G-7 Deal Kills Section 899, US-China Trade Truce, Trump Fuels UK Uni Interest
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This is the Bloomberg Daybreak Europe podcast, available every morning on Apple, Spotify or wherever you listen. It's Friday the 27th of June in London. I'm Caroline Hepker. And I'm Stephen Carroll. Coming up today, the US Treasury pulls the so-called revenge tax from Trump's big, beautiful bill, following a G7 deal exempting American companies from the global minimum tax.

UK Prime Minister Keir Starmer waters down plans to cut welfare in a bid to quell a growing Labour rebellion. Plus degrees of separation growing political pressure on US universities pushes American students to look beyond the Ivy League and towards the UK. Let's start with a roundup of our top stories.

The US Treasury has announced a deal with G7 countries to remove a controversial revenge tax from President Donald Trump's big beautiful bill. Section 899 would have targeted countries whose tax policies were deemed discriminatory by the United States, applying higher rates exclusively to those jurisdictions.

Under the agreement announced late last night, American firms will be exempted from an OECD-brokered 15% global minimum tax rate for big companies. Bloomberg's Capitol Hill reporter Eric Wasson says the 899 threat got other nations to back down.

The revenge tax was never really designed to go into effect. It was meant as a cudgel to get an agreement on things like the digital services tax. These are efforts that really impact Meta, Google, Amazon, Uber and others providing digital services. It would be a major win for those companies if there's agreement to get rid of those or to lessen them.

Bloomberg's Capitol Hill reporter Eric Wasson says Section 899 had sparked fears on Wall Street and beyond that it would make it much more expensive for foreign individuals and companies to invest in the United States. Meanwhile, a Republican plan to slash Medicaid and health care spending hit a major hurdle in the Senate. The chamber's legislative referee ruled key provisions ineligible for fast-track consideration, complicating President Trump's push to pass the tax and spending bill by the 4th of July.

Now, the US and China have finalised their trade understanding, which includes Beijing's commitment to deliver rare earths used in various industries. The US Commerce Secretary Howard Lutnick says the deal was signed two days ago. Speaking to Bloomberg's Balance of Power, Lutnick also said that President Trump is ready to complete several trade deals within two weeks ahead of his July 9th deadline to bring back higher tariffs that were paused back in April.

What we're going to do is we'll announce some deals, but basically the deals we're going to announce are sort of the head of the class, the structural spot in the line, and then all the other countries will fit behind those categories, right? So we're going to do top 10 deals, put them in the right category, and then these other countries will fit behind.

And you can hear the full conversation with the U.S. Commerce Secretary Howard Lutnick on our Bloomberg Talks podcast. All of our key interviews in one place. Lutnick, though, did not specify which countries will be part of that first wave of trade pacts. Earlier on Thursday, President Trump suggested the U.S. was nearing an agreement with India.

The European Commission President Ursula von der Leyen says the EU is prepared for all outcomes of its trade negotiations with the United States. Speaking at a press conference, the European Commission President said nothing is yet ruled out. We are ready for a deal. At the same time, we are preparing for the possibility that no satisfactory agreement is reached.

This is why we consulted on a rebalancing list and we will defend the European interest as needed. In short, all options remain on the table.

Ursula von der Leyen speaking there. Her comments come as EU officials weigh whether to accept an asymmetrical trade deal with the United States or retaliate risking an escalating trade war at a summit in Brussels this week. Most member states argued that a quick EU-US agreement would be better than waiting for a perfect one. The EU needs to reach an agreement with President Trump by the 9th of July when levies on nearly all of the bloc's exports to the US increase to 50%.

UK Prime Minister Keir Starmer capitulated to rebels in his party, angry about his plan to cut welfare, setting up a £1.5 billion fiscal hole for the government. Bloomberg has learned that the Labour leader agreed to pare back the controversial plan after nearly a third of his own MPs warned that they would vote against the government. Treasury Select Committee Chair Meg Hillier, who led the rebellion, says that she will likely back

to the bill now. Big change since last week. Massive changes to ensure that the most vulnerable people are protected in terms of their personal independence payments and the health element of universal credit. And crucially, involving disabled people themselves in the design of future benefit changes.

