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Italian-U.S. carmaker Fiat Chrysler on Thursday pulled the plug on its proposed merger with Renault, saying negotiations had become “unreasonable” because of  political resistance in Paris.  

Fiat Chrysler Automobiles, or FCA, had stunned the markets last week with a proposed “merger of equals” with the French group that would — together with Renault’s Japanese partners, Nissan and Mitsubishi Motors — create an auto giant spanning the globe.  

The French government, which controls 15 percent of Renault, gave the deal a conditional green light, with analysts suggesting it wanted more control over the combined group alongside Fiat’s Agnelli family. 

FCA said late Wednesday that it “remains firmly convinced of the compelling, transformational rationale” of the tie-up, which it said was “carefully balanced to deliver substantial benefits to all parties.”

“However it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully,” it said in a statement.  

On Thursday, FCA chief John Elkann stood by the decision to start, and then leave, the merger talks. 

“When it becomes clear that the conversations have been brought to the point beyond which it becomes unreasonable to go, it is necessary to be equally brave to interrupt them,” Elkann wrote in a letter to employees published by Italian media.  

Renault expressed its “disappointment” at the turnabout. 

“We view the [Fiat] opportunity as timely, having compelling industrial logic and great financial merit, and which would result in a European-based global auto powerhouse,” it said in a statement. 

The combined group, including Nissan and Mitsubishi, would have been by far the world’s biggest, with total sales of 15 million vehicles, compared with both Volkswagen and Toyota, which sell around 10.6 million apiece. 

Shares in Renault plunged by more than 6 percent on the Paris stock exchange. In Milan, FCA shares also initially slid but then recovered to close up 0.1 percent.

Nissan holds key

Despite the verbal sparring that erupted after FCA’s announcement, industry experts did not rule out talks being resumed.  

“The collapse of the proposed Fiat Chrysler/Renault merger leaves both firms exposed to the shifting dynamics of a sector at a crossroads,” Ilana Elbim, credit analyst for Hermes Investment Management, said in a note.  

Pointing to falling sales volumes in major auto markets, she said “mega-mergers designed to save on capital expenditures remain inevitable.” 

On Tuesday, Renault’s board had said it was studying FCA’s offer “with interest,” but held off final approval pending further deliberations.  

By Wednesday, all Renault directors had come around in favor of the merger, with the exception of the employee representative affiliated with the powerful CGT union and two from Nissan who abstained, according to a source close to Renault.   

The two Nissan directors were said to have asked for more time to approve the deal. There was no official comment from Nissan headquarters in Tokyo. 

Relations between Renault and Nissan have come under strain since the arrest in November of their joint boss, Carlos Ghosn, who awaits trial in Japan on charges of financial misconduct. 

French Finance Minister Bruno Le Maire had laid down conditions for the tie-up with FCA, insisting there be no plant closures and that the Renault-Nissan alliance be preserved.  

The Renault source said Le Maire had asked for another board meeting next Tuesday following his return from a trip to Japan, where he was to discuss the proposal with his Japanese counterpart at a meeting of G-20 finance ministers.  

Blame game

A source close to FCA said it was the “sudden and incomprehensible” objections by Le Maire’s ministry that had caused the deal to collapse. 

Italian Deputy Prime Minister Luigi Di Maio said: “When politics tries to intervene in economic procedures, they don’t always behave correctly, I don’t want to say any more.”   

But Le Maire stressed that, of his conditions, only the explicit approval of Nissan remained to be secured, while aides denied that the ministry had played politics with the deal. 

A source close to the finance ministry said the French government “regrets the hasty decision of FCA.” 

“Despite significant progress, a short delay was still necessary so that all conditions set by the state could be met,” it said. 

Le Maire indicated the French government was amenable to changes at Renault despite FCA’s U-turn. 

“We remain open to the prospect of industrial consolidation, but once again, in calmness, without haste, to guarantee the industrial interests of Renault and the industrial interests of the French nation,” he told the French parliament. 

For his part, Elkann said FCA “will continue to be open to opportunities of all kinds that offer the possibility of strengthening and accelerating the realization of this strategy and creating value.” 
…

Italian-U.S. carmaker Fiat Chrysler on Thursday pulled the plug on its proposed merger with Renault, saying negotiations had become “unreasonable” because of  political resistance in Paris.  

Fiat Chrysler Automobiles, or FCA, had stunned the markets last week with a proposed “merger of equals” with the French group that would — together with Renault’s Japanese partners, Nissan and Mitsubishi Motors — create an auto giant spanning the globe.  

