TheChek News Flow

Medical research fell under the hatchet of the Trump administration this week, and investors slashed the stocks of those who make lab equipment.

The National Institutes of Health announced on Friday, Feb. 7, that it will cap its payments for the indirect costs of research, like support staff and costly lab equipment.

Shares of gene-sequencing leader Illumina have fallen 17% to $101.50 since the announcement. Its smaller rivals 10X Genomics and Pacific BioSciences of California have lost 23% and 15%, respectively.

Until now, the amount of a grant that could be spent on overhead—known as “indirect funds”—was negotiated for each grant. Indirect funds amounted to $9 billion, or 26%, of the $35 billion that NIH distributed in grants last year. NIH says it will now only allow 15% toward overhead. That would have reduced its last year’s overhead payments to $5 billion from $9 billion.

Medical research institutes and universities quickly warned that the cuts would devastate the search for cancer cures and other cutting edge research.

“We’re all reeling,” Harvard Medical School Dean George Daley told NPR. “This would decimate medical research.”

The Boston area’s concentration of research labs has made Massachusetts into the nation’s biggest recipient of NIH funds, per-capita. Institutions in the state stand to lose about half a billion dollars under the announced cuts, says James S. Murphy, a policy analyst at the advocacy group Education Reform Now. That includes about $105 million for Massachusetts General Hospital, $78 million for Brigham and Women’s Hospital, and $55 million for Boston Children’s Hospital.

“Cutting indirect funding for NIH research with a hatchet instead of a chisel jeopardizes the entire ecosystem of scientific discovery,” said a post on X by Answer ALS, a charity that funds research into the deadly neurological disease amyotrophic lateral sclerosis.

Attorneys general from 22 states went to federal court in Boston on Monday, where U.S. District Judge Angel Kelley temporarily halted the policy in those states, pending a hearing on Feb. 21.

In its announcement, the NIH had called out Ivy League research centers that it said had spent two-thirds of their grants on overhead.

The cuts were cheered by President Donald Trump’s designated ax-wielder, Tesla CEO Elon Musk, who claimed elite universities were wasting grant dollars on administrative costs.

“Can you believe that universities with tens of billions in endowments were siphoning off 60% of research award money for ‘overhead’?” Musk wrote on his social-media platform X. “What a ripoff!”

The cuts are bad news for some scientific instrument makers, whose expensive systems are shared at a research institution and funded from the overhead portion of NIH grants.

The 2025 budget for NIH is for $49 billion. So the just-announced cuts would trim that by about 8%, or $4 billion, said Morgan analyst Rachel Vatnsdal in a Sunday research note.

“We believe the budget actions will result in broader headwinds for the life science tools space, although we expect specialty tools will be more impacted than core tools,” she writes.

Those specialty tools include Illumina gene-sequencing systems, which research centers usually house in a central lab funded from the “indirect” pieces of NIH grants. She rates Illumina stock at a Hold.

Vatnsdal figures that some 25% of Illumina orders come from customers reliant on NIH’s indirect funding. At Pacific Biosciences and 10x Genomics, she estimates that NIH overhead grants account for 20% of revenue.

Illumina shares have been shadowed for months by fears of NIH cuts and of a trade war. China’s Ministry of Commerce recently blacklisted the company’s products. Apart from warning that these actions pose risks, Illumina hasn’t quantified how they would affect its revenue.

Illumina has dominated the market for gene-sequencing systems, and kept America at the forefront of genomics. It now faces competition from Roche Holding, and a handful of start-ups. So its sales of sequencers could slow over the rest of the decade, says Guggenheim analyst Subbu Nambi.

But most Illumina revenue comes from consumables used in sequencing. Those sales will continue growing, the analyst says, and that will lift Illumina earnings at a 10% annual rate. Nambi rates Illumina a Buy, and hopes its stock will rise to $150, from $101 today.

The NIH cuts won’t help.

Illumina’s 2024 year 10-K just appeared on Thursday.

It warns: “Reduced allocations to government agencies that fund research and development activities, such as the U.S. National Institutes of Health, or NIH, or targeted cancellations by the U.S. federal government of certain grants or contracts, could adversely affect our business or results of operations.”

Some wealthy Americans are motivated by the changing political landscape under President Donald Trump, or they want to protect their assets if the U.S. economy weakens.

Many wealthy individuals are pleased with President Donald Trump’s policies—and relieved they won’t face the “billionaire’s” tax once proposed by the Biden administration. But others are worried, and they aren’t waiting to see how Trump’s second term will affect the economy, markets, and their personal lives.

Many wealthy individuals are pleased with President Donald Trump’s policies—and relieved they won’t face the “billionaire’s” tax once proposed by the Biden administration. But others are worried, and they aren’t waiting to see how Trump’s second term will affect the economy, markets, and their personal lives.

In addition to moving assets and investments abroad, these folks are also, in some cases, seeking residency or citizenship in other countries, according to immigration attorneys and wealth managers.

The wealthy have a number of reasons for moving funds to Switzerland, Singapore, or the United Arab Emirates, among other locales. Here’s one: protection against actions by the Trump administration for perceived wrongdoing.

Those who didn’t receive preemptive pardons from Biden, and who worry about being targeted, fear the new administration could freeze their bank and brokerage accounts, according to immigration attorney David Lesperance.

“Having money means that they have more tools in the toolbox,” Lesperance told Barron’s. “It also means they’re at a greater risk of being a target and they’ve got more pain points.”

He prepared a document outlining actions clients should take if they are concerned about retribution. Step one: Secure a second passport, as the U.S. one can be canceled by the government without notice. Step two: Open and fund non-U.S. bank and brokerage accounts “ASAP.”

One of Lesperance’s clients, who was among those involved in “high-profile efforts to bring Trump to justice,” wants to move himself and his family out of the U.S., given the propensity of Trump and his supporters to seek revenge on perceived enemies, he says.

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“Unjustified civil and criminal government harassment would be financially and emotionally devastating,” Lesperance says. “This is a major topic of discussion with his [client’s] colleagues, both currently in and out of government.”

Interest in moving assets abroad always increases when different parties take the U.S. presidency, says Philipp Hensler, an independent wealth advisor in Switzerland. “Doesn’t matter if Biden or Trump is president,” he says. “Uncertainty increases, and wealthy people are trying to hedge their bets.”

Some who are now inquiring about moving assets or getting a second citizenship want to “prepare for the unexpected,” Hensler tells Barron’s. These individuals are worried about the radicalization of the political and social discourse in the U.S. and believe the country is “entering a prolonged period of uncertainty and volatility,” he says. “There is this general unease that something isn’t quite right.”

