* * * * * * TUESDAY, AUGUST 13, 2019 ~ VOL. CCLXXIV NO. 37 WSJ.com HHHH $4 .00

DJIA 25897.71 g 389.73 1.5% NASDAQ 7863.41 g 1.2% STOXX600 370.41 g 0.3% 10-YR. TREAS. À 27/32 , yield 1.640% OIL $54.93 À $0.43 GOLD $1,505.30 À $8.70 EURO $1.1216 YEN 105.30

Think U.S. Politics Is Exhausting?Mexico’s President Briefs Daily

i i i

At 7 a.m., Chatterbox-in-Chief LópezObrador treats nation to one-man show

MEXICO CITY—Every week-day morning at 7 o’clocksharp, President Andrés Ma-nuel López Obrador stars inhis own one-man show.

As dawn breaks over thiscapital city, the 65-year-oldtakes to a pulpit in front ofthe press, where he answersquestions and holds forth in afolksy style about everythingfrom the price of gas towhether drug lord Joaquín “ElChapo” Guzmán got too harsha prison sentence.

A daily news conference isalmost unheard of for any ma-jor world leader. It marks anespecially radical change inMexico, where pomp-ladenpresidents have long beenseen as out-of-touch and inac-cessible.

The event is popularly

dubbed “La Mañanera,” whichis Mexican slang for a morn-ing sexual encounter. Equalparts politician, preacher andcranky old man, the silver-haired leftist usually talks fornearly 90 minutes. His an-swers can last for five or 10minutes.

“He was and is a magicianof communication,” said Fe-lipe González, a former Span-ish prime minister, at an eventlast year. “I don’t know a sin-gle political leader who canhold [even] a weekly pressconference without gettingburned.”

It doesn’t hurt that many ofthe questions are softballs—perhaps because the earlyhour means the journalists arehalf-asleep. One local TV re-porter compared the presidentto a Kenyan long-distance run-ner, and asked in awed tones

PleaseturntopageA10

BY DAVID LUHNOWAND JUAN MONTES

CBS and Viacom arein the final stagesof talks to reuniteSumner Redstone’smedia empire. Hisdaughter, ShariRedstone, right,vice chairman ofboth CBS andViacom, has backedthe combination. B1

� Gerald F. Seib: Easy primaryseason gives Trump edge... A4

WASHINGTON—The Trumpadministration issued a rulethat would disqualify legal im-migrants from permanent resi-dency if they use certain public-assistance programs and blockprospective applicants deemedlikely to need them.

The rule, issued by the De-partment of Homeland Securityon Monday, is one of the mostsweeping elements of the ad-ministration’s bid to createwhat officials described as atighter, more discerning U.S. im-migration system. Critics of theregulation said it could hurtpoor immigrants and result inwidespread confusion in mi-grant communities. Democraticstate attorneys general are ex-pected to challenge the rule incourt.

The administration all butguaranteed fresh criticismfrom immigration groups bypushing ahead with the rule inthe wake of a shooting in ElPaso, Texas, that authoritiessaid was motivated by anti-im-migrant animus. Similar criti-cisms were expressed afterImmigration and Customs En-forcement carried out raids onfood-processing plants in Mis-sissippi last week.

The rule change tightensthe definition of who is likelyto become a “public charge”under immigration law, a des-ignation that prevents an im-migrant from obtaining agreen card, which permits le-gal permanent residence. Thedesignation also is used by the

PleaseturntopageA4

BY ANDREW RESTUCCIAAND LOUISE RADNOFSKY

GreenCardsBecomeHarderTo GetTrump rule makessome legal immigrantsineligible if they useMedicaid, food stamps

Mr. Stone cajoled his Chinese suppli-ers not to let the now-25% tariff deterthem from the American market. Heworked across time zones to see ifHome Depot would absorb part of theadded costs. He tried to time oceanshipments so that some might not besubject to the punitive levies. And hisU.S. team looked at rejiggering trans-port and packaging costs for more sav-ings.

“It comes down to every little thing,”

said Mr. Stone, wearing sneakers and aYankees cap as he moved betweenmeetings in the Yangtze River port cityof Zhangjiagang. "We find every quar-ter-point we can. If you have 10 quarter-points, then you have 2½ points.”