The French government, which controls 15 percent of Renault, gave the deal a conditional green light, with analysts suggesting it wanted more control over the combined group alongside Fiat’s Agnelli family. 

FCA said late Wednesday that it “remains firmly convinced of the compelling, transformational rationale” of the tie-up, which it said was “carefully balanced to deliver substantial benefits to all parties.”

“However it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully,” it said in a statement.  

On Thursday, FCA chief John Elkann stood by the decision to start, and then leave, the merger talks. 

“When it becomes clear that the conversations have been brought to the point beyond which it becomes unreasonable to go, it is necessary to be equally brave to interrupt them,” Elkann wrote in a letter to employees published by Italian media.  

Renault expressed its “disappointment” at the turnabout. 

“We view the [Fiat] opportunity as timely, having compelling industrial logic and great financial merit, and which would result in a European-based global auto powerhouse,” it said in a statement. 

The combined group, including Nissan and Mitsubishi, would have been by far the world’s biggest, with total sales of 15 million vehicles, compared with both Volkswagen and Toyota, which sell around 10.6 million apiece. 

Shares in Renault plunged by more than 6 percent on the Paris stock exchange. In Milan, FCA shares also initially slid but then recovered to close up 0.1 percent.

Nissan holds key

Despite the verbal sparring that erupted after FCA’s announcement, industry experts did not rule out talks being resumed.  

“The collapse of the proposed Fiat Chrysler/Renault merger leaves both firms exposed to the shifting dynamics of a sector at a crossroads,” Ilana Elbim, credit analyst for Hermes Investment Management, said in a note.  

Pointing to falling sales volumes in major auto markets, she said “mega-mergers designed to save on capital expenditures remain inevitable.” 

On Tuesday, Renault’s board had said it was studying FCA’s offer “with interest,” but held off final approval pending further deliberations.  

By Wednesday, all Renault directors had come around in favor of the merger, with the exception of the employee representative affiliated with the powerful CGT union and two from Nissan who abstained, according to a source close to Renault.   

The two Nissan directors were said to have asked for more time to approve the deal. There was no official comment from Nissan headquarters in Tokyo. 

Relations between Renault and Nissan have come under strain since the arrest in November of their joint boss, Carlos Ghosn, who awaits trial in Japan on charges of financial misconduct. 

French Finance Minister Bruno Le Maire had laid down conditions for the tie-up with FCA, insisting there be no plant closures and that the Renault-Nissan alliance be preserved.  

The Renault source said Le Maire had asked for another board meeting next Tuesday following his return from a trip to Japan, where he was to discuss the proposal with his Japanese counterpart at a meeting of G-20 finance ministers.  

Blame game

A source close to FCA said it was the “sudden and incomprehensible” objections by Le Maire’s ministry that had caused the deal to collapse. 

Italian Deputy Prime Minister Luigi Di Maio said: “When politics tries to intervene in economic procedures, they don’t always behave correctly, I don’t want to say any more.”   

But Le Maire stressed that, of his conditions, only the explicit approval of Nissan remained to be secured, while aides denied that the ministry had played politics with the deal. 

A source close to the finance ministry said the French government “regrets the hasty decision of FCA.” 

“Despite significant progress, a short delay was still necessary so that all conditions set by the state could be met,” it said. 

Le Maire indicated the French government was amenable to changes at Renault despite FCA’s U-turn. 

“We remain open to the prospect of industrial consolidation, but once again, in calmness, without haste, to guarantee the industrial interests of Renault and the industrial interests of the French nation,” he told the French parliament. 

For his part, Elkann said FCA “will continue to be open to opportunities of all kinds that offer the possibility of strengthening and accelerating the realization of this strategy and creating value.” 
…

The U.S. economy could be weakened by escalating trade wars or a sudden downturn in global financial markets, the International Monetary Fund (IMF) warns.

In an annual review of the U.S. economy, the IMF said it was on a 2.6 percent growth track this year, greater than the 2.3 percent growth rate forecast in April.

But the report also said the U.S. economy appears to be increasingly vulnerable amid investor concern over America’s trade wars, noting they could trigger worsening global financial conditions.

The IMF criticized U.S. President Donald Trump’s administration for efforts to remake global trade relationships through higher tariffs and said it was “especially important” to resolve the trade dispute with China.

