05/03/2025

BIZ & FINANCE WEDNESDAY | MAR 5, 2025

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Trade war as Trump’s new tariffs take effect

Versace could expand Prada’s reach, but hurt short-term profits MILAN: An acquisition of Versace by Italian luxury group Prada would create a company with a broader base that is more resistant to business cycles, but reviving the targeted brand could take years and hit short-term profits. Prada is seeking to expand after posting strong organic sales growth in the last nine months of 2024 despite a slowdown in demand, while Versace operates at a loss. A merger would be Italy’s answer to the French conglomerates that dominate the luxury business. “The (Versace) brand needs restructuring and has a history of mismanagement with no easy fix,“ said Melania Grippo, analyst at BNP Paribas, in a note on Monday. However, acquiring such a famous brand as Versace would accelerate growth, said Mario Ortelli, managing partner at luxury advisory firm Ortelli & Co. “Scale matters,“ he said, pointing out that Prada, with a market capitalisation of US$22.5 billion (RM100 billion), is a fraction of the size of French giants LVMH and Kering. Bloomberg News reported on Sunday that Prada is moving closer to a deal after agreeing to pay nearly €1.5 billion (RM7.1 billion) for the business founded by the late Gianni Versace in the 1970s, where his sister Donatella has been the creative head for more than two decades. Capri Holdings, which owns Versace, is working with Barclays to explore a sale of the brand, sources have said. Prada, listed in Hong Kong but controlled by designer Miuccia Prada and her husband Patrizio Bertelli, has the right skills to address Versace’s shortcomings in manufacturing, marketing strategy and running of directly owned shops. It also has the leather goods skills needed to develop that part of the business, which never took off. “Versace has not expressed all the potential it had under Capri’s management. Prada has the credentials for a relaunch,“ Ortelli said. Capri, previously known as Michael Kors, bought Versace more than six years ago for €1.8 billion. Versace, with its bold maximalist aesthetic, would bring a new segment of customers to Prada, known for its minimalist style. “Prada‘s interest in Versace probably also derives from the desire to make its business less cyclical from a fashion point of view, since it would bring on board a brand with a very different profile,“ UBS analyst Susy Tibaldi said in an interview. Turning Versace around could take several years, Tibaldi said. “There is a lot to rebuild,“ she said, citing, for example, Versace’s widespread discounts and wide range of products, not all of which can be called luxury items.“If you can get this type of asset for an attractive price, the potential is very significant.” A sign of Versace’s potential is its license portfolio, which has a retail value around US$2 billion, she added. Versace is expected to report revenues of US$810 million in its fiscal 2025 ending in March, down from the previous year. It had operating losses in the last three quarters. “We would not applaud the acquisition of Versace by Prada,“ BNP Paribas said.“But, in light of Prada’s (recent) share price underperformance, we believe potential risks around this deal have been mostly priced in.” Prada ended 2023 with a net cash position of €197 million, after a significant outlay on real estate investments. Analysts expect the group, which releases its financial results yesterday, to have over €500 million in net cash at the end of 2024. This would need another €1 billion in financing, which would be sustainable for the group, analysts said. – Reuters

WASHINGTON: US President Donald Trump’s new 25% tariffs on imports from Mexico and Canada took effect yesterday, along with a doubling of duties on Chinese goods to 20%, launching new trade conflicts with the top three US trading partners. The tariff actions, which could upend nearly US$2.2 trillion (RM9.8 trillion) in two-way annual US trade went live at 12:01am EST (0501 GMT), hours after Trump declared that all three countries had failed to do enough to stem the flow of the deadly fentanyl opioid and its precursor chemicals into the US. China responded immediately after the deadline, announcing additional tariffs of 10 15% on certain US imports from March 10 and a series of new export restrictions for designated US entities. Canada and Mexico, which have enjoyed a virtually tariff-free trading relationship with the US for three decades, were poised to immediately retaliate against their longtime ally. Canadian Prime Minister Justin Trudeau said Ottawa would respond with immediate 25% tariffs on C$30 billion (RM92 billion) worth of US imports, and another C$125 billion if Trump’s tariffs were still in place in 21 days. He said previously that Canada would target American beer, wine, bourbon, home appliances and Florida orange juice. “Tariffs will disrupt an incredibly successful trading relationship,” Trudeau said, adding that they would violate the US-Mexico-Canada free trade agreement signed by Trump during his first term. Ontario Premier Doug Ford told NBC that he was ready to cut off shipments of nickel and transmission of electricity from his province to the US in retaliation. Mexican President Claudia Sheinbaum was expected to announce her response during a morning news conference in Mexico City yesterday, the country’s economy ministry said. The extra 10% duty on Chinese goods adds to a 10% tariff imposed by Trump on Feb 4 to o Levies of 25% on imports from Mexico and Canada, doubling of duties on Chinese goods to 20% signal start of conflict