When the Trump administration firstimposed 10% tariffs on many Chinesegoods about a year ago, suppliers, im-porters, distributors and retailersworked together to defray the cost and

PleaseturntopageA10

ZHANGJIAGANG, China—When theU.S. raised its tariffs on Chinese importsin May, Harlan Stone knew his U.S. vinylflooring importing business had tomove fast.

He got on the phone with his maincustomer, Home Depot Inc., to update it.Soon he was on a plane to China, pre-pared for tough conversations with sup-pliers.

BY CHAO DENG

CBS,ViacomNearA Deal

PATR

ICKT.

FALLON/B

LOOMBERGNEWS

fully electric cars, viewing hy-brids—which save fuel bycombining a gasoline enginewith an electric motor—asonly a bridge to meetingtougher tailpipe-emissions re-quirements, particularly inChina and Europe.

GM plans to launch 20 fullyelectric vehicles world-wide inthe next four years, includingplug-in models in the U.S. forthe Chevy and Cadillac brands.Volkswagen has committedbillions of dollars to producing

more battery-powered models,including introducing a smallplug-in SUV in the U.S. nextyear and an electric version ofits minibus around 2022.

“If I had a dollar more toinvest, would I spend it on ahybrid? Or would I spend it onthe answer that we all know isgoing to happen and get therefaster and better than anybodyelse?” GM President MarkReuss said in an interview.

GM’s view contrasts withPleaseturntopageA6

Auto makers for two de-cades have leaned on hybridvehicles to help them complywith regulations on fuel con-sumption and give customersgreener options in the show-room. Now, two of the world’slargest car manufacturers saidthey see no future for hybridsin their U.S. lineups.

General Motors Co. andVolkswagen AG are concen-trating their investment on

BY MIKE COLIAS

Once on the Cutting Edge, HybridsLose Favor With Some Auto Makers

INSIDE

VINCE

NTTH

IAN/A

SSOCIATE

DPRESS

Antigovernment protesters filled the arrival hall of the Hong Kong International Airport on Monday, prompting a halt to all flights.

HONG KONG—A largecrowd of antigovernment dem-onstrators shut down HongKong’s airport and strandedthousands of passengers, asofficials in Beijing respondedto the weekend’s violentclashes by saying they sawsigns of terrorism emerging inthe protests.

Hong Kong’s airport author-ity canceled all departing

bound flights were canceledTuesday as well.

Demonstrators gathered toprotest what they said was po-lice brutality over a bloodyweekend that saw some of theworst clashes between policeand protesters in more thantwo months of demonstrations.

By 8 p.m. Monday, a fewhours after the cancellationswere announced, most protest-

ers had dispersed. Among thedozens of demonstrators re-maining at the airport the nextmorning, some said they ex-pected more supporters to re-turn after online pleas.

Passengers crowded intoHong Kong’s airport Tuesday

PleaseturntopageA8

flights Monday as well as somearrivals after thousands ofdemonstrators thronged thearrival and departure halls,joining a sit-in at the terminalthat has run since Friday. Hun-dreds of inbound and out-

By Natasha Khan,Wenxin Fan

and Preetika Rana

Protests in Hong Kong IntensifyAs Beijing Cites Signs of Terrorism

At 25%, Tariffs Have Firms SquirmingA vinyl flooring importer tries every angle to disperse the cost, keep his suppliers on board

� Cathay Pacific warns staff onjoining protests........................ A8

LIFE & ARTSKondo comes to thefridge, with color-coordinated produceand tidy shelves A11

ISTO

CK

SPORTSAfter a sex-abuse

scandal and bankruptcy,USAGymnastics gets a

reprieve A14

JAMIE

SQUIRE/G

ETT

YIM

AGES

many times over.IDC ranks Dell Technologies #1 in 15 categories

— from cloud IT infrastructure to

storage and HCI.

