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Pentagon blacklisting of CATL creates challenges for U.S. banks

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For Wall Street banks hoping to play a role in one of Hong Kong’s biggest IPOs in years, the U.S. Department of Defense’s decision this week to add CATL to a list of companies thought to have links to the Chinese military could not have come at a worse time.

The company, the world’s largest maker of electric vehicle batteries and a supplier to Tesla, has been in talks with banks in recent weeks as it prepares plans for a secondary public offering in Hong Kong. The initial public offering will give the company, which aims to expand overseas, access to offshore funds, and Morgan Stanley estimates it could raise up to $7.7 billion.

Goldman Sachs, Bank of America, JPMorgan, and Morgan Stanley have expressed interest in working on the listing, two people familiar with the process told the Financial Times. The Shenzhen-listed company is expected to select underwriters ahead of a shareholder meeting on January 17, when the date and size of the offering will be discussed, one of the people said.

But the Pentagon’s move, which also added tech giant Tencent and Cosco, one of China’s largest shipping companies, to the list, threatens to change banks’ risk-reward calculations.

Although it does not directly impose legal restrictions on banks working with companies on the list, it will force banks to face a difficult reputational question: Can a bank finance shares in a company that the U.S. says has links to the Chinese military?

“Unfortunately, random blacklisting of customer names is becoming a more common feature of banking these days, which creates risk,” said Han Shen Lin, China country director at U.S. consultancy The Asia Group. “The most banks can do is to reposition their business and customer mix accordingly,” he added.

Speaking to the Financial Times, Lin said inclusion on the list “doesn’t carry the same weight as a sanction, but it’s close enough that banks can preemptively reduce exposure to these names just to avoid negative headlines.”

It is unclear whether U.S. banks will continue their participation following the Pentagon’s move. Goldman Sachs, Bank of America, and JPMorgan declined to comment, and Morgan Stanley did not respond to a request for comment.

Tensions lead to uncertainty in trade agreements

This action is the latest sign that U.S.-China tensions are dragging deals into more and more uncertainty. Any move to sever ties with companies on the list could be costly for banks. Tencent, in particular, is among the most important Chinese customers of U.S. institutions.

The tech giant’s parent company paid $524 million in investment banking fees between 2004, the year of its initial public offering, and 2023, according to figures from the London Stock Exchange Group. Morgan Stanley, Bank of America, Goldman Sachs, and Citigroup were the biggest beneficiaries of these payments.

Although Goldman Sachs was the third-largest recipient of fees from investment banking activities, CATL benefited less from foreign banks, with the lion’s share of its fees going to China Securities and CICC, according to LSEG data.

CATL and Tencent said they are planning legal action to challenge the Pentagon listing if talks with the U.S. Department of Defense fail.

Pony Ma, founder and chairman of Tencent, said the company was “neither a Chinese military company nor a military-civilian fusion company contributing to the Chinese defense industrial base.”

CATL said it had “never engaged in any military-related business or activity,” while Cosco said none of the companies on the list were “Chinese military companies” and that it would contact U.S. authorities “to clarify this matter.”

The move echoes the dilemma faced by banks in 2023 when Swiss agrochemical company Syngenta wanted to hire banks for its $9 billion initial public offering on the Shanghai Stock Exchange.

Banks were hesitant about whether they could work on the deal because the U.S. Department of Defense had placed Syngenta’s owner, state-owned ChemChina, on its list of “Chinese military companies.”

Bankers at Goldman Sachs, JPMorgan, Morgan Stanley, UBS, and HSBC lobbied for a role on the list, although Syngenta eventually canceled the plan.

CATL told investors that access to dollars was a key part of the rationale for the listing. The company had RMB 289 billion ($40 billion) in cash as of March 31, but China’s strict capital controls system means government approval is required for overseas direct investments above a certain threshold.

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Trump administration targets 60 nations with new tariff draft under Section 301

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The US administration is proposing new tariffs of at least 10% on imports from 60 trading partners, following an investigation into goods allegedly produced using forced labor.

According to a Bloomberg report citing sources within the Office of the US Trade Representative (USTR), the specific tariff rates will vary based on individual countries’ legislative frameworks regarding forced labor and their capacity to enforce those laws.

Under the drafted regulations, a 10% tariff rate will apply to imports from the European Union, Mexico, Canada, the United Kingdom, Taiwan, and several other nations. Conversely, goods arriving from China, India, Japan, South Korea, Switzerland, and Brazil will be subject to a 12,5% tariff.

The USTR stated that the lower tariff rate will apply to products from nations that prohibit forced labor or have committed to doing so. The agency emphasized that states failing to establish such prohibitions or lacking the capacity to effectively enforce them will face the higher tariff rate.

Bloomberg reported that this step represents a continuation of President Donald Trump’s policy to reinstate across-the-board tariffs on all countries, which had previously been ruled unconstitutional.

The proposed tariffs are the result of investigations initiated under Section 301 of the Trade Act of 1974.

Commenting on the development, Deborah Elms, Head of the Trade Policy Group at the Hinrich Foundation in Singapore, said, “This is highly significant because Section 301 is an extremely powerful tool and is highly unlikely to be overturned. This opens the door to a range of new tariff and non-tariff measures.”

The report noted that the tariffs are being introduced at what could be a turning point for the global economy.

Financial markets are already navigating a sensitive period due to rising gas and oil prices driven by conflict in Iran.

The new tariffs will not take effect immediately. Before implementation, a review and evaluation period will be conducted, which may lead to modifications in the draft proposal.

According to the timeline reported by Bloomberg, written comments on the tariffs must be submitted by July 6. Additionally, the Section 301 Committee is scheduled to hold a public hearing on July 7.

US Trade Representative Jamieson Greer argued that forced labor practices in partner nations force American workers to compete on an unequal playing field. “We will no longer tolerate this unfairness,” Greer said.