The number of individuals who expatriate from the U.S. each year often rises around presidential elections, according Scott Bowman, a partner at McDermott Will & Emery in Washington, D.C., who counsels wealthy individuals, families, and family offices on tax and estate planning. But “the level of intensity of concern in the lead-up to the 2024 election was greater than what I have seen in previous election years,” he says.

Most of the clients who are now retaining immigration firm Henley & Partners are “Democrat-aligned,” Dominic Volek, global head of private clients, tells Barron’s. But there also were those who approached Henley before the election fearful of the implications to their wealth from a win by Democrat Kamala Harris. Some of those individuals are still pursuing a second citizenship as insurance, should Democrats take power in four years, he says.

Michael Pellman Rowland, a partner with Baseline Wealth Management, a Swiss boutique wealth manager that works with U.S. citizens opening accounts abroad, tells Barron’s that some of the inquiries are from those who worry that the U.S. government could impose capital controls on their assets, limiting their ability to move money abroad in the future.

Among Rowland’s clients are a Chicago-based Democratic donor and his wife. They are moving assets to Switzerland so they have “adequate capital outside the U.S., should it ever become difficult to do so in the future,” he says. The couple also plans to live in Europe part time, or even full time ultimately.

Another is a California resident who is a member of a notable art family. She worries about political turmoil in the U.S. and the rising U.S. government deficit. She worked with Rowland to move some of her trust assets to Switzerland.

Many have nonpolitical concerns. Some want to “hedge or at least ‘prep’ for a potential economic ‘doomsday scenario’ ” resulting from inflation, high levels of government spending, and public debt, says Bowman at McDermott Will & Emery.

Bowman’s clients—most with a net worth of about $100 million or more—also are worried about the “ongoing efficacy of the U.S. dollar as the world’s dominant currency,” as the U.S.’s relative share of global GDP declines, according to a draft of a paper Bowman wrote on diversifying jurisdictions.

The wealthy don’t view these factors as “a five-alarm fire,” but because they are stewards for future generations of wealth that they created or inherited, they are asking, “Do we need to have some strategies to diversify out the legal, economic, and political risk if we’re highly concentrated in one jurisdiction?” he says.

Todd Cowan, executive director at London & Capital, a U.K.-based wealth management firm, says the primary reasons his clients choose to move assets or relocate has shifted over the years from a desire to geographically spread their holdings to worries that the U.S. Supreme Court’s 2022 decision to overturn Roe vs. Wade could eventually impact same-sex marriage. People have also cited rising healthcare costs and gun violence in the U.S., in addition to politics.

“While concerns about the changing political landscape or potential policy changes (from Trump to Biden, and now back to Trump), have been part of the conversation and in some instances a leading motivator” for some clients, Cowan said in an email, they are usually part of personal and financial considerations rather than the primary driver.

There isn’t comprehensive data on capital flows to other countries from individuals. But Foreign Bank and Financial Accounts tracked by the government have risen nearly every year since fiscal year 2020 (beginning Oct. 1), including a nearly 8.8% jump to more than 1.7 million accounts in 2024 from under 1.6 million a year earlier, according to a spokesperson for the Financial Crimes Enforcement Network unit of the U.S. Treasury Department.

In the past, U.S. citizens may have moved assets abroad in an effort to avoid paying taxes, but the U.S. government clamped down on foreign financial institutions beginning in 2008 for their alleged assistance in allowing citizens to avoid paying taxes, Bowman wrote.

Today, U.S. citizens seeking to move money abroad aren’t motivated by tax avoidance, agrees Reaz Jafri, a New York immigration attorney at Withersworldwide. “They realize that as American citizens they are going to have their worldwide income reported and taxed in the U.S. and any foreign bank accounts they have will be reported to the IRS,” Jafri told Barron’s.

Securing residency or citizenship abroad is often part of the package for individuals who want to diversify their assets overseas—which often involves buying a home. An initial spike of inquiries in the wake of the 2024 presidential election into law firms and specialists that facilitate migration to other countries have since, in many cases, turned into applications for residency or citizenship abroad for those who qualified.

The number of clients who have retained Lesperance to apply for residency, citizenship, or a digital nomad visa is up more than 400% from his usual pace of business, he says. A digital nomad visa allows someone to live and work abroad for a year or more, depending on the country, buying time until a long-term solution is completed. It’s a “tsunami,” now compared with the “bit of an uptick,” after Biden’s proposed fiscal 2024 budget included a “billionaire minimum tax” of 25% on those worth $100 million or more, he says.

Beginning in the third quarter last year, Latitude, a firm that specializes in residence and citizenship by investment, received an increase in inquiries “from financially qualified individuals with greater intent and faster readiness to proceed,” says Christopher Willis, a managing partner at Latitude. About 16% of inquiries by those who are financially qualified become clients.

At Henley & Partners, applications by U.S. citizens jumped nearly 60% last year from a year earlier. In December, the number of clients retained from the U.S. “absolutely shot the lights out” in a month that is usually quiet, says Volek.

Not all inquiries have turned into applications. At Arton Capital, a firm specializing in residency and citizenship by investment, 5% have initiated the process, with another 15% continuing to explore their options. CEO Armand Arton told Barron’s that he expects a fifth of those will proceed, with others dropping out for a range of reasons, including not being able to qualify or because they no longer feel compelled to move.

Those who are considering a move outside the U.S. for political reasons may be jumping from the frying pan into the fire, as the atmosphere from France to Italy and Germany becomes more nationalistic. But people with enough wealth view a second citizenship as a hedge, not a foolproof solution, Volek says. “If you have the financial capacity, you should be as diversified in terms of your domicile options as possible, because nowhere is perfect.”

Kyiv wants security guarantees to be tied to any natural resources deal

Ukrainian President Volodymyr Zelenskyy has rejected a US proposal to take ownership of around 50 per cent of the rights to his country’s rare earth minerals and is trying to negotiate a better deal, according to several people familiar with the matter.

US Treasury Secretary Scott Bessent offered Zelenskyy the deal during a visit to Kyiv on Wednesday, which came after Trump suggested the US was owed half a trillion dollars’ worth of Ukraine’s resources in exchange for its assistance to the war-torn country.

Zelenskyy wants American and European security guarantees to be tied directly to any deal on the mineral reserves, according to three people familiar with the US-Ukraine negotiations.

He is also keen for other countries, including EU states, to be involved in future natural resource exploitation.

“We are still talking,” Zelenskyy said in Munich on Saturday. “I have had different dialogues.”

A senior Ukrainian official told the Financial Times that Kyiv was “trying to negotiate a better deal”. 