Learn more at DellTechnologies.com/IDC

1 IDC WW Quarterly Cloud IT Infrastructure Tracker, 2019Q1 – Vendor Revenue2 IDC WW Quarterly Enterprise Storage Systems Tracker, 2019Q1 – Vendor Revenue3 IDC WW Quarterly Converged Systems Tracker, 2019Q1 – Vendor Revenue

CONTENTSBanking & Finance... B10Business News...... B3Capital Journal...... A4Crossword.............. A12Heard on Street. B12Life & Arts....... A11-13

Markets..................... B11Opinion.............. A15-17Sports....................... A14Technology............... B4U.S. News............. A2-6Weather................... A12World News. A7-9,18

s 2019 Dow Jones & Company, Inc.All Rights Reserved

>

What’sNews

�The Trump administrationissued a rule that would dis-qualify legal immigrants frompermanent residency if theyuse certain public-assistanceprograms and block pro-spective applicants deemedlikely to need them. A1� Antigovernment dem-onstrators shut down HongKong’s airport, as Beijingofficials responded to week-end clashes by saying theysaw signs of terrorism emerg-ing in the protests. A1, A8� Investigators havefound serious irregularitiesat the federal jail in NewYork where Epstein wasbeing held, Barr said. A2� Trump confirmed re-ports that an advanced nu-clear-powered cruise mis-sile had exploded duringtesting in Russia. A18�The administration is eas-ing several Endangered Spe-cies Act regulations, re-sponding to complaints fromdevelopers and others. A3� An NRA check sent to anobscure Delaware entity raisesnew questions about thegroup’s attempts to explainan aborted mansion deal. A6� Prosecutors allege afriend of the Dayton gunmanbought body armor and gunaccessories that were usedin the mass shooting. A3�Residents of India-admin-istered Kashmir observedthe Muslim holiday of Eid al-Adha under tight security. A9� Two experimental Eb-ola drugs significantly im-prove a patient’s chance ofsurviving the virus, accord-ing to preliminary data. A18

General Motors andVolkswagen say that

they see no future for hy-brid vehicles in their U.S.lineups and are concen-trating their investmenton fully electric cars. A1� Recent swings acrossasset classes are flashing awarning sign for stocks.The Dow slid 1.5% Monday,while the S&P 500 andNasdaq both fell 1.2%. B1, B11� CBS and Viacom are inthe final stages of negoti-ating a deal that would re-unite mogul Sumner Red-stone’s media empire. B1� Saudi Aramco unveiled a$15 billion deal to expand itsglobal refining footprint andheld its first-ever earningscall with financial analysts. B1�Argentina’s stocks stagedtheir steepest fall in decadesamid investor concerns aboutthe potential return to powerof the Peronist movement.A7� South Korea droppedJapan as a favored tradingpartner, further escalatingtensions between the two.A8� Verizon agreed to sellblogging website Tumblr tothe owner of online-pub-lishing tool WordPress.comfor an undisclosed sum. B1�A stock-market data feedrun by the NYSE suffered aglitch, leading to delays in re-leasing the end-of-day valuesof the Dow and S&P 500. B10� Rite Aid appointed Hey-ward Donigan as CEO, tout-ing her experience leadinghealth-care companies. B3� Yum Brands named op-erating chief David Gibbsto be its next CEO. B3

Business&Finance

World-Wide

A10 | Tuesday, August 13, 2019 THEWALL STREET JOURNAL.

absorb some of the higher tar-iff. A Home Depot spokesmandeclined to share details aboutthe retailer’s approach, sayingits strategy varies across ven-dors and products and it makes“every effort to lessen the im-pact on the consumer.”

HMTX, which Mr. Stone saidhas about $700 million in an-nual revenue and a net profitmargin in the mid-single digits,has a wholesale division thatsells to other regional distribu-tors in the U.S. That divisiondecided to raise prices bynearly 20% on flooring. Whole-salers in general have in-creased prices of luxury vinylflooring by as much as 50cents a square foot, or close to25%, according to estimatesfrom industry executives.

The 18 Flooring Liquidatorsretail stores in California carryChinese-made products fromHMTX, among others. Thechain has raised prices forsome products because of thetariffs. Tiles for a living room,dining room and hallway spacecan run up to hundreds of dol-lars more than before.

“You can’t have a 25% in-crease and not have an effecton retail prices,” said StephenKellogg, president and owner.

As for other tariff-hit house-hold goods, such as washingmachines and furniture, FFOHome in Fort Smith, Ark., israising prices on couches anddining-room sets with partsfrom China. Store owner LarryZigerelli said some items havealready gone up by 10% be-cause of tariffs imposed lastyear, and he expects to raiseprices more as manufacturerspass on 25% tariffs.