Hillier's changes marked the government's second major U-turn in as many months after it dropped a controversial cut to winter fuel payments. Both reversals leave Chancellor Rachel Reeves needing to raise even more money to be able to stick to her fiscal rules.

The Bank of England Governor Andrew Bailey says the government's new payroll tax is costing the UK jobs and pushing up food prices. Tax data suggests employment fell at the fastest pace in five years in May, with more than a quarter of a million jobs lost since the Labour government's policies were announced last October.

The governor's comments help explain his recent decision to leave interest rates unchanged. Markets are pricing in an 80% probability of a quarter point reduction to 4% next month. And lastly, Impossible Foods is one step closer to completing a six-year quest to enter the world's biggest meal alternative market. So the move would be a major breakthrough for the California-based company Blue Bigs. Tima Adebayo has the details.

Demand for meat in the U.S. is on the rise, fueled by MAGA masculinity rhetoric and weight loss drugs. The surge is driving alternative protein retailer Impossible Foods to look elsewhere in a bid to boost sales. According to CEO Peter McGinnis, the firm is on the verge of rolling out its food to countries including Germany and the U.K., pending regulatory approval.

He says sustainability-conscious consumers on the continent are more open to plant-based eating than their American counterparts. However, the brand still has to navigate strict EU regulations on new ingredients and genetically modified food before its products can feature on European menus. In London, Tiwa Adebayo, Bloomberg Radio.

And those are our top stories for you this morning. Looking at the markets, Asian stocks rising, optimism about trade deals, Howard Lutnick mentioning those 10. We still don't have details, but the All Country World Index is up, the MSCI Asian Pacific Index is up four-tenths of 1%. The KOSPI is lower this morning. Stock futures for Europe also very positive, up half of 1%.

And you've also got the S&P 500, which gained 0.8% within striking distance of another new record high. That is just really remarkable, isn't it, in terms of what stocks have done. Blueberg Dollar Spot Index is up 0.1%. 10-year Treasury yields at 425, up a basis point. So, increased expectations of Fed interest rate cuts now also worth mentioning for the bond markets.

In a moment, we'll bring you more on the US abandoning its plans for a revenge tax, plus why Donald Trump's campaign against Harvard and other American colleges is fueling interest in British universities. But another story that caught our eye. I mean, this was a surprise, perhaps unexpected,

not to people in the industry, but the name who has been synonymous with Vogue for decades, Anna Wintour, is going to be stepping down from her role as editor-in-chief of American Vogue. Absolutely. Look, we still claim her as British-born, English, although, of course, she's the Doyenne of American fashion. Yeah, an amazing career. 37 years. She's only stepping back one, for one role. One of her jobs. One of her many, many jobs. Absolutely. This is Dame Anna Wintour, of course. Um,

And she will still basically be the chief content officer for this huge stable of magazines, Condé Nast, Wired, Vanity Fair, GQ, Glamour, Tatler. I think the most remarkable thing about it is, you know, most people don't even really buy magazines if you look at circulation numbers. But Vogue is one of the ones that has remained, you know, at the forefront. And so, you know, keeping hold of that...

empire and keeping hold of eyeballs I think is really amazing. Yeah, I quite like that apparently the staff meeting when she made this announcement she said it goes without saying that I plan to remain Vogue's tennis and theatre editor in perpetuity and why not? After that sort of tenure running that job good luck to Anna Wintour.

Well, let's bring you more now on our top story this morning. The US Treasury announcing a deal with G7 countries that will exclude US companies from the global minimum corporate tax, the 15% rate that was agreed as part of a deal at the OECD. This is in exchange for removing the so-called revenge tax proposal, Section 899 from Donald Trump's tax bill. Let's bring in our news desk editor, Jill Desis, for more on this. Jill, what do we know about the deal the US did with its G7 allies?

Yes. Well, I think just as you outlined, essentially here, the big news is that those U.S. companies are going to be excluded from that Pillar 2, that's the global minimum tax that was implemented in 2024.