During his visit to the presidential office in Kyiv this week Bessent brought a document that Trump wanted Zelenskyy to sign before Bessent returned to Washington, according to five people familiar with the matter.

Speaking to reporters before he and Zelenskyy discussed the deal privately for roughly an hour, Bessent described it as an “economic agreement” with Kyiv to “further intertwine our economies”. 

The Trump administration would “stand to the end [with Kyiv] by increasing our economic commitment” which would “provide a long-term security shield for all Ukrainians” once Russia’s war is over, Bessent said.

“When we looked at the details there was nothing there [about future US security guarantees],” another Ukrainian official told the FT.

Asked whether it was a bad deal for Ukraine, a third Ukrainian official familiar with the proposal said it was “a Trump deal”. “This is Trump dealmaking,” the official said. “It’s tough.” 

Ukraine’s main concern is the lack of connection to broader security guarantees, according to three people who have reviewed the proposal.

Ukrainian officials asked how the agreement would contribute to their country’s long-term security, but were only told it would ensure an American presence on Ukrainian soil — a vague response that left key questions unanswered, those people said.

Bessent argued that the mere presence of Americans securing the mineral deposits’ sites would be enough to deter Moscow.

Another sticking point is the document’s specification that New York would be the jurisdiction in which disputes over the mineral rights are resolved, according to two people familiar with the matter.

After their meeting Zelenskyy told reporters that he would consider the proposal but would not sign anything at that time.

“We will review this document and work swiftly to ensure our teams reach an agreement. The US is our strategic partner and we are committed to finalising the details,” Zelenskyy said at the time.

Bessent said after the meeting that Trump wanted the deal to be done.

“I believe this document is important from President Trump’s perspective in resolving this conflict [with Russia] as soon as possible​,” he said. “We will provide guarantees of American assistance to the people of Ukraine. I believe this is a very strong signal to Russia about our intentions​.”

Zelenskyy said he wanted to discuss the prospect of a mineral rights deal further at the Munich Security Conference, which is taking place this weekend.

At a meeting with US vice-president JD Vance in Munich on Friday, he made a counter-offer which he also discussed with US lawmakers on the sidelines of the forum.

In a speech in Munich on Friday, Zelenskyy said his legal team would review the document Bessent presented in Kyiv to offer advice and suggest potential changes. He described it as a memorandum between the US and Ukraine, rather than a formal security agreement.

Zelenskyy has not signed the deal because he wants to get others, including European nations, involved in mining the minerals too, a European official briefed on the meetings said.

“They’re under intense pressure from the Americans on this,” the official said.

The US proposal aligns with a “victory plan” that Zelenskyy’s team has been developing since last summer to deepen ties with the Trump administration by allowing the US access to critical minerals used in high-tech industries.

Ukraine has precious minerals estimated to be worth several trillion dollars, including lithium, titanium and graphite, all of which are crucial for manufacturing high-tech products. But many of these resources are in areas which are either under Russian occupation or are at risk of being captured by the Kremlin’s advancing forces, as they sit near the front lines in Ukraine’s east.

Billionaire Ratcliffe’s big sports bet misfires

Also in this week’s newsletter, a new chess championship and a fresh crisis for French football

Greetings from Weissenhaus, a secluded luxury resort by the Baltic Sea, where the world’s top chess players have gathered to take part in a competition with a twist.

Magnus Carlsen, the five-time World Chess Champion and arguably the greatest player in history, has brought his peers and rivals to northern Germany to do battle under Chess960 or Fischer Random rules.

Popularised by chess legend Bobby’s Fischer, Chess 960 randomises the starting positions of the pieces on the back row. The idea is that it’s impossible to prepare for 960 different opening positions, meaning that players can’t memorise their moves ahead of time.

The idea is old but the execution is new. Carlsen has teamed up with German venture capitalist Jan Henric Buettner, the owner of the Weissenhaus estate, to start the Freestyle Chess series.

The series has already riled FIDE, the game’s governing body, in the sort of clash that happens all too often when investors challenge the status quo. Watch out for more on this fight.

In today’s Scoreboard, we’re rounding up yet another fruitful week for sports lawyers, as two private equity-backed rights holders find themselves heading for court. Do read on — Samuel Agini, sports business correspondent.

Send us tips and feedback at scoreboard@ft.com. Not already receiving the email newsletter? Sign up here. For everyone else, let’s go.

Rugby ruck adds to sporting woes at Ineos

In a rather po-faced statement this week, Ineos blamed the “deindustrialisation of Europe” for its (unsuccessful) attempt to renegotiate a sponsorship deal with New Zealand Rugby, the organisation that runs the famous All Blacks team.

NZR, which counts US private equity firm Silver Lake as one of its backers, responded by launching legal action over what it said was a breach of contract.

Tough trading conditions in the petrochemicals manufacturer’s core business certainly make life harder for a company that has taken on major sporting interests across football, cycling, motorsport and sailing.

But the fight over rugby is just the latest in a string of bad headlines for Ineos, and raises fresh questions about what Sir Jim Ratcliffe’s chemicals company is trying to achieve in the world of sport.

In cycling, Ineos Grenadiers, the outfit previously known as Team Sky, is looking for a second major sponsor. “It’s fair to say that Ineos don’t want to spend more money,” Grenadiers boss John Allert said last month.

There has also been a very public break-up with Sir Ben Ainslie, the British sailor who led Ineos’ team in the America’s Cup. He has vowed to fight Ineos in the courts over the company’s decision to cut ties.

And then of course there is Manchester United, the elephant in the Ineos sporting empire. The English Premier League club’s balance sheet was well known to be in need of capital when Ratcliffe bought in. United has failed to post an annual profit since before the pandemic. That’s why the Monaco-based billionaire committed $300mn of fresh equity alongside his purchase of a $1.3bn stake from the Glazer family last year.

What has followed on the pitch has been dismal — the team currently sits 13th in the league table, while brutal cost-cutting has dented morale off the pitch. There have been expensive mistakes along the way too. The decision to replace United’s head coach a few months ago cost £21mn.

It may well be that United has simply become such a big job that other Ineos sporting assets are destined to suffer from a lack of love, attention and money. Perhaps not winning has taken some of the fun out of the various projects too.

But the current turbulence at Ineos offers a timely reminder for investors. As an expensive and unpredictable sector, sport can be painfully exposed when trouble strikes a completely uncorrelated core business. More importantly, unparalleled success elsewhere — in tech, in finance, in petrochemicals — is a miserable indicator of whether you can win trophies.

