Trump cracks down on Los Angeles protests

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0:32Good morning from the Financial Times. Today is Tuesday, June 10th, and this is your FT News Briefing. A global ports deal could jeopardize the Panama Canal's neutrality, and Brazil is hoping a bond sale will strengthen its ties with China. Plus, we look into the gravity of Donald Trump deploying the military in Los Angeles. It's a very real and visceral flexing of executive power and one that really drives home that this is the path that the administration is on. I'm Mark Filippino, and here's the news you need to start your day.

1:14A$23 billion deal is putting the Panama Canal's neutrality at risk, so says the administrator of the Panama Canal Authority, Ricarte Vasquez. Here's a breakdown of that deal. Hong Kong's C.K. Hutchinson sold 43 ports in 23 countries to a consortium. That consortium is led by subsidiaries of BlackRock and the Mediterranean Shipping Company, or MSC. Competitors are worried that the sale gives MSC an unfair advantage. Vasquez echoed those concerns when he recently spoke to the FT. He said there's a threat to neutrality if there is, quote, a significant level of concentration on terminal operators belonging to an integrated or one single shipping company.

1:57These comments come after repeated threats by U.S. President Donald Trump to, quote, take back the canal. Trump's also warned that China's influence on the canal is a national security risk to the U.S.

2:14Donald Trump is testing the boundaries of his power. He deployed the National Guard in Los Angeles over the weekend.

2:24Troops clashed with protesters who were rallying against immigration raids. Trump sent the troops without permission from California Governor Gavin Newsom, who called the deployment unlawful. Then, on Monday, the U.S. deployed the Marines to the city. Here to tell us more is the FT's Washington correspondent, Joe Miller. Hey, Joe. Hi, Mark. So, Joe, just get us up to speed about what's been happening in Los Angeles. So, there's been a steady escalation in the Trump administration's crackdown on suspected undocumented migrants in the last few days. And it has centered specifically on Los Angeles.

3:01And that sparked a lot of unrest in communities where there are many undocumented immigrants who are very fearful for what would happen next. This began to escalate. The LAPD was originally dealing with it and Trump vowed to send in the National Guard against the wishes of local law enforcement, against the wishes of LA's mayor, and against the wishes of California's Democratic governor, Gavin Newsom. Newsom has accused the Trump administration of breaching state sovereignty. He says he's going to sue the administration over the deployment of the National Guard. And, you know, he's going as far as to say that the White House has abandoned the core principles of democracy with this move.

3:50So it sets up an almighty battle between the U.S.'s richest state and Washington. Joe, just out of curiosity, how common is it for a president to do something like this, call in the National Guard and the Marines? It's incredibly uncommon. The National Guard is essentially a reserve force that is there for states to use when they feel that regular police forces are struggling to contain a riot or something of the like. And this is actually the first time in many decades that the National Guard has been deployed on domestic soil against the express wishes of a state's governor. The last time that actually happened was when Lyndon Johnson in 1965 sent troops to protect civil rights demonstrators in that famous march in Selma, Alabama.

4:39And late on Monday, this breach with convention went even further. Several hundred Marines were deployed on the streets of Los Angeles in an incredibly uncommon move, which requires the invocation of the Insurrection Act, which last happened more than 30 years ago. How does this all fit into this idea that Trump is maybe pushing the envelope when it comes to his executive power in his second term? This is clearly the most visible manifestation of that, but really it's of a pattern with many things that the Trump administration has been doing in the last few months that by their own definition is testing the limits of executive power.

5:24They've done that by going after perceived enemies like Harvard University, by deportation of non-citizens without due process, by going after opening investigations into Joe Biden himself. The list goes on and on. The difference in this case is that obviously, you know, it's a very real and visceral flexing of executive power and one that really drives home that this is the path that the administration is on. Joe, does this set up a power struggle between the federal government and state governments like California, which I think is interesting because the Republicans generally favor state rights.