For now, consumer spendingin the U.S. is solid. By econo-

mists’ estimates, it will takethree to six months for someportion of the tariff costs to befully reflected in consumerprices.

On average, an Americanhousehold will pay about $770more each year under the 25%tariffs the U.S. has imposed on$250 billion in Chinese goods,according to Trade PartnershipWorldwide, a consulting firmworking with industry groups.Consumers’ costs to are likelyto rise more if PresidentTrump carries through with10% tariffs he announced thismonth on the roughly $300 bil-lion in annual Chinese importsnot yet taxed.

Permanent change?“There’s certainly going to

be people who just can’t affordthe same good,” said KatherynRuss, a University of California,Davis, economics professor.

CFL Flooring, one of thelargest exporters of flooringfrom China to the U.S., witharound 2,600 workers at facto-ries in Jiaxing city south ofShanghai, sees the tariffs as aportent of permanent change.CFL decided last fall to set upfactories in Taiwan and Viet-nam and started shippinggoods from those sites inMarch.

“The desire to not be depen-dent on China is here to stay,”said Thomas Baert, a CFL co-owner. “Whatever happenswith tariffs, certain customershave made up their mind thatthey want to be out of Chinafor X% of their business.”

Mr. Stone thinks most man-ufacturing of vinyl flooring willremain in China. Since he be-gan purchasing the product in

Stone took care to project opti-mism with Mr. Sun and othersuppliers. Fresh designs werein the pipeline, he remindedthem, and a new digital print-ing method from Italy wouldallow them to adapt designsmore quickly. American cus-tomers would see that their of-ferings were higher-quality andpick those, Mr. Stone said.

He reminded them, too, thatHome Depot hadn’t canceledany orders and was preparedto fight the tariffs too. Still, thelack of a firm deal with the re-tailer, at the time, nagged him.

Over the following weeks,there were emails, phone callsand texts with the Home Depotteam. Mr. Stone’s colleaguesmade trips to the chain’s At-lanta headquarters. Their pitchwas that Home Depot shouldshare the tariff burden, other-wise HMTX and its manufac-turers wouldn’t have money toinvest in designs and processesto remain competitive.

“All that costs money,” Mr.Stone recalled saying. “I’vebuilt warehouses, I’ve stockedthem, I have robots taking or-ders. If I don’t keep doing this,we’ll both lose.”

Home Depot’s argument forfooting less of the bill, accord-ing to Mr. Stone, was that withthis type of product, raising re-tail prices risked driving awaycustomers. Unlike fixing aleaky roof or replacing a bro-ken washing machine, home-owners could put off buying anew floor.

Home Depot set up whatemployees called a “tariffs warroom” to analyze products andcosts and devise pricing strate-gies, Mr. Stone said. In lateJune, Home Depot’s chief exec-utive told CNBC it was working

try to avoid passing it on toconsumers for fear of losingsales. Mr. Stone and his Chi-nese partners initially atemost of the vinyl flooring tar-iff cost, passing just a tad onto retailers.

Tariffs at the 25% level arequite another matter. They areupending cost projections andbusiness models and strainingrelationships built up over de-cades. For operations such asMr. Stone’s, the math is pain-ful. He and others are trying tofigure out how much of thenew expense can be dispersedthroughout the supply chain,how much should be passed tocustomers, at what potentialcost in lost sales, and howmuch they must swallow.

These tit-for-tat tariffs, attheir new higher levels, areforcing businesses into tortu-ous calculations and negotia-tions. How these ultimatelyturn out will have ramificationsthroughout the U.S. economy,determining how the highercosts get distributed and whateffects they may have on sales,as the U.S. and China dig in forwhat is becoming a protractedtrade battle.

“This is a chaos moment. IfI pay the tariffs, I don’t haveany money,” said Mr. Stone.

The 61-year-old has beenbuying goods from Asia sincethe 1970s, first from Taiwanand later mainland China, hav-ing followed his father into thevinyl flooring business.

The product, often made tolook like hardwood flooring orstone, was one of the largestcategories of Chinese exportson the U.S. target list for tar-iffs. The U.S. vinyl flooringmarket was worth about $3 bil-lion last year, with most com-ing from China, according toStifel Equity Research Group.High-end flooring, the kind Mr.Stone sells through his whole-sale and distribution business,makes up most of that marketand is growing roughly 25% an-nually.