French football’s never ending crisis

Wrong direction: Ligue 1 in dismay © Guillaume Horcajuelo/EPA-EFE/Shutterstock

When DAZN stepped in last summer with an offer to buy up the bulk of TV rights to Ligue 1, it looked like French football had been pulled back from the brink of disaster. While the deal offered a bit less money than hoped, it prevented a financial unravelling for some clubs and made sure live games actually made it to air.

But now, that lifeline risks becoming a millstone. This week the relationship between Ligue de Football Professionnel and DAZN broke down after the broadcaster withheld a payment due to clubs last month.

DAZN blamed LFP for failing to address piracy and the clubs for not doing more to promote Ligue 1 matches. LFP responded by taking DAZN to court.

As with Ineos vs New Zealand Rugby, there is a private equity element lurking in the background here too. CVC Capital Partners owns a stake in the commercial entity that controls LFP’s media rights.

The blow-up follows weeks of murmuring about how badly DAZN’s French football deal has been going. Local press reported that the streamer had only attracted 400,000 subscribers for Ligue 1, well below its target of 1.5mn. People familiar with the situation also point out that many subs have been sold at heavily discounted rates.

Recent results show that DAZN has continued to burn through cash. In 2023, it made a loss of $1.4bn, while billionaire owner Sir Leonard Blavatnik pumped in another $800mn.

For French football, the new legal fight will bring back painful memories of botched rights deals from the past. In 2020, LFP sold the bulk of its TV rights to Mediapro, an unproven Chinese-backed company, for big money. The deal severed the league’s ties with its long-standing broadcaster Canal+ but then fell apart after just a few months.

DAZN is no Mediapro. Despite its heavy losses, it hasn’t stopped taking on new commitments, such as agreeing to pay $1bn for global rights to show this summer’s new Fifa Club World Cup, even if an expected equity investment from future World Cup host Saudi Arabia should help pay that bill.

The longer-term risk for LFP is that the fight with DAZN raises a deeper question: perhaps French football rights simply aren’t worth much in the current climate.

MI5 investigates use of Chinese green technology in UK

Concern has grown at Beijing’s potential hold on strategic assets

Britain’s security services are taking part in a review into China’s growing role in the UK’s energy system amid concerns over Beijing’s influence in strategic national infrastructure.

MI5 is helping establish the extent to which the use of Chinese technology such as solar panels or industrial batteries could pose potential future security threats, according to people close to the situation.

Concern over Chinese companies’ dominance of international supply chains for technologies crucial to decarbonisation is growing as the UK tries to shift away from fossil fuels.

That has sparked concern in Whitehall about the potential for sensitive data to be shared with the Chinese government as well as the country’s potential control over strategic energy assets.

The review into China’s growing role in the energy system is part of the government’s broader “audit” of UK-China relations that will report later this year.

“The spooks are looking at it,” said one official. “It’s tied to the industrial strategy, looking at general questions of where we get our things from, and the security risk.”

MI5 director-general Ken McCallum said in October that the “National Protective Security Authority” — a branch of the domestic security service responsible for monitoring technical threats — has had a long-running “focus” on supply chain security.

MPs this week clashed in the House of Commons over proposals for privately owned Chinese company Mingyang to supply wind turbines for a planned floating offshore wind project in Scottish waters called Green Volt.

While China’s largest floating offshore wind company is privately owned, critics are concerned there is a risk of interference from Beijing in corporations’ decision-making.

Energy minister Kerry McCarthy told MPs on Wednesday: “We’re undergoing rigorous processes to look at the role of China in our supply chain in investment in critical infrastructure . . . we are taking into account the national security considerations.”

Shadow energy secretary Andrew Bowie said it was “unthinkable to disregard the security implications” if Chinese-manufactured turbines were installed in British wind farms.

The Sun reported this week that the Ministry of Defence had raised concerns that Green Volt could be used for spy sensors.

“Security experts have warned that sensors could spy on British seas, defence submarine programmes and the layout of our energy infrastructure,” said Bowie.

“We would be reliant on Chinese equipment and software, and on Chinese suppliers for updates and maintenance, handing Beijing significant opportunity for interference.”

The UK’s “China audit” is being led by the Foreign, Commonwealth and Development Office with input from other departments.

The government is seeking to walk a tightrope between a pragmatic economic relationship with Beijing and protecting against security threats.

Labour has stepped up diplomatic engagement, with senior ministers visiting the Chinese mainland in recent months and Prime Minister Sir Keir Starmer looking to visit later this year.

However, last autumn ministers used the National Security and Investment Act to order a Chinese investor to sell its majority stake in a British semiconductor company.

The developers of Green Volt — Norwegian-Italian owned Vargronn and Japan’s Flotation Energy — have denied that they have yet chosen Mingyang to provide the turbines.

Green Volt said it was “identifying supply chain partners to help us build the wind farm”. It added: “As yet, no turbine supplier has been confirmed for Green Volt. We will comply with any government regulation and guidance around security of critical national infrastructure in the selection of all our suppliers.”

Mingyang has said it would open a turbine manufacturing plant in Scotland if it was chosen as the supplier and the Treasury is understood to back the scheme. “[Chancellor] Rachel Reeves came back from her recent trip to China really keen on this project,” said one government figure.

The UK government wants to decarbonise Britain’s power sector by 2030, requiring a massive increase in wind turbines, solar panels and batteries.

In particular, officials are understood to be more concerned about the “primary control systems” used to angle the blades and keep them facing into the wind.

The Green Volt situation exemplifies how Britain has taken an inconsistent approach to China in sensitive industries in recent years.

The UK government forced state-owned Chinese nuclear company CGN to sell its stake in the proposed new power station at Sizewell C in Suffolk, although the group is still involved in the consortium building Hinkley Point C in Somerset.

Bowie said it was “concerning” that the Treasury seemed determined to give the green light to Mingyang.

“This green revolution will come with a ‘made in China’ label,” he said. “Chinese-controlled technology embedded in our critical energy infrastructure is evidently a threat to our security.”

The government said it was undertaking “rigorous processes” to examine the role of China in Britain’s supply chain and investment in critical infrastructure. “We would never let anything get in the way of our national security, and while we would not comment on individual cases, investment in the energy sector is subject to the highest levels of national security scrutiny.”

Any attempt to significantly cut back Chinese involvement in UK renewables supply chains would be problematic given China’s dominance in the supply of global batteries and solar panels, even if their role in British wind farms is currently relatively small.

“There is a fear that we could be looking at a Huawei moment,” said one government figure, referring to the government’s decision to remove Chinese company Huawei from the UK’s 5G network.

“The renewables market is almost completely dependent on supplies from China.”