The report said the U.S. economy has recovered from the financial crisis that began in 2008, but millions of Americans did not benefit from the recovery. Household income increased a meager 2.2 percent from the end of the last century, the report said, while the U.S. economy expanded 23 percent per capita during the same period.

“The poorest 40 percent of households have a level of net wealth that is lower today than it was in 1983,” the report said.

The report called on the Trump administration to avert an economic slowdown by adopting measures to cut public and corporate debt and address inequality.

On Wednesday, the IMF warned the U.S.-China trade war could cut world economic growth next year.

IMF Managing Director Christine Lagarde said Trump’s threat to tax all trade between the two countries would shrink the global Gross Domestic Product (GDP) by one-half-of-one percent.

“This amounts to a loss of about about $455 billion, larger than the size of South Africa’s economy,” Lagarde said in a briefing note for the Group of Twenty (G-20), a collection of the world’s largest advanced and emerging economies. “These are self-inflicted wounds that must be avoided… by removing the recently implemented trade barriers and by avoiding further barriers in whatever form,” she added.

The warning came as G-20 finance ministers and central bankers prepare to meet in Japan later this month. They will gather just weeks after U.S.-China talks collapsed amid claims of broken promises and another round of punishing tariffs.
…

The U.S. economy could be weakened by escalating trade wars or a sudden downturn in global financial markets, the International Monetary Fund (IMF) warns.

In an annual review of the U.S. economy, the IMF said it was on a 2.6 percent growth track this year, greater than the 2.3 percent growth rate forecast in April.

But the report also said the U.S. economy appears to be increasingly vulnerable amid investor concern over America’s trade wars, noting they could trigger worsening global financial conditions.

The IMF criticized U.S. President Donald Trump’s administration for efforts to remake global trade relationships through higher tariffs and said it was “especially important” to resolve the trade dispute with China.

The report said the U.S. economy has recovered from the financial crisis that began in 2008, but millions of Americans did not benefit from the recovery. Household income increased a meager 2.2 percent from the end of the last century, the report said, while the U.S. economy expanded 23 percent per capita during the same period.

“The poorest 40 percent of households have a level of net wealth that is lower today than it was in 1983,” the report said.

The report called on the Trump administration to avert an economic slowdown by adopting measures to cut public and corporate debt and address inequality.

On Wednesday, the IMF warned the U.S.-China trade war could cut world economic growth next year.

IMF Managing Director Christine Lagarde said Trump’s threat to tax all trade between the two countries would shrink the global Gross Domestic Product (GDP) by one-half-of-one percent.

“This amounts to a loss of about about $455 billion, larger than the size of South Africa’s economy,” Lagarde said in a briefing note for the Group of Twenty (G-20), a collection of the world’s largest advanced and emerging economies. “These are self-inflicted wounds that must be avoided… by removing the recently implemented trade barriers and by avoiding further barriers in whatever form,” she added.

The warning came as G-20 finance ministers and central bankers prepare to meet in Japan later this month. They will gather just weeks after U.S.-China talks collapsed amid claims of broken promises and another round of punishing tariffs.
…

Liz Hung supports a lot of the imaginative concepts being discussed to make Vietnam “greener” economically and in terms of urban planning.

Consider traffic lights. Hung described how government authorities could collect smartphone data to see which streets are crowded, and then calibrate the stoplights to optimize traffic flow.

Hung and others in the private sector are giving Vietnamese officials their wish list for a green economy, from more renewable energy to buildings that collect rain water for use.

“Road congestion costs us at least 2 to 5% of our [gross domestic product] growth every year because of the time we lost or the high transportation cost, so that is why being smart [in] mobility is very crucial,” said Hung, who is CBRE associate director of Asia Pacific Research.

Hung’s comment highlights the link between good city planning and economic benefits.

Emulating China, Australia

There is also a larger debate about whether the economic benefits outweigh the costs of going green.

There is a financial cost of technology to make Vietnam more efficient. But there also is a security cost, as “smart devices,” like lights connected to the internet, have looser security settings that make them easier to hack.

In looking for inspiration for Vietnam’s future, Hung looked at places from Hangzhou, China, where she heard about the traffic data, to Adelaide, Australia, where authorities installed smart sensors in trash bins, which alert garbage collectors when the bins are nearly full.

If the idea is to increase efficiency, Vietnam should think about energy use, said Tomaso Andreatta, vice chair at the European Chamber of Commerce in Vietnam.

