. “Most of the people who use it are young and happy with the price.”

Palestinians have limited self rule in parts of the West Bank, which they want for a future state alongside East Jerusalem and the Gaza Strip. Israel captured those areas in the 1967 Middle East war. It withdrew from Gaza in 2005, but still occupies the West Bank and East Jerusalem.

Under interim peace accords, Israel still controls 60 percent of the West Bank, where most of its settlements are located. Careem’s drivers have Palestinian license plates, meaning they usually cannot enter Israeli-controlled areas.

In 2015, Israel and the Palestinian Authority agreed to expand 3G mobile access to the West Bank by 2016, but have yet to implement the agreement. In the meantime, the Ramallah municipality has set up public Wi-Fi in parts of the city center, allowing Apps like Careem to be used more easily.

Despite 2G’s slower service, Zinaty said their model was an opportunity for telecommunication companies to look into expanding services and technologies to better serve Palestinian start ups and businesses.

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Peru Cancels Plan to Cut Value-Added Tax Rate as Growth Slows

The government of Peru’s President Pedro Pablo Kuczynski is no longer considering cutting the value-added tax (VAT) rate due to slumping government revenues as the economy slows, the country’s prime minister said Tuesday.

Trimming the VAT rate gradually to 15 percent from 18 percent had been part of Kuczynski’s economic platform as he took office a year ago, before severe flooding and a graft scandal thwarted investments and knocked Peru’s growth outlook.

Dropping the plan will likely be welcomed by the right-wing opposition that had feared a VAT reduction would widen the fiscal deficit. But it could be seen as a broken campaign promise by Kuczynski allies who expected a lower rate to stimulate the economy and encourage more people to pay the tax.

“Reducing the VAT has been ruled out,” Prime Minister Fernando Zavala told foreign media in a press conference. “Tax revenues haven’t grown in recent months and we think we have to improve that in coming years by making VAT collection more

efficient.”

Kuczynski named Zavala finance minister while keeping him in his post as prime minister last month after the opposition-controlled Congress ousted the former finance minister over a scandal involving an airport contract.

Peru, the world’s second biggest copper, zinc and silver producer, has enjoyed some of the strongest growth readings and slowest inflation rates in the region this century.

But the economy will likely slow to 2.8 percent this year from 3.9 percent in 2016, even with the government’s planned fiscal stimulus, Zavala said. Next year the economy should expand by between 3.8 percent to 4 percent, he added.

The government previously forecast growth at 3 percent in 2017 and 4.5 percent in 2018.

Zavala reiterated that the government planned to expand the fiscal deficit to 3 percent of gross domestic product this year and to 3.5 percent next year to pay to rebuild parts of Peru devastated by floods this year.

“It’s a deficit increase but only for resources for the reconstruction and only for a period of 3 to 4 years,” Zavala said. “We’re taking all the measures necessary for the economy to accelerate.”

Peru will likely sell sovereign bonds again next year to finance government spending or to extend the life of the country’s debt, Zavala said.

On Monday, Peru sold some $3 billion in sol-denominated bonds that can be settled through post-trade services provider Euroclear, part of the country’s efforts to reduce debt in foreign currencies.

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Daimler to Recall 3 Million Vehicles to Ease Diesel Doubts

German automaker Daimler says it is voluntarily recalling 3 million diesel cars in Europe to improve their emissions performance.

The Stuttgart-based company, which makes Mercedes-Benz luxury cars, says it is taking the step to reassure drivers and strengthen confidence in diesel technology.

Diesels have been under a cloud since Daimler’s competitor Volkswagen admitted equipping vehicles with illegal software that meant they passed emissions tests, but then exceeded limits in everyday driving. There has been a push for diesel bans in some German cities because of concerns about levels of nitrogen oxide emitted by diesels.

The Daimler announcement comes hours after the regional government in the company’s home region of Baden-Wuerttemburg agreed to abandon proposals to restrict diesels if older diesels could be mechanically fixed to pollute less, the dpa news agency reported.

Daimler CEO Dieter Zetsche said Tuesday that “the public debate about diesel engines is creating uncertainty – especially for our customers.”

The recall will cover nearly all vehicles made under the EU5 and EU6 emissions standards and start in the next few weeks. The company said it would cost 220 million euros ($254.21 million), but that customers wouldn’t pay anything.

Daimler said in May that German investigators had searched its offices in connection with investigations of Daimler employees because of suspicion of fraud and criminal advertising relating to the possible manipulation of exhaust controls in cars with diesel engines. The company has said it is cooperating with the investigation.

 

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US-China Trade Rifts Resurface Even After Friendly Summit

Cake and conversation, it seems, can go only so far to mend longstanding economic rifts between the United States and China.

Three months after President Donald Trump and his Chinese counterpart, Xi Jinping, shared chocolate cake at an amiable summit in Florida, tensions between the world’s two biggest economies are flaring again.