Rivals for satellite cellphone service include Elon Musk’s SpaceX, Apple, and Amazon.

A heavenly battle is brawling for your cellphone.

Overhead, competing rings of satellites are readying cell towers in space that will eliminate dead zones down here. The rivals include Elon Musk’s SpaceX, Apple, Amazon.com, and an upstart named AST SpaceMobile.

Since its 2021 initial offering, AST SpaceMobile has lured investors with its aim of delivering 5G-quality voice, data, and video coverage worldwide. It is the only pure stock play on direct-to-cell service.

AST stock rose more than sixfold after announcing partnerships last year with Verizon Communications and AT&T. It has deals with 45 other mobile network operators around the globe. Fans say that gives AST a shot at 2.8 billion wireless subscribers.

Its prospects are dicier than the stock price suggests. The bankruptcies of previous satellite phone ventures cast a shadow on its goal of finding millions of customers who would pay an extra $10 a month for satellite coverage, when it will come cheaper—or free—from rivals.

Foremost among those rivals is SpaceX, with over 6,000 Starlink satellites already orbiting and a thriving home internet service to subsidize its cell service. Those watching Sunday’s Super Bowl saw an ad in which Starlink cell partner T-Mobile US announced that its own direct-to-cell messaging service is now open for anyone in the U.S. to try, including customers of Verizon and AT&T.

The first satellite phone networks were high-profile flops. Motorola’s Iridium sought bankruptcy protection barely a year after its 1998 debut. Globalstar avoided bankruptcy for just a few years more. Their bulky, dedicated phones, and cost of two bucks a minute, found only a couple of hundred thousand subscribers.

The new satellite services will link to everyday cellphones. The idea was already in the air when Musk’s SpaceX launched its first 60 satellites in 2019. The next year, space station astronauts helped the start-up Lynk send a text message to an Android phone in the Falklands.

Investors became desperate to follow privately held SpaceX into orbit. More than half a dozen space ventures came public through mergers with special purpose acquisition corporations, or SPACs, in 2021. One of them, AST SpaceMobile, was founded by veteran satellite entrepreneur Abel Avellan. AST promised more than text: the first global satellite broadband for off-the-shelf cellphones.

At an August trade show in 2022, Musk joined T-Mobile to announce that a new generation of Starlink satellites would offer cellular coverage across the U.S., in addition to Starlink’s home internet service. Then Apple surprised everyone the next month with the cellphone industry’s first satellite service: Each iPhone 14 had free emergency messaging that used Globalstar’s satellites and frequencies.

Eager to keep America in the lead of the new direct-to-cell technologies, the Federal Communications Commission proposed regulations in 2023 to let satellite firms use the frequencies reserved for cellphones, if they made a deal with the cell carrier licensed for the frequency. Once approved, T-Mobile customers’ unmodified phones will work with SpaceX’s Starlink, while AST satellites will service the phones of partners Verizon and AT&T.

“The new rules were written with us in mind,” AST President Scott Wisniewski tells Barron’s. After the FCC created a dedicated Space Bureau, then completed its regulations for Supplemental Coverage from Space last year, AST moved its satellite licenses from Papua New Guinea to the U.S.

AST didn’t launch its first five commercial satellites until September 2024, seven years after the company’s formation. In November, the company announced agreements to launch as many as 60 satellites to cover key markets such as the U.S., Europe, and Japan.

The 2025 and 2026 launch program will use rockets from SpaceX, the Jeff Bezos rocket company Blue Origin, and the Indian Space Research Organization. With a 700-square-foot antenna, AST’s satellites will be among the largest commercial communications arrays in low Earth orbit. The company bets that its fewer, but bigger, satellites can reach cellphones better than the legions of smaller satellites flown by SpaceX.

AST’s big satellites cost a lot: from $19 million to $21 million each.

Wisniewski says the company’s five orbiting satellites could provide a total of 30 minutes of coverage a day for any particular location. For half-time coverage of the U.S. and Europe, AST will require 20 more satellites. A total of 40 to 50 satellites will be needed to deliver coverage around the clock.

At $20 million apiece, building and launching 50 satellites would use up the $1 billion in cash that AST now has on its balance sheet; the company must also fund $100 million or more in annual operating losses. The full constellation of nearly 250 satellites, for which AST has sought FCC approval, could cost about $4.9 billion, not counting operating expenses.

For a company with a $7.2 billion enterprise value, raising the money for a satellite fleet will dilute shareholders materially, at today’s $28 stock price. The stock showed its sensitivity to dilutive capital raises when it dropped 18% a few weeks ago on AST’s announcement of a $460 million convertible note offering that could convert to 3% of its shares outstanding.

Wisniewski said an initial fleet of 20 satellites providing half a day’s service should be enough to get AST to break-even cash flow. “With 40 to 50 satellites, we feel we will be very much on our front foot and positioned to win,” says Wisniewski. “We’ll add more, but it will be demand based.”

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To make a case for the billions that AST must raise for its satellites, bulls say that it will find millions of users. Deutsche Bank’s Bryan Kraft is the biggest optimist, justifying his Street-high $53 target price for the stock with a projection for nearly $5 billion in yearly revenue by 2030.

He predicts that 12 million people will subscribe for supplemental satellite cell service at $10 a month, with another 300 million paying $5 a day for occasional day passes. Some 125 million others in the developing nations will pay $1 a month to use AST satellites as their primary broadband connection, Kraft believes.

AST hasn’t yet said exactly how much it intends to charge for its supplemental service, although executives have spoken of monthly subscription fees in the $10 to $15 range, with revenue split equally between the company and its carrier partners.

“We think there is a ton of demand,” says Wisniewski.

But those forecasts for AST’s subscribers and pricing might not be easy to achieve, given the extent of terrestrial coverage and the competition from Starlink and others.

Dead zones exist, but nearly 97% of U.S. households now have access to terrestrial 5G broadband service, according to the FCC’s year-end 2024 report on the communications marketplace. Household access to 5G in the United Kingdom is only about 80%, but close to 100% in most of Europe’s affluent countries. The prior-generation broadband service called 4G LTE has even wider coverage.

The question for satellite phone subscriptions is: How much time do those households spend beyond cell tower reach? Studying that question globally, the wireless researchers at Opensignal found that subscribers in the U.S. and the U.K. spend 1% of their time in places with no tower signal.

As for price levels, the FCC report shows that mobile broadband prices in Germany match those in the U.S. but are cheaper in France and Italy, and far cheaper in the U.K. and Spain. A $10 add-on subscription might be hard to sell abroad.

However large the total market proves for satellite phone service, AST’s pricing power will also face competition.