His Chinese suppliers, part-ners for decades, wereshellshocked by the latest tar-iffs, fearing they and theirthousands of workers wouldface canceled orders from U.S.customers. Some smaller Chi-nese suppliers began offeringdiscounts to European buyersto unload inventory.

CheerleadingOn his trip to China, part of

a multipronged search for tariffsolutions that has absorbedhim for months, Mr. Stoneacted as a cheerleader, tryingto rally his partners.

“Do not stop production. Donot let your workers go home.Finance yourselves locally,” heinstructed managers atZhangjiagang Elegant Home-Tech Co., a family businessstarted by a Chinese factoryworker-turned-entrepreneurand now run by that man’sCanada-educated son.

Mr. Stone and his Connecti-cut-headquartered HMTX In-dustries LLC wanted a commit-ment from Home Depot to

ContinuedfromPageOne

what the secret was to his en-ergy and health.

Other journalists have be-come quasi celebrities, includ-ing a local energy reporterwho sports a slim black mus-tache and a trademark bowtie. In the wake of a gasolinepipeline explosion that killed137 people in January, heasked about the temperatureat which “the molecule”—re-ferring to gasoline—would ig-nite, so that people at fillingstations might be careful.

The question went viral andquickly earned the reporterthe moniker “Lord Molecule”on Twitter.

The president has alsoopened up the conference toYouTube and Twitter person-alities—part of what he callsthe “blessed social media”that helped him get elected.Some, with names like the No-pal Times, are openly pro-gov-ernment. Another site, called

ContinuedfromPageOne

“El Chapucero,” or “The Bun-gler,” has nearly a million sub-scribers and sells López Obra-dor-themed T-shirts, mugs,and socks.

“It’s less an exercise intransparency and accountabil-ity than in political communi-cation,” says Juan Pardinas,the editor of Mexico’s re-spected daily Reforma, whichis often attacked by the presi-dent as “posh press.”

“Ironically, he’s using anews conference to removethe media in their role as in-termediaries and take hismessage directly to the peo-ple,” he adds.

The president’s legions ofsupporters welcome a chanceto hear directly from a leaderthey trust. “It feels good toknow the president is incharge so early in the morn-ing,” says Raúl Palacios, aburly 34-year-old mechanicwho says he often watchesparts of the conference onYouTube during work breaks.

Many local media are waryof challenging the presidentbecause the vast majority de-pend on government advertis-ing to break even, says An-drew Paxman, a historian andmedia expert at the CIDE re-search university in Aguascali-entes. This year’s government

budget calls for some $240million in such advertising.

Journalists who ask toughquestions often get attackedon social media by the presi-dent’s followers or heckled bysupporters at the Mañanera.Mr. López Obrador has deniedhe is behind the intimidation,but in April he told journal-ists: “If you step out of line,you know what will happen.But it won’t be me, it’s thepeople.”

According to an analysis bySpin, a local political consult-ing firm, the president makes

on average six false state-ments in each news confer-ence.

In April, Mr. López Obradorsaid his government had vio-lence under control and thatmurders hadn’t increased inthe first quarter of the year.

In fact, murders increased8% to some 8,500, the higheston record, according to fig-ures of his own interior minis-try. He said he had “other fig-ures.”

He also boasted that formaljob creation in the January-March period increased at a

pace not seen in 10 years,when in fact was the lowestsince 2014, according to localthink tank Mexico Cómo Va-mos.

Throughout, one theme isconstant: The president waselected to lead the countryout of a dark period of neolib-eral economic policies likeprivatizations that protected acorrupt and conservative eliteat the expense of Mexico’sgood and honest people.

It is a message that reso-nates in a country with one ofthe world’s highest gaps be-

tween rich and poor.As part of his populist ap-

peal, he cut his own salary byhalf, and slashed the wages ofmost other top officials aswell. He is selling the presi-dential plane, a new Boeing787-8 Dreamliner, and travelseconomy on commercialflights. He opened up the for-mer presidential residence tovisitors, allowing more than amillion Mexicans to walk itsgilded halls.

Recently, he was asked torespond to the IMF havinglowered its growth estimatefor Mexico’s economy to 0.9%this year from 1.6%. The presi-dent responded by blastingmultilateral organizations.