6:05Indeed, it does. And, you know, in many ways, there's already a power struggle going on. It may not have got as much attention, but we've had the Trump administration at loggerheads with the state of Maine, for example, after the governor of Maine threatened not to follow the Trump administration's view on transgender rights, etc. And we've had the governor of New York stand up for New York against the administration. The most interesting thing about this will be, you know, whether these democratic states that are now clashing in court with the administration get any allies from the right, like Greg Abbott in Texas, et cetera, who have basically made their reputation by doubling down on states' rights.

6:49And so we're certainly going to see how far the kind of partisan split has really gone and whether there is any sense that governors across the political spectrum will band together to reassert their rights. That's the FT's Joe Miller in Washington. Thanks, Joe. Thank you, Mark.

7:15Warner Brothers Discovery is splitting up its TV and its streaming businesses. The media giant made the announcement on Monday, and the split means that one business will focus just on streaming and studios, the other will focus on television networks like CNN and Discovery. They'll both become two publicly traded companies. The split breaks up a company created when WarnerMedia and Discovery merged three years ago. Now, the group said the move would unlock value for shareholders, but investors, they didn't see it that way. Warner Brothers Discovery shares ended the day down almost 3 % on Monday.

7:57Brazil is looking to raise money in China through a so-called Panda bond later this year. The country wants to issue debt in Chinese renminbi rather than its own currency. Now, Panda Bond is a cute nickname, but it's indicative of a larger debt problem for Brazil and could have big implications for President Luiz Inácio Lula da Silva. I'm joined now by the FT's Michael Pooler to discuss this. Hey, Michael. Hi, Mark. So why is Brazil targeting China's bond market in particular? So the reason behind this is a desire by President Lula to deepen Brazil's trade and investment ties with China. China is already Brazil's biggest trading partner.

8:38It's a huge consumer of Brazilian commodities like oil, soybeans, iron ore. And now Brazil is trying to draw in more Chinese capital to boost its economy and invest in things like industry. And they see going for the Chinese sovereign debt market as a way to tap more of the appetite for Brazilian assets. When we interviewed Brazil's deputy finance minister, he said that in addition to looking at hand bonds, they're also planning to re-enter the euro-denominated market. And that falls into another limb of Brazil's trade policy. They're trying to strengthen trade with Europe. And a lot of people in South America and Europe view that as very important given the context of the global trade war that's been sparked by US President Donald Trump's protectionism.

9:23Why does Lula think these panda bonds are necessary? What sort of shape is Brazil's economy in right now? So the debt issuance in Chinese renminbi isn't really necessary for the government, but they view it as a way to try and encourage the trade ties and links between the country. Brazil actually borrows most of its money from local borrowers, so it doesn't rely on foreign markets like some other emerging market countries might do. Brazil's economy has been growing at a decent clip. However, there are a lot of concerns among investors about the state of the public finances, in particular, public debt levels and the deficit.

9:58A fund manager I spoke with said that a benefit of issuing the Chinese panda bonds is that it could give Brazil slight low borrowing costs, even if they hedge it back into dollars or reais. But it would be likely to be fairly small in terms of size compared with the overall amount of Brazil's public debt. What happens if Lula can't get this public debt and deficit under control quickly, Michael? So that's the really big issue which the Brazilian government is facing at the moment. This growing skepticism in the financial market that the government is doing enough to reduce spending and get the public finances under control.

10:36The Lula government insists that it is getting to grips with the public deficit and that eventually debt will start to fall. And it says that this is in line with its objectives to regain an investment-grade credit rating, and that could potentially lead to a lot more capital and cheaper funding pouring into the country. However, mainstream economists and investors are very skeptical about that. The big complaint is that excessive state spending is fueling inflation, and in turn, that's forcing the central bank to raise interest rates. Higher interest rates generally drag on economic growth, and next year there's a general election in Brazil.

11:13So if the economy slows down, but inflation still remains fairly high, that's not going to do well for Lula out of what everyone expects to be another run for the presidency. Michael Pooler is the FT's Brazil correspondent. Thanks, Michael. Thanks, Mark.

11:31You can read more on all 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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