Apple’s free iPhone satellite service, available since 2022, can send only terse SOS messages and the phone’s location to friends and emergency responders. But Apple thinks enough of the feature to have supplied $1.7 billion in financing to Globalstar. That gives Apple 20% ownership of Globalstar’s direct-to-cell service, and covers most of the cost of upgrading satellites and ground stations to allow expanded services in the next couple of years.

Musk’s SpaceX is ready to roll. T-Mobile says Starlink service will be included free in its best wireless plans, once beta tests end in July. Lower-tier plans can add satellite coverage for $15 a month, or $10 for those who take part in the beta trial. Even Verizon and AT&T customers will be able to have the service for $20 a month.

T-Mobile Starlink will be text-messaging at first, said T-Mobile CEO Mike Sievert in the company’s Super Bowl announcement. Picture messages, data, and voice calls will follow.

Starlink’s coverage will be hard for other satellite networks to match. It has launched more than 350 satellites equipped for direct-to-cellphone service, and plans to double that number by mid-2025. SpaceX rockets can carry 60 of the birds per launch, and the FCC has given permission for up to 7,500 of the new-generation satellites. Ultimately, Starlink sees its constellation growing to 40,000.

After several years of delay, Amazon is also entering the internet space race, with FCC approval to launch over 3,200 satellites for its Project Kuiper. It has committed over $10 billion. Amazon has told regulators it is exploring options for direct-to-cell services.

“[AST executives] have to say they’re going to offer something orders of magnitude better than those services if they’re going to try and charge for it. Because if [another service] is free, they’re screwed,” says Tim Farrar, a telecom industry analyst and consultant in satellite communications.

AST’s Wisniewski is confident that the company’s broadband service will prove more valuable than the lower-grade service of rivals. Amazon said it wasn’t yet ready to talk about its Kuiper plans. SpaceX didn’t respond to requests for comment.

AST is progressing. In January, its British partner, Vodafone, demonstrated what it claimed was a “world’s first” video satellite call though AST satellites to a standard smartphone on a Welsh hilltop with no terrestrial coverage. In late January, the FCC authorized AT&T and Verizon to start testing AST’s service on a few thousand phones each.

Providing voice service and some video to a demonstration phone is one thing. Serving up 5G-quality broadband concurrently to thousands of moving phones is a technical challenge.

“A modern cellphone is essentially an underpowered, poorly located satellite antenna for a cell tower in space,” said Sara Spangelo, the co-leader of SpaceX’s direct-to-cell program, at a conference a few years back. To better reach cellphones, SpaceX has asked the FCC to let Starlink satellites transmit at higher power and with narrower safeguards protecting neighboring frequencies from interference.

In common with other stocks that came to the market via SPAC deals, AST has a strong retail investor following. Some institutional fans recognize there is a degree of risk. AST is the single biggest holding in the Hennessy Focus fund, a high-conviction concentrated portfolio run by California-based Hennessy Funds. It recently removed a warning about the potential for a “complete capital loss” on the investment, but still classifies it as a “special situation.”

Others remain skeptical. Some 27% of AST’s free-trading shares have been sold short by those betting the stock will drop.

So far, AST SpaceMobile’s celestial broadband quest has defied skeptics. Some of the world’s biggest carriers have bought in, and five functioning satellites now fly overhead. For its numbers to work—not to mention its stock—it will have to find millions of callers willing to pay a premium above what rivals like SpaceX charge.

Shares of wine, beer, and liquor companies have been hit hard as consumers cut back on alcohol consumption. But some are finding value in beer stocks.

Dry January,” a yearly prompt for the sober-curious, has passed. But brewers, distillers, and vintners aren’t raising their glasses to celebrate. Cutting back on alcohol has turned into an all-season trend, especially among the young. That is raising the prospect of an age waterfall effect, where older drinkers are replaced by younger, more moderate ones, draining booze sales.

“Dry January,” a yearly prompt for the sober-curious, has passed. But brewers, distillers, and vintners aren’t raising their glasses to celebrate. Cutting back on alcohol has turned into an all-season trend, especially among the young. That is raising the prospect of an age waterfall effect, where older drinkers are replaced by younger, more moderate ones, draining booze sales.

Shares of companies that were once considered staples are spilling. Some are adding to decadelong losses, like Anheuser-Busch InBev and Molson Coors Beverage, which contended in past years with a flood of craft beers, and then a shift to cocktails. Others rode the cocktail craze until 2023, when spirits slipped into their first U.S. sales decline in three decades. Now Diageo, maker of Johnnie Walker Scotch whisky, is down 36% over two years, while Brown-Forman, with its Jack Daniel’s Tennessee whiskey, has lost more than 50%.

An investor who bought shares of Boston Beer a decade ago has had the type of wild ride that brings to mind crypto coins and meme trading. By spring 2021, the stock price had quadrupled, but now that gain has turned to a 24% loss. The company’s Truly brand put it in the middle of a hard seltzer craze, but then all the big beer brands piled in, just as some seltzer drinkers moved on to ready-to-drink cocktails in bottles and cans.

Meanwhile, Constellation Brands, which sells Corona and Modelo beers in the U.S., had been a growth holdout. But its latest quarterly report showed flat sales, and shares plummeted 17% in a day. They’re now down 31% in a year. Some on Wall Street see select buying opportunities in alcohol stocks, while others say to stay away.

Don’t blame alcohol’s slide on the Surgeon General’s recent warning on its cancer risks. That is drawing comparisons to tobacco and could add to industry challenges in coming years, but with alcohol, the government is following rather than leading the change. If obesity drugs play a role, it is marginal. Rising prices and budget constraints appear more important, as do big strides in nonalcoholic beer and spirits. But perhaps the biggest driver of moderation is a particularly worrisome one for the industry: Today’s 20-somethings, who have no memory of life before smartphones, just don’t seem that into alcohol.

Student Drinkers

Ethyl and Tank, in the heart of Ohio State University’s campus in Columbus, had it better than most college bars this winter. The Buckeyes won the national football title. An expanded playoff format meant more games for winners, drawing fans to bars and lifting beer sales. “It helped a ton,” says bar co-manager Nnamdi Aninweze. But even here, the broader trend is unmistakable. “We can’t lie: Post-Covid, everyone got hurt,” says Aninweze. Some students come to the bar for a week or two during a stressful time, and then say they’re quitting for health reasons. Some mention personal-improvement regimens like 75 Hard, which involves exercise, healthy eating, self-help reading, and alcohol abstinence. Many prefer cannabis. Others drink but avoid drunkenness, out of fear that a social-media video will compromise their futures. They’re gone by midnight or 1 a.m.

