europe & us relations turning sour due to pandemic

Historically, major tech investors have shrugged off the challenge from Margrethe Vestager, the competition tzar of the European Commission who wants to reduce the internet domination of US behemoths. Apple, Amazon.com, Facebook and Google controller Alphabet ‘s total market cap has increased more than tripled to $4.4 trillion since the Dane’s first term ended in 2014. Two new Apple probes, launched Tuesday, suggest it’s time to start taking her more seriously.

Vestager is convinced that rivalry is skewed by the rules for Apple’s preponderant app store. Music streaming rival Spotify Technology complained that Apple is levying a 30 per cent “tax” on smartphone user purchases made within apps, while at the same time stopping app developers from steering customers to cheaper options. Apple Pay’s second probe center allows customers to purchase things using an iPhone. Vestager is concerned that Apple makes it difficult for its popular smartphones to work smoothly with competing payment systems. Apple said it was upset that the European Commission is “advancing complaints from a few businesses who just want a free pass.”

But chief executive Tim Cook – and investors from the company – should be concerned about this. The mobile industry is large, and that’s an problem for Apple as it accounts for about half the sales. In the first quarter of 2020, iPhone smartphone revenues dropped 7 per cent. Apple has paid for its entertainment and music offerings by offering additional games, and subscriptions. Thanks to the rapid growth, these services close in on a quarter of all revenue. Citi economists say the app store accounts for 30 percent of all sales from utilities.

That has convinced the market to revalue Apple, as consumers favor recurring revenue from services to one-off hardware purchases. The company’s shares are valued, using data from Refinitiv, at 24 times estimated earnings over the next 12 months. That’s almost twice as high as the multiple from 2015 through to the end of 2018. If Apple is pressured by the commission to slash App Store prices and encourage rival programs to Apple Pay, its sales growth will stall, potentially warrant a lower number, and jeopardize its $1.5 trillion market capitalisation.In other words, Vestager is getting critical – unlike previous probing in Google’s shopping platform and Android operating system , causing no difference to the main business of the firm. Cook ‘s shareholders should be worried, as should those in other tech behemoths.

The Coronavirus has added more tension to the relationship between the United States and the European Union. The decision by President Donald Trump to ban European citizens from the United States and his definition of the virus as “Chinese” has weakened US relations with the European Union. Europeans and the US could not even agree to a joint text by the G7 foreign ministers on attacking the virus.

Nearly European ambassadors said that the relationship between the United States and Europe today was worse than any other modern U.S. administration, including during the Iraq War of 2003. On top of EU-U.S. Economic disagreements — such as on finance, security , climate change and Iran — ambassadors berated the “ideological animosity” of the Trump administration to the EU and NATO. One described the administration as showing “blatant disregard for shared values that have for decades underpinned the transatlantic alliance” and “lack of decorum” by the president when engaging European allies. The President ‘s calling the EU a “foe” and “crime-ridden” European countries was characterized as “violent.”

Source: 1. https://in.reuters.com/article/us-apple-antitrust-breakingviews/breakingviews-europes-latest-apple-bite-is-close-to-the-core-idINKBN23N2H4

2. https://carnegieendowment.org/2020/04/04/u.s.-relations-with-europe-likely-to-remain-strained-regardless-who-wins-november-election-pub-81493