This is an audio transcript of the FT News Briefing podcast episode: ‘How Italy could decide the EU’s response to tariffs’
Kasia Broussalian
Good morning from the Financial Times. Today is Monday, April 7th, and this is your FT News Briefing.
The UK is looking to make things easier for private equity, and Italy holds the key to Europe’s response on tariffs. Plus, popular apps on Google and Apple mobile stores might have connections to China.
Michael Acton
It’s not immediately clear that you’re dealing with a company that’s linked to a Chinese sanctioned entity.
Kasia Broussalian
I’m Kasia Broussalian and here’s the news you need to start your day.
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The UK government is expected to introduce lighter regulations today for private equity and hedge funds. The Treasury plans to lift the size requirements for certain rules. Instead of kicking in for firms managing £100mn in assets, it’ll now apply to those with £5bn. The government is hoping that’ll make it easier for smaller firms to meet reporting requirements, and it’ll get rid of some overlap with other rules. Ultimately, officials hope that these changes will encourage more investment. The move is part of a bigger initiative in the UK to cut red tape for businesses and kick-start the country’s stagnant economy.
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Italy’s Prime Minister Giorgia Meloni is in a difficult position. She’s been asked to pick a side when it comes to President Donald Trump’s tariffs, and her decision could either complicate Italy’s relationship with the European Union or the United States. The FT’s Andy Bounds is covering a meeting of EU trade ministers today, and he’s here to tell me where things stand. Hi, Andy.
Andy Bounds
Hi, Kasia.
Kasia Broussalian
So first, just tell me what the bloc is actually considering when it comes to a response to US tariffs.
Andy Bounds
Yes, so there’s been three hits on the EU, if you like. They’ve been hit by the steel and aluminium, then by the car tariffs, and now by the so-called reciprocals of 20 per cent. So far, they have responded to the steel tariffs with a €26mn package, which is likely to be passed this week. Now, a lot of member states wanna go further and faster. They’re still trying to negotiate their way out of this, but saying, if this doesn’t work, we’re gonna respond forcefully.
Kasia Broussalian
And do we have any idea of what “forcefully” actually means from the EU?
Andy Bounds
Yeah, the dilemma they have is that on goods, they obviously run a surplus with the US. So, therefore, when it comes to retaliation, it’s only so far they can go without hurting their own industries as well, who need some of these US supplies. So they’re starting to think about services, things like restrictions on tech operations, even financial services. You could, in theory, ban American companies from winning public procurement contracts. So that’s where a lot of member states are saying, we’re inevitably going to end up.
Now, Italy is very, very soft on this issue. They don’t want any retaliation at all at the moment. They’re saying let’s hold off, let’s talk. You know, the US is so important to us. We don’t wanna compromise our relationships. And this has left Italy in a very complicated position.
Kasia Broussalian
Yeah, tell me more about that. Where does Meloni fit into this picture?
Andy Bounds
So Meloni came to power a couple of years ago and nobody quite knew what to make of her. She was a sort of hard right, populist, nationalist. You know, historically she’s had quite close ties to Donald Trump, she’s been to Mar-a-Lago, but she governed as quite centrist. There’s certain issues at home, identity politics she’s played with, but in the EU she’s generally played ball, she’s genuinely been on the side of the majority. So some member states are saying, now is the time she has to choose. Is she loyal to the sort of nationalist creed “My country first and I’ll do what’s best for me” or is she going to be a team player in Europe and kind of join tough retaliation if that’s what the majority want?
Kasia Broussalian
And what sort of power does Meloni hold as the EU is kind of debating whether or not to hit US services?
Andy Bounds
Yeah, so what they need to do that strongly is something called the anti-coercion instrument, which has been sort of dubbed the “bazooka” in Brussels, because it allows them to do pretty tough things, as I mentioned earlier. But to use it, you need to have a qualified majority of member states. So it would need sort of five member states to oppose it, and one of those would have to be quite a big member state because population counts in the EU voting system. So if Italy was to join the sort of blocking minority, then they wouldn’t be able to use this. And they would feel that it’s a bit like going in to negotiate with Trump. You know, without a gun in your holster, all the bullets have been taken out before you even go in the room, so why is he gonna negotiate with you?
Kasia Broussalian
So there’s a lot still under consideration. So Andy, what do you think Meloni, and in the end, the European Union, will do in the face of these tariffs?