Last month, the chamber held a forum on sustainable cities. In addition to rooftop solar panels and wind turbines, some cities are exploring ways to create energy from things that would otherwise be tossed out.

Trash can be burned, for example, to boil water for steam generators that produce electricity, a process known as waste-to-energy. This does risk increasing carbon emissions or decreasing incentives for recycling, however.

Aiming for zero waste

“More and more we realize that resources are limited, and producing waste destroys the quality of life,” Andreatta said. “Therefore, there’s been a movement worldwide to reducing waste to an absolute minimum, ideally zero.”

He went on to say, “The rapid development of the middle class and its lifestyle, which includes intensive air conditioning use, accounts for a considerable proportion of energy consumption growth.”

It may be the middle class that benefits most from a greener Vietnam, where the private sector steps in to create greater efficiencies, when the government is not involved.

Property developers are building enclosed communities where sustainability is part of the design, whether it’s motion-detecting lights, or insulation that keeps indoor temperatures manageable. One developer introduced pollution warnings. Another made a transportation app just for its residents.

But what about those who are not lucky enough to live in a gated community?

Government officials say they are listening to proposals across all sectors. They say that as Vietnam faces a major threat from climate change, it needs to make greater efforts at green planning.

“Climate change will have a big impact on the region,” said Huynh Xuan Thu, deputy chief officer of the Ho Chi Minh City Department of Architecture and Urban Planning.

Some of the ideas, such as a country full of electric cars, may be a pipe dream or years down the road. But Vietnam is getting started on some of the proposals.

In Ho Chi Minh City, officials are looking at traffic sensors and gathering data on congestion, which they hope to reduce through technology in the near future.

 
…

Liz Hung supports a lot of the imaginative concepts being discussed to make Vietnam “greener” economically and in terms of urban planning.

Consider traffic lights. Hung described how government authorities could collect smartphone data to see which streets are crowded, and then calibrate the stoplights to optimize traffic flow.

Hung and others in the private sector are giving Vietnamese officials their wish list for a green economy, from more renewable energy to buildings that collect rain water for use.

“Road congestion costs us at least 2 to 5% of our [gross domestic product] growth every year because of the time we lost or the high transportation cost, so that is why being smart [in] mobility is very crucial,” said Hung, who is CBRE associate director of Asia Pacific Research.

Hung’s comment highlights the link between good city planning and economic benefits.

Emulating China, Australia

There is also a larger debate about whether the economic benefits outweigh the costs of going green.

There is a financial cost of technology to make Vietnam more efficient. But there also is a security cost, as “smart devices,” like lights connected to the internet, have looser security settings that make them easier to hack.

In looking for inspiration for Vietnam’s future, Hung looked at places from Hangzhou, China, where she heard about the traffic data, to Adelaide, Australia, where authorities installed smart sensors in trash bins, which alert garbage collectors when the bins are nearly full.

If the idea is to increase efficiency, Vietnam should think about energy use, said Tomaso Andreatta, vice chair at the European Chamber of Commerce in Vietnam.

Last month, the chamber held a forum on sustainable cities. In addition to rooftop solar panels and wind turbines, some cities are exploring ways to create energy from things that would otherwise be tossed out.

Trash can be burned, for example, to boil water for steam generators that produce electricity, a process known as waste-to-energy. This does risk increasing carbon emissions or decreasing incentives for recycling, however.

Aiming for zero waste

“More and more we realize that resources are limited, and producing waste destroys the quality of life,” Andreatta said. “Therefore, there’s been a movement worldwide to reducing waste to an absolute minimum, ideally zero.”

He went on to say, “The rapid development of the middle class and its lifestyle, which includes intensive air conditioning use, accounts for a considerable proportion of energy consumption growth.”

It may be the middle class that benefits most from a greener Vietnam, where the private sector steps in to create greater efficiencies, when the government is not involved.

Property developers are building enclosed communities where sustainability is part of the design, whether it’s motion-detecting lights, or insulation that keeps indoor temperatures manageable. One developer introduced pollution warnings. Another made a transportation app just for its residents.

But what about those who are not lucky enough to live in a gated community?

Government officials say they are listening to proposals across all sectors. They say that as Vietnam faces a major threat from climate change, it needs to make greater efforts at green planning.

“Climate change will have a big impact on the region,” said Huynh Xuan Thu, deputy chief officer of the Ho Chi Minh City Department of Architecture and Urban Planning.

Some of the ideas, such as a country full of electric cars, may be a pipe dream or years down the road. But Vietnam is getting started on some of the proposals.

