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The world economy is slowing as the prospect of a trade war grows ever closer, the New York Times reports. The most recent escalation of hostilities came on Friday, when President Trump imposed tariffs on $50 billion worth of imports from China, prompting Beijing to retaliate, and the effects are being felt around the world: Shipments are slowing, prices of raw materials are rising, orders are being cut and investments delayed. American farmers are losing sales as trading partners impose duties of their own. Trump, who believes trade wars “are easy to win” may be using the threat of a full-blown conflict as a negotiating tactic, as he seeks to reduce U.S. trade deficits and persuade multinational companies to start manufacturing in the U.S. again, but history suggests that trade wars are costly for everyone. In the meantime, U.S. businesses are struggling to cope with threats to their supplies, uncertainty over the terms of trade and fear of an “existential threat” to the world economy. Due to the globalized nature of the computer-chip supply chain, the latest developments could mean U.S. companies will be paying a tariff on their own products, according to a warning from the Semiconductor Industry Association. Meanwhile, India has proposed to raise import duties by up to 50 percent on 30 products, ranging from motorcycles and certain iron and steel goods to boric acid and lentils, in a signal that New Delhi will hit back at America’s protectionist policies that range from a tighter visa regime to higher import duties.
The New York Times, Financial Times
Hedge funds investing in cryptocurrencies have suffered heavy losses this year, with performance dropping by 35 percent, the Financial Times reports. Global hedge funds investing in cryptocurrencies rose by more than 2,700 percent in 2017 but they have fallen sharply this year, partly in response to concerns over a regulatory crackdown, with negative returns in four out of five months: The funds rose 45 percent in April but were down 17 percent in May. Bitcoin has lost more than half its value this year, falling to $6,600 from about $17,500 at the start of the year, and reducing its market cap from nearly $300 billion to just over $100 billion. Yet observers say that hedge funds may see short-term volatility as an opportunity, rather than a threat, and say that the long-term effects of so many hedge funds entering the market will prove more significant than price fluctuations. Separately, the Bank of International Settlements (BIS) said that cryptocurrencies are not scalable and are more likely to suffer a breakdown in trust and efficiency the greater the number of people using them.
The New York Times, Financial Times, Stat
Theranos founder Elizabeth Holmes has been indicted for fraud by a grand jury, which found that the company’s patented blood-testing devices cheated investors and put thousands of patient’s lives at risk, Stat reports. Holmes and her former deputy, Sunny Balwani, were charged with two counts of conspiracy to commit wire fraud and nine counts of wire fraud, leaving them facing up to 20 years in prison and $2.7 million in fines. Three months ago, Theranos settled fraud charges brought by the Securities and Exchange Commission, which argued it had lied about its finances, and the potential of its technology. The criminal charges brought by the Department of Justice go further, alleging that Holmes and Balwani lied to patients and doctors, selling blood tests it knew were faulty and putting patients at risk, as well as defrauding investors. It alleges they lied about the state of the business, claiming it would earn $100 million in 2014 and $1 billion in 2015, when they knew it would make almost nothing.