“We’re stuck with an empty bar at the end of the night,” says Aninweze. “It used to be that you had to force these kids to go home.”

A 4½ hour drive northwest, in South Bend, Ind., is Notre Dame—the other team to make it to the big game. Just across the street from the university, Linebacker Lounge built its reputation on packing the house. An ESPN commentator once called it “a garbage disposal for wobbly humans”; The Backer, as the bar is known, still sells a $30.50 T-shirt with the phrase. But young revelers now typically show up at 11 p.m. and are gone by 1 or 1:30 a.m., whereas on Thursdays, Fridays, and Saturdays, they used to drink until 3. “They don’t stay out till the late, late nights like we’ve seen in years past,” says general manager Chantal Porter. “And I would say that’s been literally since Covid.”

Alcohol sales fell 1% last year to $112 billion, according to NielsenIQ. Volume fell more, and declines were spread across beer, spirits, and wine. Pockets of strength were few. Sales of ready-to-drink cocktails are still growing nationwide from a relatively small base, but volumes have been flat, and they have begun to decline in New York and Florida, according to industry watcher IWSR, raising the question of whether other states will follow.

Sales figures match with survey results. Gallup has measured how Americans view moderate drinking since 2001. In last year’s results, a record 45% said that one or two drinks a day is unhealthy. That’s up six percentage points in a year, and 17 points since 2018. Some 55% now say that even average drinkers should cut back, and another 22% say they should stop. Among the young, ages 18 to 34, those numbers are 67% and 23%, respectively.

A Barrel Plant’s Demise

Some alcohol makers are responding more urgently than others. Brown-Forman, which rode out a U.S. alcohol ban in the 1920s and 1930s by securing a license for medicinal whiskey, said last month that it will lay off 12% of its workers and close its Kentucky barrel plant. Its stock has been hit much harder than others for three clear reasons, plus a speculative one. First, it traded at a premium price when whiskey looked unstoppable, leaving it more vulnerable to investor disappointment. Second, whiskey is typically aged in barrels rather than consumed right away, which means that inventory gluts can drag on. The industry now appears to be awash in unsold barrels. Just look at results for Kansas-based MGP Ingredients, which makes and ages whiskey for other brands. Sales in its most recent quarter plunged 24%, and management is slashing production.

A third potential challenge for Brown is tariffs. President Donald Trump has variously threatened to place large and broad ones on goods from China, Canada, Mexico, the whole of Europe, Colombia, and elsewhere. Few goods are more symbolically fit for retaliation than revered red state exports like Tennessee whiskey and Kentucky bourbon.

There is a fourth factor unique to Brown, in the opinion of Truist Securities analyst Bill Chappell, who recently downgraded the stock to Hold from Buy. Past moves into honey-flavored Jack and premixed Jack and Coke in cans have been good for revenue, but Chappell believes they have turned Jack Daniel’s from a premium brand into a merely popular one, like Jim Beam, which is owned by privately held Beam Suntory. Then again, even selling premium brands is no longer a guarantee of growth, in the U.S. or abroad. Pernod Ricard, Davide Campari-Milano, and Rémy Cointreau have all suffered slipping sales and tumbling share prices. Brown-Forman didn’t respond to requests for comment.

Cannabis bans are falling, and a 2018 farm bill meant to support hemp provided an opening for cannabis beverages. Hemp is used to make industrial fibers and contains only tiny amounts of the psychoactive compound THC, but distillation, a key to making spirits, can turn low concentrations into higher ones. Cannabis drinks would seem a good investment for alcohol companies, but both Anheuser and Constellation have been burned there. So far, distribution rules are murky, and consumers who frequent cannabis dispensaries are more likely to stick with gummies or pot than switch to THC drinks.

Leaving Out the Booze

Diageo is taking a different approach. In September, it bought Ritual Zero Proof—mix its gin alternative with its aperitif alternative, stir with ice, strain, garnish with an orange, and you’ve got a no-hangover Negroni. IWSR reports that no-alcohol spirits grew sales at a compounded 60% a year over the past five years.

Near-beer had seen almost no innovation since Prohibition, says distance runner, former hedge fund trader, and now entrepreneur Bill Shufelt. “It just existed in these dusty bottles on the side of the shelf until Athletic Brewing really recognized that, hey, this actually fits the modern, busy, productive life really well,” he says. Shufelt founded Athletic in 2017 with brewing partner John Walker. Early batches were brewed in Gatorade jugs. “We approached it from a love of beer, not just a replacement product,” says Shufelt. Today, there are India pale ales, Belgian-style whites, stout-inspired darks, and many other varieties, sold online and in stores, with praising reviews on beer snob forums.

Last year, Athletic sold “well over” 100 million cans and generated more dollar growth than any other craft beer brand, with or without alcohol. It’s over 10% of all beer sales at some grocery chains, and over 15% at Whole Foods.

But is Shufelt the chicken or the egg? Is his company benefiting from alcohol moderation, or helping to cause it? Shufelt says both—that Athletic has changed the image of nonalcoholic beer and removed the stigma, but also that if he had launched 10 years earlier, it wouldn’t have worked. “It’s the right time with information, health trends, everything,” he says. “I think this is going to be a major sea change when we look back on it in 25 years.”

Shifting Views

American views on alcohol have evolved more than once over the past half-century. “The three-martini lunch is the epitome of American efficiency,” President Gerald Ford told the National Restaurant Association in 1978. “Where else can you get an earful, a bellyful, and a snootful at the same time?” But liquid lunches fell out of favor, and per capita U.S. alcohol consumption started to decline in the early 1980s. In 1991, 60 Minutes newsman Morley Safer visited a Lyon bistro to open a discussion of how the French enjoyed rich foods but had lower rates of cardiovascular disease. Maybe it was La République’s love of wine, the thinking went. Soon, Americans of all walks were learning to pronounce “cabernet.”

Research has since failed to prove alcohol’s health benefits, and health officials are growing more vocal about its risks. A January advisory report from the Surgeon General called alcohol consumption a leading preventable cause of cancer. It recommended new warning labels on packages and a revisiting of government guidelines—currently set at no more than two drinks a day for men and one for women. In response, investment bank Alliance Global Partners published a chart of U.S. per capita cigarette consumption peaking around when the Surgeon General first warned of tobacco’s cancer risks in 1964, and then plunging over decades through advertising bans, tobacco tax hikes, and lawsuits.

There are key differences with alcohol. It’s much more fragmented than tobacco in production and distribution, with far more jobs. “So, it’s going to be hard for Congress to go and change the label on something that’s such a big part of their local community,” says Roth Capital Partners analyst Bill Kirk.