In Ho Chi Minh City, officials are looking at traffic sensors and gathering data on congestion, which they hope to reduce through technology in the near future.

 
…

In a double blow for Mexico, credit ratings agency Fitch downgraded the nation’s sovereign debt rating on Wednesday, citing risks posed by heavily indebted oil company Pemex and trade tensions, while Moody’s lowered its outlook to negative.

The Mexican peso weakened as much as 1.3% on the news.

Cutting Mexico’s rating to BBB, nearing junk status, Fitch said the financial woes of state oil company Pemex were taking a toll on the nation’s prospects.

Fitch said mounting trade tensions influenced its view, according to a statement issued shortly after the end of a meeting in the White House in which Mexican officials tried to stave off tariffs U.S. President Donald Trump has vowed to impose next week.

Following a surge in mostly Central American migrants arriving at the U.S. border, Trump threatened blanket tariffs on Mexican imports if it did not do more to stem the flow.

“Growth continues to underperform, and downside risks are magnified by threats by U.S. President Trump,” Fitch said.

Mexican President Andres Manuel Lopez Obrador took office in December with ambitious plans to build a $8 billion refinery, a decision ratings agencies and investors warned would divert funds from its more profitable production and exploration business.

“Further evidence that medium-term growth is in decline, whether as a result of policies that actively undermine growth or because of continued policy unpredictability, would put downward pressure,” Moody’s said in a statement.

Mexico’s finance ministry declined to comment.

Lopez Obrador has said the ratings agencies were punishing Mexico for the “neo-liberal” policies of previous administrations.

A Reuters analysis of Pemex accounts from the past decade shows debt increased by 75% during the term of Lopez Obrador’s predecessor, Enrique Pena Nieto, amid a landmark energy reform.

Pemex

Moody’s highlighted the risks posed by Pemex, formally known as Petroleos Mexicanos, the world’s most indebted oil company.

“The impact of the contingent liability represented by Pemex weighs increasingly heavily on the sovereign credit profile,” Fitch said in a statement.

The latest moves by the ratings agencies on Mexico’s sovereign rating could also ratchet up pressure on the oil company’s own rating, which is teetering on the brink being downgraded from investment grade.

In March, S&P cut its stand-alone assessment of Pemex by three notches, following Fitch’s move to downgrade its credit in January. S&P pegs the rating of Pemex to that of the sovereign rating and the stand-alone assessment does not equal a rating.
…

In a double blow for Mexico, credit ratings agency Fitch downgraded the nation’s sovereign debt rating on Wednesday, citing risks posed by heavily indebted oil company Pemex and trade tensions, while Moody’s lowered its outlook to negative.

The Mexican peso weakened as much as 1.3% on the news.

Cutting Mexico’s rating to BBB, nearing junk status, Fitch said the financial woes of state oil company Pemex were taking a toll on the nation’s prospects.

Fitch said mounting trade tensions influenced its view, according to a statement issued shortly after the end of a meeting in the White House in which Mexican officials tried to stave off tariffs U.S. President Donald Trump has vowed to impose next week.

Following a surge in mostly Central American migrants arriving at the U.S. border, Trump threatened blanket tariffs on Mexican imports if it did not do more to stem the flow.

“Growth continues to underperform, and downside risks are magnified by threats by U.S. President Trump,” Fitch said.

Mexican President Andres Manuel Lopez Obrador took office in December with ambitious plans to build a $8 billion refinery, a decision ratings agencies and investors warned would divert funds from its more profitable production and exploration business.

“Further evidence that medium-term growth is in decline, whether as a result of policies that actively undermine growth or because of continued policy unpredictability, would put downward pressure,” Moody’s said in a statement.

Mexico’s finance ministry declined to comment.

Lopez Obrador has said the ratings agencies were punishing Mexico for the “neo-liberal” policies of previous administrations.

A Reuters analysis of Pemex accounts from the past decade shows debt increased by 75% during the term of Lopez Obrador’s predecessor, Enrique Pena Nieto, amid a landmark energy reform.

Pemex

Moody’s highlighted the risks posed by Pemex, formally known as Petroleos Mexicanos, the world’s most indebted oil company.

“The impact of the contingent liability represented by Pemex weighs increasingly heavily on the sovereign credit profile,” Fitch said in a statement.

The latest moves by the ratings agencies on Mexico’s sovereign rating could also ratchet up pressure on the oil company’s own rating, which is teetering on the brink being downgraded from investment grade.

