Washington — The U.S. Commerce Department on Monday proposed prohibiting key Chinese software and hardware in connected vehicles on American roads due to national security concerns — a move that would effectively bar nearly all Chinese cars from entering the U.S. market.

The planned regulation, first reported by Reuters, would also force American and other major automakers in the coming years to remove key Chinese software and hardware from vehicles in the United States.

The Biden administration has raised serious concerns about the collection of data by Chinese companies on U.S. drivers and infrastructure through connected vehicles as well as about potential foreign manipulation of vehicles connected to the internet and navigation systems. The White House ordered an investigation into the potential dangers in February.

The prohibitions would prevent testing of self-driving cars on U.S. roads by Chinese automakers and extend to vehicle software and hardware produced by other U.S. foreign adversaries including Russia.

“When foreign adversaries build software to make a vehicle that means it can be used for surveillance, can be remotely controlled, which threatens the privacy and safety of Americans on the road,” Commerce Secretary Gina Raimondo told a briefing.

“In an extreme situation, a foreign adversary could shut down or take control of all their vehicles operating in the United States all at the same time causing crashes, blocking roads.”

The move is a significant escalation in the United States’ ongoing restrictions on Chinese vehicles, software and components. Earlier this month, the Biden administration locked in steep tariff hikes on Chinese imports, including a 100% duty on electric vehicles as well as new hikes on EV batteries and key minerals.

There are relatively few Chinese-made cars or light-duty trucks imported into the United States. But Raimondo said the department is acting “before suppliers, automakers and car components linked to China or Russia become commonplace and widespread in the U.S. automotive sector… We’re not going to wait until our roads are filled with cars and the risk is extremely significant before we act.”

Nearly all newer cars and trucks are considered “connected” with onboard network hardware that allows internet access, allowing them to share data with devices both inside and outside the vehicle.

A senior administration official confirmed the proposal would effectively ban all existing Chinese light-duty cars and trucks from the U.S. market, but added it would allow Chinese automakers to seek “specific authorizations” for exemptions.

The United States has ample evidence of China prepositioning malware in critical American infrastructure, White House National Security Adviser Jake Sullivan told the same briefing.

“With potentially millions of vehicles on the road, each with 10- to 15-year lifespans the risk of disruption and sabotage increases dramatically,” Sullivan said.

The Chinese Embassy in Washington last month criticized planned action to limit Chinese vehicle exports to the United States: “China urges the U.S. to earnestly abide by market principles and international trade rules, and create a level playing field for companies from all countries. China will firmly defend its lawful rights and interests.”

The proposal calls for making software prohibitions effective in the 2027 model year while the hardware ban would take effect in the 2030 model year or January 2029.

The Commerce Department is giving the public 30 days to comment on the proposal and hopes to finalize it by Jan. 20. The rules would apply to all on-road vehicles but exclude agricultural or mining vehicles not used on public roads.

The Alliance For Automotive Innovation, a group representing major automakers including General Motors, Toyota, Volkswagen and Hyundai, has warned that changing hardware and software would take time.

The group noted connected vehicle hardware and software are developed around the world, including China, but could not detail to what extent Chinese-made components are prevalent in U.S. models.
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NEW YORK — A roaring rally in U.S. stocks will face a gauntlet of economic data, looming political uncertainty and a corporate earnings test in coming weeks as investors navigate one of the most volatile periods of the year for equity markets.  

The benchmark S&P 500 .SPX last week hit its first closing all-time high in two months after the Federal Reserve unveiled a hefty 50-basis point rate cut, kicking off the first U.S. monetary easing cycle since 2020.  

The index is up 0.8% so far in September, historically the weakest month for stocks, and has gained 19% year-to-date. But the rocky period could carry over until the Nov 5 election, strategists said, leaving the S&P 500 vulnerable to market swings.  

“We’re entering that period where seasonality has been a bit less favorable,” said Angelo Kourkafas, senior investment strategist at Edward Jones. “Despite the excitement about the start of the new rate-cutting cycle, it could still be a bumpy road ahead.”  

The second half of September is historically the weakest two-week period of the year for the S&P 500, according to a Ned Davis Research analysis of data since 1950.  

The index has also logged an average 0.45% decline in October during presidential years, data from CFRA going back to 1945 showed.  

Volatility also tends to pick up in October in election years, with the Cboe Market Volatility index .VIX rising to an average level of 25 at the start of the month, as opposed to its long-term average of 19.2, according to an Edward Jones analysis of the past eight presidential election years. The VIX was recently at 16.4.  

The market could be particularly sensitive to this year’s close election between Republican Donald Trump and Democrat Kamala Harris. Recent polls show a virtually tied race.  

“Unless the data deteriorates considerably, we think U.S . elections will start to be more at the forefront,” UBS equity derivative strategists said in a note.    

Investors are also looking for data to support expectations that the economy is navigating a “soft landing,” during which inflation moderates without badly hurting growth. Stocks fare much better after the start of rate cuts in such a scenario, as opposed to when the Fed cuts during recessions.  