Just as officials of the two nations prepare to meet Wednesday in Washington, the Trump administration is considering slapping tariffs on steel imports, a step that risks igniting a trade war. For the United States, it’s a perilous option to address a problem caused largely by China’s overproduction of steel.

And Trump is criticizing China again for failing to use its economic leverage to rein in its neighbor and ally, the nuclear rogue state North Korea.

Could this week’s U.S.-China Comprehensive Dialogue produce a meaningful breakthrough in economic relations?

Most China watchers are skeptical.

“I’m not looking for anything worthwhile,” says Derek Scissors, a China specialist at the conservative American Enterprise Institute.

For one thing, the points of difference between the two countries run deep. For another, Xi faces political pressures at home and won’t want to cause a stir in Beijing.

For all the tensions between the two nations, Trump’s words about Xi himself have remained warm. He has suggested that the personal bond he formed with Xi when the two met April 6-7 at Trump’s Mar-a-Lago resort can overcome fundamental differences on trade and national security. Last week, the president called his Chinese counterpart a “friend of mine,” ”a terrific guy” and “a very special person.”

At a White House event Monday, Trump suggested that the relationship is so strong that he asked during the Florida summit to start exporting U.S. beef to China and that the request was quickly granted. Trump said that the beef industry was so pleased to return to China after a 14-year ban that one executive from Nebraska “hugged me, he wanted to kiss me so badly.”

“We welcome this opportunity,” Kenny Graner, a North Dakota cattle farmer who is president of the U.S. Cattlemen’s Association, says of the China market. “They have a middle class that’s growing in income. It’s big, a lot of people.”

After the meeting, the president softened his accusations of abusive Chinese practices, dropped his threat to label China a currency manipulator and expressed optimism that China would pressure North Korea to scale back its nuclear program.

Still, the Trump-Xi relationship has yet to deliver the substantive changes that Trump the candidate had promised voters – a core piece of his mantra to put “America first.” The economic irritants are likely to vex U.S. and Chinese officials this week.

Trump had campaigned on a promise to shrink America’s trade deficits, which he blames for wiping out American factories and manufacturing jobs. The United States last year ran a trade deficit in goods with China of $347 billion, the amount by which imports exceeded exports. It’s by far the widest gap that U.S. has with any country. Trump says China unfairly subsidizes exports.

Take steel. From 2000 to 2016, China accelerated steel production, raising its share of the world market from 15 percent to nearly 50 percent. As Chinese steel poured into the market, global prices fell, hurting American steelmakers. Scissors notes that China has long promised to stop subsidizing steel and to slow production but hasn’t delivered.

The Trump administration responded by invoking a little-used weapon in American trade law that lets the president tax or restrict imports – if a U.S. Commerce Department investigation finds that they imperil national security. (The result of Commerce’s investigation of steel imports is expected soon.) The rationale was that the American military relies on steel for airplanes, ships and other equipment. Steel also goes into roads, bridges and other infrastructure.

The problem is that the United States already blocks most Chinese steel imports. So any tariffs or limits on imports would instead hurt other countries, including such staunch allies as Canada and South Korea.

Scissors says the United States could try to coordinate sanctions against China by countries that do import Chinese steel.

David Dollar, a former World Bank and U.S. Treasury official who is now at the Brookings Institution, thinks Xi isn’t likely to make a bold move to cut Chinese steelmaking capacity – or enact other economic reforms – in advance of the Chinese communist party’s National Congress this fall. At the meeting, Xi will want to further tighten his grip on the party.

What’s more, the European Union and others are likely to lash back if the U.S. imposes sanctions on foreign steel, thereby running the risk of a broader trade war.

Then there’s North Korea. As a presidential candidate, Trump attacked China for refusing to pressure Pyongyang to back off from developing nuclear weapons. After the Mar-a-Lago summit, though, Trump praised Beijing for agreeing to help deal with North Korea. As a reward, he abandoned his vow to accuse China of manipulating its currency to benefit Chinese exporters.

This month, North Korea defiantly proceeded with its first launch of an intercontinental ballistic missile. Trump tweeted his complaint:

“Trade between China and North Korea grew almost 40% in the first quarter. So much for China working with us – but we had to give it a try!”

Brookings’ Dollar says the administration will likely continue to be disappointed.

“China is not going to do anything dramatic” to pressure North Korea, he says. “They don’t want that regime to collapse” and thereby destabilize the Korean peninsula and likely send North Korean refugees into China.

Overall, Dollar expects more turbulence between Washington and Beijing. The Obama administration, he notes, had kept the relationship stable despite economic differences by working with China on such issues as the Paris climate agreement and the Iran nuclear deal. But Trump has pulled out of the Paris deal and denounced the Iran pact.

“We’re going to see more volatility in the U.S.-China relationship than we’ve seen in years,” Dollar says.