I do believe at this point you've got obviously the U.S. saying that they've reached this deal with G7 nations. I think this still has to be formally approved by the OECD at some point within the next week or so. But again, you know, the big tradeoff here is, of course, scrapping that revenge tax proposal. So, I mean, you know, that's the one that was, you know,

really looking at the idea of creating that new provision in the U.S. tax code, boosting taxes on U.S. income of non-U.S.-based businesses and individuals. And, you know, obviously it was really, really kind of, it created quite a stir on Wall Street. So I think, you know, at this point, removing that is obviously quite

quite a lot of relief to a lot of corporations. Yeah, absolutely. Anyone paying attention will have seen references to this, you know, lots of times the idea that this had spooked investors. How much relief is there at the moment, do we think, around this, the fact that the 899 section, the threat of that has been removed?

Well, I think at this point, I mean, obviously critics were arguing pretty heavily against the revenge tax provisions saying that they were worried about how much investment it would deter from coming from outside the U.S. I mean, particularly at this point in time, you still have a lot of open questions about what's happening with Trump trade policy, you know, concerns about, you know, deteriorating fiscal accounts in the United States. I mean, you know,

markets were already, there's been quite a lot of volatility over the past few months, just with regard to some of this trade policy. I'd point out that, you know, it's really over the next week or so that Trump is even hoping to, you know, bring in more trade deals, but that's uncertain. So I think, you know, removing that level of uncertainty over foreign investment in the United States certainly is providing some level of relief here. I mean, you had investors that, you know, who tied up in trillions of dollars worth of investments that could have been, in fact,

it had that gone into effect. Although I think as we've covered in this program, you know, there's quite an argument to be made for the fact that, you know, maybe it was just, you know, the idea of this being a big, this rule being a big deterrent and not something that was actually intended to go into effect in the first place.

Yeah, I mean, I wonder, this was an agreement at the OSD that took many, many years to negotiate. And I wonder, without the US companies being affected, who were set to be most of those that were going to be covered by the global minimum tax, does that deal look dead now?

Yeah, I mean, obviously, it's huge for U.S. companies to not be involved in this anymore. And I think that what this does is kind of harken back to a huge part of Donald Trump's agenda, right? I mean, you know, that agreement for that global minimum 15 percent tax that was brokered back in 2021 under the Biden administration and at the time Treasury Secretary Janet Yellen. I mean, you know, this is something that, you know, Trump certainly had had

take an issue with. He often, as we saw during his first term in office following the Obama administration, often wants to rewrite the rules of his predecessors. And so I do think that that's certainly an open question there that, I mean, going ahead with this, if this is ultimately approved, you've kind of removed U.S. involvement in something that they were quite heavily involved with just a few years ago.

Yeah. Jill, thank you so much for being with us this morning. That has been Bex Jill Desis there just taking us through what happened with the Treasury, U.S. Treasury Department agreeing that idea of ditching maybe the 899 section as part of the big, beautiful bill. Ryan Reynolds here from Intmobile. With the price of just about everything going up, we thought we'd bring our prices down.

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President Trump's attempts to reshape higher education in the US by revoking foreign students' visas and cutting funding has led to an upsurge in interest in universities in Britain. More American students are now showing an interest in coming to study in the UK, and that could provide a much-needed boost for the university's sector here. Our UK economy reporter, Irina Angel, is with us for more on this. Irina, who are the students considering coming to the UK, and how are we measuring their interest? Well,

It's American and international students. And it's people who otherwise would have wanted to go to a U.S. university. But now that dream was crushed by Trump's crackdown on the American higher education sector. Many of those who have already been accepted by a U.S. university now fear they won't get a visa. And of course, you know, this is after Trump passed.

asked embassies worldwide to stop scheduling visa appointments for students and also decided to implement stricter reviews of applicants' social media profiles. And this last point has been particularly worrying for students from the Middle East, some of whom have been active on social media with pro-Palestine posts.

And of course, this broader climate is also discouraging both international and American students who are just seeking a multicultural learning environment and freedom of speech and freedom of thought more broadly.

And, you know, we've talked with university admissions consultants, with UK university deans and to students themselves. And for example, we had this one college admissions consultant, Donald Millen, who has been advising students to get into top US universities for 15 years. But now he's finding that half of his Middle Eastern clients and about 15% of his American students are, you know, looking outside of the US. Well, why are they looking then at the UK? Yeah.