“With all due respect, thoseorganizations were the onesthat imposed neoliberal eco-nomic policies that did somuch damage to Mexico. Ithink they should apologize tothe people of Mexico,” he said.

He has also asked the Span-ish king and Catholic Churchto apologize for the Conquest.

One of the few topics thatleave him tongue-tied is Mex-ico’s sometimes-rocky rela-tionship with the U.S. presi-dent. When asked aboutDonald Trump, Mr. López Ob-rador often just replies,“Peace and love.”

with suppliers to offset tariffcosts, although part of the 25%would be passed to consumers.

A few weeks later, accordingto Mr. Stone, after six differentoffers and multiple revisions,he and Home Depot reached anagreement that will last untilFebruary. Without providingspecifics, he said it was “in thespirit of half-half.” His Chinesepartners, he said, were re-lieved.

Lobbying effortMeanwhile, Mr. Stone is try-

ing to get luxury vinyl flooringoff the list of tariffed products.One argument he makes is thatU.S. manufacturers can’t meetthe huge demand for vinylflooring at home. He has teamsof lawyers in New York, Wash-ington and Hong Kong workingthe issue and said he is intouch with legislators to helplobby the Trump administra-tion.

In another challenge hefaces, a rival that makes vinyltiles in America, Mohawk In-dustries Inc., has lobbied inWashington in favor of tariffson China-made goods. Thisyear, Mohawk petitioned theU.S. International Trade Com-mission to block Chinese im-ports, alleging patent infringe-ment.

On a recent Friday, Mr.Stone was in New York to meeta lawyer about next steps inthe patent-infringement case.It had been nearly a year sincethe Trump administration im-posed duties that hit the vinylflooring business.

“Eighty percent of my timeand nearly 100% of my energygoes to dealing with the tar-iffs,” Mr. Stone said.

July-A

ugus

t201

8$540 billionin goods fromChina in 2018

$120 billionin goodsfrom U.S.in 2018

$50 billion

Septem

ber2

018

U.S. imposestariffs on anadditional$200 billion.

Chinaimposestariffs on anadditional$60 billion.

May

2019

Tariffsincrease onthe additional$200 billion.

China alsoraises tariffson theadditional$60billion.

Aug

.1,2

019

Trumpannouncestariffs on theremainingimports.

China allowsyuan todepreciatesignificantlyagainst thedollar inretaliation.

U.S.importsfromChina

ChineseimportsfromU.S.

Up to 10% tariff

Up to 25% tariff

Tariff TrailTrade duties imposed by theU.S. and China on each other’sgoods

Source: U.S. Census Bureau (2018 imports)

25% TariffsHave FirmsSquirming

Wake-UpCall FromPresident

FROM PAGE ONE

China in the 1980s, he said, thecountry has developed a deeppool of skilled labor and qual-ity manufacturers that wouldbe hard to replicate.

Hundreds of Chinese facto-ries compete for business, in-vesting in new technologies toimprove costs and products.Chinese suppliers, Mr. Stonesaid, have led the way in pro-ducing a thinner but strongerand more affordable form of vi-nyl flooring in recent years.

When he started workingwith Zhangjiagang Yihua Plas-tic Co., the company was stillstate-owned. The governmentassigned a demobilized mili-tary officer, Sun Yonghua, torun the company and he later

privatized it, retaining Mr.Stone as a customer.

In May, over a dinner ofcrayfish, beef hot pot, fish andred wine, the two men dis-cussed the tariffs and what todo about them. Mr. Sun said hewas confident his companywould get support from bigChinese banks, and that wouldhelp him weather the tariffs.

Mr. Sun bellowed that theirmore than 30-year partnershipwould survive. “Under yourleadership, we aren’t afraid ofthe trade war,” he said, raisinga toast to Mr. Stone. The twoexchanged pictures of theirgrandchildren.

Throughout his trip, Mr.

‘We find everyquarter-point wecan,’ says a vinylflooring importer.

Facing 25% tariffs on Chinese vinyl flooring, importer Harlan Stone went to Zhangjiagang, China, to meet with his longtime suppliers.

RAULARIANOFO

RTH

EWALL

STR

EETJO

URNAL

Mexican President Andrés Manuel López Obrador at his daily morning news conference.

SASHENKAGUTIERREZ/EPA

/SHUTT

ERSTO

CK