In March, S&P cut its stand-alone assessment of Pemex by three notches, following Fitch’s move to downgrade its credit in January. S&P pegs the rating of Pemex to that of the sovereign rating and the stand-alone assessment does not equal a rating.
…

U.S. refiners warned the Trump administration that tariffs on imports from Mexico could deliver a punishing blow to refiners and raise the cost of gasoline just as the U.S. driving season kicks into high gear, according to sources familiar with the discussions.

Trump surprised Mexico last week with a threat to impose 5% tariffs on all its exports to the United States unless the Mexican government took measures to stem the flow of illegal immigrants into the United States.

The United States imports more than 650,000 barrels of crude per day from Mexico, about 10% of total crude imports, according to U.S. government data. Refiners are also worried that Mexico could retaliate with tariffs on its imports of U.S. fuel, a major source of revenue for the U.S. industry.

“If these tariffs take hold, particularly if they’re able to get up to 25%, that could really impact the overall competitiveness of the U.S. refining industry,” said Chet Thompson, chief executive of the American Fuel and Petrochemical Manufacturers trade association. The group has had discussions with the administration and Congress on the issue, Thompson said.

​Mexico oil complements US oil

Mexico’s oil is heavy and refiners need it to blend with lighter U.S. oil to produce diesel fuel, gasoline and other products. Tariffs would drive up the cost of those imports — and Trump has said he would increase levies by 5% monthly until they reach 25% in October.

Mexico is a prime supplier of heavy crude, which has been harder to come by since the United States imposed sanctions on Venezuela in January.

Gasoline prices have remained subdued as global oil prices have declined because of worries about worldwide economic demand. But without enough heavy crude, U.S. refineries could run plants at lower rates to save money if heavy crude feedstock becomes too costly, lobbyists said.

“The heavy crude market is tight and it’s only Mexico at the moment. The tariff would essentially make the crude uneconomical and we may have no choice but to consider run cuts,” said one Washington-based refinery lobbyist.

Refiners have said that could drive up the price of gasoline at the pump, just as American drivers take to the road in the period of the highest gasoline demand in the United States.

Texas lawmakers alarmed

International crude prices are near a six-month low, so any rise in gasoline prices is unlikely to be prohibitive.

Right now a regular gallon of gasoline in the United States averages $2.80, according to the American Automobile Association, but it tends to rise in the summer months.

“We are trying to educate the administration on what this means for gas prices,” the lobbyist said. The potential for tariffs has alarmed lawmakers of both major U.S. parties, including members of Congress from Texas, a reliably Republican state that voted for Donald Trump in 2016 but depends on the oil industry and cross-border trade with Mexico, which accounts for 39 percent of the state’s exports, according to the Texas-Mexico Trade Coalition.

“We shouldn’t be imposing tariffs on Mexico,” said Senator Ted Cruz, Republican of Texas. He told Reuters that Republican senators “had a vigorous and frank discussion” with White House officials on the issue.

Texas has 5.7 million barrels of daily refining capacity, more than any other state.

U.S. refiners are also concerned about retaliatory actions by Mexico, which buys about one-quarter of U.S. refined product exports. In March, Mexico bought about 1.3 million bpd of oil products from the United States, according to U.S. Energy Department data.

“It would be pretty devastating to us,” a second Washington-based lobbyist said.
…

U.S. refiners warned the Trump administration that tariffs on imports from Mexico could deliver a punishing blow to refiners and raise the cost of gasoline just as the U.S. driving season kicks into high gear, according to sources familiar with the discussions.

Trump surprised Mexico last week with a threat to impose 5% tariffs on all its exports to the United States unless the Mexican government took measures to stem the flow of illegal immigrants into the United States.

The United States imports more than 650,000 barrels of crude per day from Mexico, about 10% of total crude imports, according to U.S. government data. Refiners are also worried that Mexico could retaliate with tariffs on its imports of U.S. fuel, a major source of revenue for the U.S. industry.

“If these tariffs take hold, particularly if they’re able to get up to 25%, that could really impact the overall competitiveness of the U.S. refining industry,” said Chet Thompson, chief executive of the American Fuel and Petrochemical Manufacturers trade association. The group has had discussions with the administration and Congress on the issue, Thompson said.

​Mexico oil complements US oil

Mexico’s oil is heavy and refiners need it to blend with lighter U.S. oil to produce diesel fuel, gasoline and other products. Tariffs would drive up the cost of those imports — and Trump has said he would increase levies by 5% monthly until they reach 25% in October.