The coming week includes reports on manufacturing, consumer confidence and durable goods, as well as the personal consumption expenditures price index, a key inflation measure.  

Attention will be squarely on employment after Fed Chair Jerome Powell said the central bank wanted to stay ahead of any weakening in the job market as the Fed announced its cut last week. The closely-watched monthly U.S. jobs report is due on Oct 4.  

“We’re going to have hyper-focus on anything that speaks to the strength of the labor force,” said Art Hogan, chief market strategist at B Riley Wealth. 

Meanwhile, the rally in stocks has pushed up valuations. The S&P 500 has a price-to-earnings ratio of 21.4 times expected 12-month earnings, well above its long-term average of 15.7, according to LSEG Datastream.  

With the scope for valuations to go higher now more limited, investors said that puts a greater burden on corporate earnings to be strong in order to support stock gains.  

Third-quarter reporting season kicks off next month. S&P 500 earnings for the period are expected to have climbed 5.4% from the prior year, and then jump nearly 13% in the fourth quarter, according to LSEG IBES.  

FedEx FDX.N shares tumbled on Friday after the delivery giant reported a steep quarterly profit drop and lowered its full-year revenue forecast.  

“Extended multiples put pressure on macro data and fundamentals to support S&P 500 prices,” Scott Chronert, head of U.S. equity strategy at Citi, said in a report. 
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ABUJA, NIGERIA — The high inflation rate in Nigeria dropped slightly in August, but a decline in the value of the nairia and a continued increase in fuel prices are eroding the slight gains and threatening to reignite the inflationary trend.

Michael Anthony, an engineer and father of four, still faces high costs despite the small drop in inflation, which fell from 33.40% in July to 32.15% in August. His household expenses remain steep, with no real relief in sight.

“In the month of July, I bought a bag of rice at the rate of 65,000 naira, but … three days ago, I bought a bag of rice for 95,000 naira,” he said. “If you want to buy anything, price has risen because of the price of fuel. I’m worried that inflation rate might rise again.”

At a market in a suburb of Abuja, food trader Blessing Ochuba is also struggling. With customers unable to buy in bulk, she’s cutting back her stock and adjusting prices to stay in business.

Ochuba said patronage has been slow despite the reported dip in inflation rate.

“People that normally buy in bags, they now buy like half or quarter … because they can no longer afford to buy for now,” she said. “I used to buy like 10 bags of rice, but now I cannot afford to buy five. Honestly, I did not see the coming down, everything is going higher.

“It’s on the high side, and it is really affecting us.”

Despite lower inflation, Nigeria’s currency has weakened from 1,200 to 1,600 to the dollar, and gasoline prices have soared from 620 to nearly 1,000 naira per liter over the past three months.

Development economist Hauwa Mustapha credited a government policy in which food imports were not subject to excise duty for 90 days for the slight inflation drop.

“I think that helped a lot, and that also helped for them to boost the supply of food. … It does not indicate a long-term recovery,” she said, adding that a lasting recovery will depend on government measures.

“What the government can do to manage inflationary pressure for both short term and long term, I think for now, is to concentrate policy action in the area of food supply,” Mustapha said.

“Thankfully, we are approaching the harvest season. Typically, in Nigeria, we also know that we experience a lot of post-harvest loss. This is … the time for the country to manage the harvest, particularly control [and] minimize post-harvest losses, so that we can keep the food supply steady.”

Experts say the government’s next steps will determine whether this inflation dip signals a recovery or just temporary relief.
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Frankfurt, Germany — Germany wants to support Volkswagen and help it avoid factory closures but the ailing car giant will have to fix most of its problems itself, Economy Minister Robert Habeck said Friday.  

Volkswagen said earlier this month it needed significant restructuring to stay competitive, and was considering shutting sites in Germany for the first time in its 87-year history.  

The announcement stunned employees and added to concerns about Germany’s flagship car industry as it grapples with high costs, increased competition from China and weak demand for electric vehicles (EVs).  

“The majority of the tasks will have to be solved by Volkswagen itself,” Habeck said during a visit to a VW plant in Emden in northwestern Germany.  

He refused to comment on media reports that thousands of jobs could be threatened at Volkswagen, saying he “cannot interfere” in company policy.  

But politicians could help the car sector by looking at ways to send the right “market signals”, Habeck said, stopping short of mentioning any possible state aid for Volkswagen.  

He pointed in particular to efforts to boost demand for EVs, insisting that electric driving “is the future.”  

Sales of battery cars have plummeted in Germany this year after the government phased out subsidies, dealing a blow to carmakers who have invested heavily in the transition away from fossil fuels.  

Berlin recently laid out plans for new tax breaks for electric company cars to help turn the tide, Habeck noted.  

The minister will on Monday host a high-level meeting with representatives from the car industry and unions to discuss the sector’s woes.  

Underlining the current challenges for carmakers, Mercedes-Benz on Thursday lowered its outlook for 2024 on the back of weak sales in the key Chinese market.  

German rival BMW likewise trimmed its profit guidance earlier this month, also citing muted demand in China. 
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