China’s commerce ministry said US tariffs violated WTO rules and harmed US-China trade. – UNSPLASH PIX

of the Chinese market to Brazil. The tariffs on Mexican and Canadian products could have much deeper repercussions for a highly integrated North American economy that depends on cross border shipments to build cars and machinery, refine energy and process agricultural goods. “Today’s reckless decision by the US administration is forcing Canada and the US toward recessions, job losses and economic disaster,” Canadian Chamber of Commerce CEO Candace Laing said in a statement. She said the US tariffs will fail to usher in a “golden age” coveted by Trump but instead raise costs for consumers and producers and disrupt supply chains. “Tariffs are a tax on the American people.” Matt Blunt, president of the American Automotive Policy Council representing Detroit automakers, called for vehicles that meet the US-Mexico-Canada Agreement’s regional content requirements to be exempted from the tariffs. Even before Trump’s tariffs announcement, US data on Monday showed factory gate prices jumped to a nearly three-year high, suggesting that a new wave of tariffs could soon undercut production. Trump’s confirmation that the tariffs would proceed sent financial markets reeling with global stocks tumbling and safe-haven bonds rallying. Both the Canadian dollar and Mexican peso fell against the greenback. – Reuters

punish Beijing over the US fentanyl overdose crisis. The cumulative 20% duty also comes on top of tariffs of up to 25% imposed by Trump during his first term on some US$370 billion worth of US imports. Some of these products saw US tariffs increase sharply under former president Joe Biden last year, including a doubling of duties on Chinese semiconductors to 50% and a quadrupling of tariffs on Chinese electric vehicles to over 100%. The 20% tariff will apply to several major US consumer electronics imports from China previously untouched by prior duties, including smartphones, laptops, videogame consoles, smartwatches and speakers and Bluetooth devices. China’s new tariffs announced yesterday targeted a wide range of US agricultural products including certain meats, grains, cotton, fruit, vegetables and dairy products. Beijing also placed 25 US firms under export and investment restrictions on national security grounds. Ten of these firms were targeted for selling arms to Taiwan. China’s commerce ministry said the US tariffs violated World Trade Organisation (WTO) rules and “undermine the basis for economic and trade cooperation between China and the US” US farmers were hard hit by Trump’s first term trade wars, which cost them about US$27 billion in lost export sales and conceded share

UK probes TikTok, Reddit over children’s personal data practices BENGALURU: Britain’s privacy watchdog, the Information Commissioner’s Office, on Monday launched an investigation into how TikTok, Reddit and online image sharing website Imgur safeguard children’s privacy. spokesman told Reuters in an emailed statement. Social media and discussion platform Reddit, and Imgur, face UK investigation over their handling of children’s personal data and age verification practices, the data watchdog said. a spokesman from the company told Reuters in an email. “Most of our users are adults, but we have plans to roll out changes this year that address updates to UK regulations around age assurance,“ the Reddit spokesman said. Imgur did not respond to a Reuters request for comment.

Social media companies use complex algorithms to prioritise content and keep users engaged. However, the fact that they amplify similar content can lead to children being influenced by increasing amounts of harmful material. The watchdog said it is probing how Chinese company ByteDance’s short-form video-sharing platform TikTok uses 13–17-year-olds’ personal information to suggest content in their feed. TikTok’s recommender systems operate under comprehensive measures that protect privacy and safety of teens, including restrictions on content allowed in their feeds, a TikTok

“If we find there is sufficient evidence that any of these companies have broken the law, we will put this to them and obtain their representations before reaching a final conclusion,“ the Information Commissioner’s Office said in a statement. In 2023, the ICO fined TikTok £12.7 million (RM71 million) for breaching data protection law by using the personal data of children aged under 13 without parental consent. Reddit has been working closely with the ICO and intends to comply with all relevant regulations in the countries in which it operates,

Britain has passed legislation that set tougher rules for social media platforms, including a mandate for them to prevent children from accessing harmful and age-inappropriate content by enforcing age limits and age checking measures. Social media platforms including Facebook, Instagram and TikTok are required to “tame” their algorithms to filter out or downgrade harmful material to help protect children under proposed British measures published last year. – Reuters