Mexico is a prime supplier of heavy crude, which has been harder to come by since the United States imposed sanctions on Venezuela in January.

Gasoline prices have remained subdued as global oil prices have declined because of worries about worldwide economic demand. But without enough heavy crude, U.S. refineries could run plants at lower rates to save money if heavy crude feedstock becomes too costly, lobbyists said.

“The heavy crude market is tight and it’s only Mexico at the moment. The tariff would essentially make the crude uneconomical and we may have no choice but to consider run cuts,” said one Washington-based refinery lobbyist.

Refiners have said that could drive up the price of gasoline at the pump, just as American drivers take to the road in the period of the highest gasoline demand in the United States.

Texas lawmakers alarmed

International crude prices are near a six-month low, so any rise in gasoline prices is unlikely to be prohibitive.

Right now a regular gallon of gasoline in the United States averages $2.80, according to the American Automobile Association, but it tends to rise in the summer months.

“We are trying to educate the administration on what this means for gas prices,” the lobbyist said. The potential for tariffs has alarmed lawmakers of both major U.S. parties, including members of Congress from Texas, a reliably Republican state that voted for Donald Trump in 2016 but depends on the oil industry and cross-border trade with Mexico, which accounts for 39 percent of the state’s exports, according to the Texas-Mexico Trade Coalition.

“We shouldn’t be imposing tariffs on Mexico,” said Senator Ted Cruz, Republican of Texas. He told Reuters that Republican senators “had a vigorous and frank discussion” with White House officials on the issue.

Texas has 5.7 million barrels of daily refining capacity, more than any other state.

U.S. refiners are also concerned about retaliatory actions by Mexico, which buys about one-quarter of U.S. refined product exports. In March, Mexico bought about 1.3 million bpd of oil products from the United States, according to U.S. Energy Department data.

“It would be pretty devastating to us,” a second Washington-based lobbyist said.
…

Lazaro Hernandez, who has made a good living showing U.S. cruise ship passengers around Havana in his pink 1950s Chevrolet, says the new U.S. ban on cruises to Cuba will wipe out 90% of his business overnight.

Hernandez is one of thousands of Cubans who benefited from the boom in American visitors to the Caribbean’s largest island following the loosening of travel restrictions under former U.S. President Barack Obama during the short-lived 2014-2016 detente between the Cold War foes.

Obama’s successor, President Donald Trump, aims to punish Cuba’s Communist government, especially for its alliance with Venezuela, by tightening the rules once more. Yet Cubans say those who will really suffer are the people, including the private-sector workers the United States purports to support.

“This is a fatal blow for us,” said Hernandez, 27, who makes $30 an hour — the equivalent of the average monthly state salary — doing tours of Havana. “If there’s no tourism, we don’t have work.”

​Second-biggest group of tourists

U.S. travelers excluding Cuban-Americans became the second-biggest group of tourists on the island in recent years after Canadians, with cruise travelers making up half of those.

Although they typically contributed less to the economy as they stayed on ships rather than in hotels or bed-and-breakfasts, they hired drivers and tour guides and spent at private shops, bars and restaurants.

“We bought T-shirts as souvenirs and bags,” said Sarah Freeman, 42, one of the passengers on the last U.S. cruise ship to sail from Havana, using a handcrafted wooden Cuban fan to fend off the Caribbean heat.

The new restrictions on U.S. travel to Cuba also include the elimination of so-called group people-to-people educational travel, one of the most popular exemptions to the overall ban on U.S. tourism to Cuba.

‘Negative perceptions’

William LeoGrande, a Cuba expert at American University in Washington, estimated the measures could reduce the number of non-Cuban-American U.S. visitors by two-thirds or more.

That could cut overall tourist arrivals in Cuba by about 10%, he said. Another expert, John Kavulich, said the drop could be as much as 20%.

“Optically, not having Carnival, Norwegian and Royal Caribbean in the marketplace will recreate negative perceptions about Cuba,” said Kavulich, president of the U.S.-Cuba Trade and Economic Council Inc., referring to the three main cruise lines forced to cancel service.

Earlier restrictions cut revenues

Tourism revenues, the country’s second-biggest source of hard currency, already slumped nearly 5% last year, according to official data.

That was partly the result of an earlier round of Trump administration restrictions.