Andy Bounds
I mean, I think personally, we will get to the stage of having to use that anti-coercion instrument. It slightly depends on what happens. You know, there are political pundits and economists saying, look, this is going to be so bad for the US economy that Trump’s going to start rolling these back, you know, within a few weeks or months. In that scenario, the EU would obviously be very, very happy not to do anything at all. But let’s say he’s going keep going with this idea, then I think we will end up going the full scale. And I think ultimately Meloni, if she’s really up against the wall and big member states like Germany, France, Spain, Poland are pushing for this, I think she will fall into line.
Kasia Broussalian
That’s the FT’s Andy Bounds. Thanks, Andy.
Andy Bounds
Thanks very much.
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Kasia Broussalian
Now in other tariff news, Donald Trump’s announcement last week ended up sparking the biggest sell-off in US junk bonds since 2020. Investors are getting pretty worried about an economic slowdown in corporate America that could leave weaker companies struggling to repay their debts. And analysts say that corporate bonds are worth watching because credit can be the proverbial canary in the coal mine for a faltering economy. Lower rated companies, particularly those dealing in household goods, retail, and car parts, were the hardest hit in the bond sell-off.
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That VPN you just downloaded from the app store, it might have ties to China. Let me explain here. A couple of popular private browsing apps on both Apple and Google mobile stores are operated by a certain company — one with links to a blacklisted cyber security firm in China. And given all the worries about Chinese tech infiltrating the US marketplace, it’s kind of concerning. Here to break it all down is my colleague Michael Acton. He’s been looking into this. Hey, Mike.
Michael Acton
Hey.
Kasia Broussalian
All right, so give me the details here. What exactly did you find out about these VPNs?
Michael Acton
So this sort of stemmed from a Tech Transparency Project report that kind of uncovered a thicket of subsidiaries that connect a company called Qihoo 360, a Chinese cyber security company, to at least five VPN apps on Apple and Google’s app stores. So we then subsequently did a bit of digging into it. my colleague actually went in person to some of these offices in China, and it became clear that there has been a sort of concerted effort to hide the fact that this company is linked. That’s significant because in 2020, Qihoo was sanctioned by the US government for potential Chinese military links.
Kasia Broussalian
Yeah, explain that a bit more. I mean, I can kind of sniff the danger already, but I also thought that the whole purpose of using a VPN was basically to hide where I am when I’m online.
Michael Acton
So there’s some irony in this because the App Store, Apple’s App Store in China, does not actually carry VPNs. Because of this precise reason, VPNs are a private encrypted connection to a server that basically allows you to get around geographical restrictions, which obviously allows people to circumvent China’s firewall.
What’s kind of difficult about this is that these companies that appear on the Apple App Store or the Google Play Store, it’s not immediately clear that you are dealing with a company that’s linked to a Chinese sanctioned entity and in fact that’s part of the problem here is how is it possible for these platforms to realistically police the millions of apps on their platforms and know exactly what is happening and that’s of course kind of a big deal at the moment for a long time there have been concerns about Chinese tech companies operating in the US that could pose a risk to consumer privacy and data protection even if these apps have stated policies. It’s very hard to actually make sure that the companies are really doing that.
Kasia Broussalian
And so how widespread are these VPNs with Chinese links ultimately downloaded?
Michael Acton
Of the five apps that are linked to Qihoo, collectively they’ve been downloaded millions of times. And these apps have high ratings. They seem, on the face of things, to be completely legitimate when you look at them, when you access the store. Another thing that Tech Transparency Project dug up was that 20 out of the 100 most popular VPN apps on Apple’s App Store surreptitiously have Chinese owners, that is to say there’s been some kind of attempt to disguise that link. Now the fact that they’re owned in China is not necessarily a huge concern in and of itself. And that’s partly why the focus of our reporting was on this sanctioned company.
Kasia Broussalian
Yeah. But it is still kind of, you know, eye-catching when we’re talking about this environment that we’re in at the moment. So how have Apple and Google responded to your findings?
Michael Acton
So both companies have a fairly similar stance. They’ve said they’re in full compliance with all sanctions laws and that they’ll take action to take apps down. And what was interesting is after we reach out to Apple ahead of publishing the story, flagging these five apps, two of them were actually pulled from the App Store.
Kasia Broussalian
Well, I guess as a user, you know, obviously I download apps from the App Store. What can I do to keep my data safe?
Michael Acton
A lot of people use these app stores pretty much every day or log into them or download things. And it’s really about not taking things on faith. And on the flip side, I mean, I think it’s clear the policymakers also have a role to play in this as well, and I guess we’ll see how this plays out.
Kasia Broussalian
Michael Acton is the FT’s San Francisco correspondent. Thanks, Mike.
Michael Acton
Thanks.
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Kasia Broussalian
You can read more on all of these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.
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