I guess in the English speaking world, UK universities have long fought neck to neck with US institutions in global rankings. So they're kind of positioned as the natural replacement almost, or, you know, the natural rivals of universities.

of U.S. universities. And then, you know, Oxford and Cambridge, the brand is perhaps the only one that can match, you know, Harvard and Yale's cultural clout and the ability to capture the public imagination. And of course, finally, U.K. universities are cheaper. An MBA at Bates Business School in London is about 15,000 pounds a year. And, you know, at Harvard is almost $80,000. So all of this is making U.K. universities an attractive refuge, let's say, from the Trump years. Right.

Irina, this is, as I mentioned, coming at a time when the university sector in the UK is facing an awful lot of challenges, particularly in terms of funding. What could this mean for British universities if this interest being expressed by more foreign students actually comes to fruition?

I don't think it's an overstatement to say this would be a blessing for UK universities. Their finances have been squeezed in recent years. Domestic tuition fees failed to keep pace with rising costs. And over 40% of them had deficits in 2024. And this pressure could continue if income from foreign students doesn't rise as much as expected.

However, the challenge is that the Labour government has stopped short of welcoming international students with open arms, as opposed to the EU, for example. And in fact, because of political pressure from Nigel Farage's Reform Party, Starmer has actually been taking steps that could discourage international student enrolment. The government is considering imposing a six-page bill

percent levy on university income from international students and also cutting the amount of time that international students can stay in the UK after graduating. That being said, these are still small disincentives compared to what the Trump administration is doing.

Yeah, Irina, thank you so much for being with us. Our UK economy reporter, Irina Angel. What an interesting report. I mean, you and I have spoken to a number of university chancellors, the president of the London School of Economics and the vice-chancellors of Cambridge. And in some senses, there is a question mark about whether the UK government is doing that outreach to all of those possible students sort of well enough. You know, there's a big question on, you know, what

what sorts of visas to offer people who are coming to study and who maybe want to stay in the UK and then work here. And this is in some ways what follows up on the conversation that we were having with the head of the LSE here about the interest from academics in the US who are looking at jobs in UK universities as well. And perhaps this is the logical next step that if students are feeling under pressure and their applications for the US, some of the people that Irina spoke to for her story as well were those who had multiple opportunities

This is students who are looking at perhaps, you know, the top level universities everywhere. And this is the nudge factor that's moving them towards studying in the UK, which, as Irina points out, is really the, you know, to me that could provide real boom for the sector here. We know there's huge strength. You know, some of the top universities in the world are,

are here in the UK. So for a chance for those places to be able to attract the best students that they would normally be competing with the American universities could be a very interesting opportunity there as well at a time when we know that the sector is trying to shore up perhaps some of those challenges that they're having financially and elsewhere. Some really interesting reporting from Irina Angel. You can read the full details on Bloomberg.com and on the terminal. Trump's

anti-Harvard campaign fuels interest in UK universities is the title of the piece.

This is Bloomberg Daybreak Europe, your morning brief on the stories making news from London to Wall Street and beyond. Look for us on your podcast feed every morning on Apple, Spotify and anywhere else you get your podcasts. You can also listen live each morning on London DAB Radio, the Bloomberg Business App and Bloomberg.com. Our flagship New York station is also available on your Amazon Alexa devices. Just say Alexa, play Bloomberg 1130.

I'm Caroline Hipker. And I'm Stephen Carroll. Join us again tomorrow morning for all the news you need to start your day, right here on Bloomberg Daybreak Europe.

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Wells Fargo, the bank of doing. Learn more at wellsfargo.com slash say do. Wells Fargo Bank N.A., member FDIC. Toyota is the best resale value brand for 2025, according to Kelley Blue Books, kbb.com. And with a wide range of dependable vehicles for any lifestyle,

You can get everything you need in a vehicle today while investing in tomorrow. So choose Toyota and choose value. Shop buyatoyota.com for great deals and more. Vehicles projected resale value is specific to the 2025 model year. For more information, visit kellybluebookskbb.com. Kelly Blue Book is a registered trademark of Kelly Blue Book Co. Inc. Toyota, let's go places. This is an iHeart Podcast.