Washington says it is pressuring Cuba to reform and tamp down its support for socialist Venezuelan President Nicolas Maduro, whom Trump has been seeking to force out in favor of opposition leader Juan Guaido, who is backed by most Western countries.

Critics say Trump is seeking to drum up support from the Cuban-American community in the swing state of Florida ahead of next year’s election.

Starting Thursday, many Cubans will be feeling the sudden absence in revenue from cruise passengers.

“For me, it will have a domino effect,” said Nichdaly Gonzalez, who earns her living posing for photos, dressed up in her colorful colonial garb, adding she expected to have to rein in her spending. As such, it will have a trickle-down impact on the local economy, especially in the ports of Havana, Santiago de Cuba and Cienfuegos that received the U.S. cruise ships.

The Cuban government has said it is aiming for tourism income to increase 5.8% this year, but it is hard to see how it can reach that goal now.

“We’ve lived with U.S. hostility now for 60 years, since the revolution, so we’ll get by,” said Abel Amador, 46, selling sketches to tourists on a cobbled street. “But this new move will still affect us.”
…

Lazaro Hernandez, who has made a good living showing U.S. cruise ship passengers around Havana in his pink 1950s Chevrolet, says the new U.S. ban on cruises to Cuba will wipe out 90% of his business overnight.

Hernandez is one of thousands of Cubans who benefited from the boom in American visitors to the Caribbean’s largest island following the loosening of travel restrictions under former U.S. President Barack Obama during the short-lived 2014-2016 detente between the Cold War foes.

Obama’s successor, President Donald Trump, aims to punish Cuba’s Communist government, especially for its alliance with Venezuela, by tightening the rules once more. Yet Cubans say those who will really suffer are the people, including the private-sector workers the United States purports to support.

“This is a fatal blow for us,” said Hernandez, 27, who makes $30 an hour — the equivalent of the average monthly state salary — doing tours of Havana. “If there’s no tourism, we don’t have work.”

​Second-biggest group of tourists

U.S. travelers excluding Cuban-Americans became the second-biggest group of tourists on the island in recent years after Canadians, with cruise travelers making up half of those.

Although they typically contributed less to the economy as they stayed on ships rather than in hotels or bed-and-breakfasts, they hired drivers and tour guides and spent at private shops, bars and restaurants.

“We bought T-shirts as souvenirs and bags,” said Sarah Freeman, 42, one of the passengers on the last U.S. cruise ship to sail from Havana, using a handcrafted wooden Cuban fan to fend off the Caribbean heat.

The new restrictions on U.S. travel to Cuba also include the elimination of so-called group people-to-people educational travel, one of the most popular exemptions to the overall ban on U.S. tourism to Cuba.

‘Negative perceptions’

William LeoGrande, a Cuba expert at American University in Washington, estimated the measures could reduce the number of non-Cuban-American U.S. visitors by two-thirds or more.

That could cut overall tourist arrivals in Cuba by about 10%, he said. Another expert, John Kavulich, said the drop could be as much as 20%.

“Optically, not having Carnival, Norwegian and Royal Caribbean in the marketplace will recreate negative perceptions about Cuba,” said Kavulich, president of the U.S.-Cuba Trade and Economic Council Inc., referring to the three main cruise lines forced to cancel service.

Earlier restrictions cut revenues

Tourism revenues, the country’s second-biggest source of hard currency, already slumped nearly 5% last year, according to official data.

That was partly the result of an earlier round of Trump administration restrictions.

Washington says it is pressuring Cuba to reform and tamp down its support for socialist Venezuelan President Nicolas Maduro, whom Trump has been seeking to force out in favor of opposition leader Juan Guaido, who is backed by most Western countries.

Critics say Trump is seeking to drum up support from the Cuban-American community in the swing state of Florida ahead of next year’s election.

Starting Thursday, many Cubans will be feeling the sudden absence in revenue from cruise passengers.

“For me, it will have a domino effect,” said Nichdaly Gonzalez, who earns her living posing for photos, dressed up in her colorful colonial garb, adding she expected to have to rein in her spending. As such, it will have a trickle-down impact on the local economy, especially in the ports of Havana, Santiago de Cuba and Cienfuegos that received the U.S. cruise ships.

The Cuban government has said it is aiming for tourism income to increase 5.8% this year, but it is hard to see how it can reach that goal now.

“We’ve lived with U.S. hostility now for 60 years, since the revolution, so we’ll get by,” said Abel Amador, 46, selling sketches to tourists on a cobbled street. “But this new move will still affect us.”
…