In spirits, Kirk says the best bargains aren’t for investors: “This is a wonderful time to be a whiskey consumer because you’re going to find deals.” His Buy ratings skew toward beer, which he views as a better fit for the moderation movement, and where he thinks companies will be able to offset volume declines with price increases. His top pick is Constellation, followed by Boston Beer.

Back when Anheuser bought Mexico’s Grupo Modelo in 2012, it had to sell Modelo’s U.S. distribution to satisfy regulators, and Constellation, a wine and spirits player without a big position in beer, was a natural buyer. Over the past decade, its investments in marketing and distribution, along with a growing U.S. Hispanic population, turned Corona and Modelo into strong growers. After Constellation’s disappointing quarterly report and stock tumble in January, management was asked on an analyst call about long-term alcohol headwinds and blamed the economy.

“Alcohol’s percent of the consumer basket remains consistent,” Constellation CEO William Newlands said, but “the overall basket is down.” Unsatisfied, Jefferies and J.P. Morgan both downgraded the stock. Kirk points out that beer sales rose 3% during the quarter. “If that’s a bad quarter, that sounds reasonable to me,” he says.

Boston Beer might be due for a name change. Around 85% of its revenue comes from hard cider, seltzer, and tea. Kirk is encouraged by recent growth in its Twisted Tea and Sun Cruiser Iced Tea Vodka.

The Search for Value

Even declining industries can produce winning stocks. In Stocks for the Long Run, Jeremy Siegel pointed out that Philip Morris, now Altria Group, was the best-performing stock in the S&P 500 from 1925 through 2007. It has continued to beat the market since then. Advertising restrictions keep costs down. High taxes provide plenty of cover for price hikes. But mostly, the combination of a chronically low stock valuation and big dividend has worked out, at least so far. Shares traded recently at 10 times earnings with a 7.7% yield. The cigarette smoking rate just tied an 80-year low, says Gallup.

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The bar isn’t quite as low for Constellation stock, at 12 times projected earnings, or Boston Beer, at 22 times. Brown goes for about 17 times; Anheuser, 14 times; and Molson Coors, nine times. Cautious investors might want to wait for either further share-price declines or signs of stabilizing demand before shopping.

There are other possible contributors to weak alcohol sales. The cost of alcohol consumed at home is up 12% over the past five years, versus 4% over the prior five, according to government inflation data. For drinking out over the same stretch, prices are up 21%, versus a prior 9%. Young consumers have new competition for their income, like legal sports betting. Population growth in rich markets is slowing. A new class of obesity drugs, which have taken a bite out of snack food shares, are believed to also curb the urge to drink alcohol.

Roth’s Kirk recently published a list of 2025 alcohol predictions—scenarios that he calls possible but not quite likely. Constellation could sell its wine and spirits businesses to its founding family and focus on beer. A big retailer could drop alcohol for health reasons, like CVS did with tobacco. An overstocked distiller might buck trends by altering some of its supply to a higher proof. “If there was a Beam Extreme, I think consumers would get excited,” says Kirk.

Shufelt says he’s open to running Athletic as a private company “forever,” or combining with a bigger company with more resources, or taking a different route. “On the right day, I’m very excited about an IPO,” he says. His top prediction is that nonalcoholic beer can reach 20% of beer sales, up from 1.5% now, with Athletic leading the charge. Getting there, he says, won’t require an alcohol collapse. It could mean adding more drinking occasions. Some 80% of his customers also consume alcohol.

“Alcohol has been around for 5,000 years,” says Shufelt. “It’s probably premature to call an abrupt end to alcohol in any way. And we’re certainly not cheering for that.”

Most of Donald Trump’s Day One executive orders—restricting gender choice, renaming the Gulf of Mexico—had little direct effect on financial markets. One exception: the returning president’s withdrawal from the global corporate minimum tax agreement reached by Joe Biden.

The details of the tax agreement, which set a floor of 15%, are complex. The politics look simpler: a quick, big win for Trump’s newfound admirers in Silicon Valley. That may not prove so simple either, though.

The Biden administration pushed the tax because U.S.-domiciled tech (and pharmaceutical) giants register much of their intellectual property in low-tax jurisdictions like Ireland or Singapore. Profit derived from this IP was counted in these havens.

“Apple is on a trajectory where it will pay more tax to Ireland than to Washington,” says Brad Setser, a senior fellow at the Council on Foreign Relations. “Tech and pharma companies lobbied very heavily against this.”

Congressional Republicans refused to ratify the minimum tax, fearing loss of sovereignty.

Credits for research or depreciation might well bring a U.S. tech power’s domestic rate under 15%, allowing another country, say France, to “top up” for its own coffers, argues Daniel Bunn, a former GOP Capitol Hill staffer who now heads the Tax Foundation.

“We don’t want other countries telling us how our tax policy should work,” he argues.

Trump settled the stalemate with a stroke of his Sharpie, but may have opened a separate global can of worms.

Nineteen other countries, including the biggest European economies and Canada, have passed digital services taxes on revenue that multinational tech firms reap within their territory. These were to be rescinded in exchange for the global minimum tax (and an accompanying “pillar” assigning profit where it was earned). Now they are back.

“Countries that enacted the DST now have a green light to implement it,” says William Reinsch, a senior adviser at the Center for Strategic and International Studies.

That sets the stage for a trans-Atlantic struggle that will exacerbate, if not eclipse, the battle over physical trade Trump just launched with 25% U.S. import tariffs on aluminum and steel, says Paul Monaghan, chief executive of the Fair Tax Foundation in London. “There is no sign that Europe will quietly go into the night on this,” he says.

A related conflict is simmering as the European Union leans on its recently minted Digital Services Act and AI Act to scrutinize U.S. tech giants on grounds of privacy and “deceptive practices.”

Vice President JD Vance told a Feb. 11 AI Summit in Paris that “a new industrial revolution will never come to pass if overregulation deters innovators from taking the necessary risks.”

European regulators will dig in, dismayed by U.S. developments like Meta Platforms dropping content moderation and Elon Musk transforming X into an overtly political platform, predicts Eoin Drea, senior researcher at the Wilfried Martens Centre for European Studies.

“Tech is one area where the EU will stand firm,” he says. “Musk is the best thing to happen to EU unity since Brexit.”

Trump harbors a special animus for Europe, too, which may override his usual transactional instincts, CSIS’ Reinsch predicts. “Trump wants to break up the EU,” he says.

Big Tech may regret being caught in the crossfire. “How this benefits Meta or Google in the long term eludes me,” Reinsch says.