On the other hand, the USTR proposed certain tariff exemptions that could affect apparel and textile imports. While these goods could enter the US at reduced tariff rates, quotas would be determined based on the respective countries’ existing textile exports to the US.

Beef, tomatoes, bananas, coffee, orange juice, and several other food products will be entirely exempt from the tariffs. Furthermore, double taxation will not be imposed on metals, specific fuel types, and chemicals that are already subject to other duties.

In May, the US Court of International Trade ruled that the 10% tariff on foreign imports promoted by President Donald Trump was unlawful. Defending the White House’s objectives following the court ruling, Trump characterized the judges as “radical left-wing” and remarked, “Nothing surprises me. We always find different ways. We make a decision and act in another way.”

In February, the US Supreme Court also ruled that tariffs established by Trump were contrary to the law. The court concluded that the president had exceeded his authority in imposing those duties. Trump, however, claimed that the court was under foreign influence.

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Google seeks approval to release 32 million mosquitoes in US disease-control project

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Google is seeking federal approval to release nearly 32 million mosquitoes in California and Florida as part of a biological pest-control initiative known as the Debug project.

The little-known program aims to combat disease-carrying mosquitoes by releasing millions of sterile male mosquitoes into the environment, an approach designed to stop “bad bugs with good bugs.”

According to the US Centers for Disease Control and Prevention (CDC), mosquitoes are classified as the world’s deadliest animals. Of the more than 3,500 mosquito species that exist globally, only Aedes aegypti is responsible for transmitting dengue fever, Zika virus and chikungunya, diseases that sicken hundreds of millions of people each year.

In a statement published on the official website of the Debug project, Google described the issue as a difficult problem to solve, noting that many mosquito-borne diseases lack effective vaccines or treatments.

The statement argued that relying on pesticides is not a sustainable solution because such chemicals become less effective over time and can be toxic. It also said that eliminating standing water alone is insufficient because it is impossible to identify every breeding site used by mosquitoes.

For those reasons, Google said a new approach is required and that it found a solution in what it describes as “good” mosquitoes of the same species.

The project website explains the method as follows:

“Good bugs are the same mosquito species as the bad bugs that spread disease. Our good bugs are male mosquitoes carrying Wolbachia, a naturally occurring bacterium found in nature. This bacterium prevents them from producing offspring with wild female mosquitoes. Male mosquitoes do not bite and cannot spread disease, so the good bugs will stop the bad bugs from reproducing. Over time, fewer bad mosquitoes will remain.”

Scientists involved in the Debug project emphasized that the technique relies entirely on a naturally occurring bacterium, contains no chemicals or toxins, and does not involve genetic modification.

Researchers said similar approaches have been used safely for decades to control other pests. They added that the Debug team is combining scientific and engineering expertise with support from international partners in an effort to suppress disease-carrying mosquito populations.

Project scientists said their approach differs from previous eradication programs because it applies the Sterile Insect Technique on a larger scale through the use of data analytics, sensors and automation.

According to information published in the project’s frequently asked questions section, program officials are working closely with national and local governments, community leaders and research institutions.

Officials said they meet with residents in areas targeted for deployment before operations begin in order to better understand local concerns and priorities.

Google is therefore continuing to pursue federal authorization to implement the project in both California and Florida.

A notice published in the Federal Register shows that the US Environmental Protection Agency (EPA) is reviewing Google’s applications for an Experimental Use Permit under the Federal Insecticide, Fungicide, and Rodenticide Act.

According to details contained in the filing, nearly 16 million mosquitoes would be released in Florida during the first year of the project.

A further 16 million mosquitoes would be released in California during the second year.

Members of the public can obtain additional information and submit comments through the federal rulemaking portal by visiting regulations.gov and entering docket identification number EPA-HQ-OPP-2025-3951.

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US Marines test lower-cost counter-drone system to reduce missile dependence

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US Marine Corps personnel tested a new counter-drone defense system during military exercises held in the Philippines in April.

According to a report by The Wall Street Journal (WSJ), the system is designed to avoid the continuous use of expensive missiles and instead relies on a coordinated set of countermeasures.

The system consists of two armored vehicles known collectively as MADIS (Marine Air Defense Integrated System).

One vehicle is equipped with an advanced radar system, while the other carries the Stinger air defense missile system. Both vehicles are also fitted with a small cannon, a machine gun and electronic warfare equipment.

According to the report, MADIS is intended to provide military personnel with multiple options for engaging drones, including cannon fire, missiles and electronic warfare tools.

The objective is to reduce dependence on high-cost weapons when protecting military units and other strategic assets.

US Marine Corps officials told WSJ that one of the system’s most effective features is its ability to fire specially manufactured 30-millimeter ammunition equipped with precision fuzes that detonate as they approach a target.

Steven Sawyer, a former ammunition technician at the NATO Support and Procurement Agency, told the newspaper that 30-millimeter rounds are generally less accurate than missiles but are significantly cheaper to use.

Sawyer said that even if five such rounds were required to destroy a drone, the total cost would remain around $11,250.

By comparison, a single Stinger missile costs about $430,000, while Coyote interceptor missiles used in conflicts in the Middle East are priced between $100,000 and $125,000 each.

Sawyer added that 30-millimeter ammunition has proven effective against Shahed-family drones, which cannot be neutralized through electronic warfare methods.

At the same time, he stressed that US defense companies continue to face difficulties producing sufficient quantities of the ammunition. According to Sawyer, the precision fuzes are highly sophisticated electromechanical devices and only a limited number of manufacturers can produce them at scale.

WSJ noted that countering large numbers of inexpensive drones has become one of the most pressing challenges facing modern militaries.

The US military has encountered the problem directly during operations in the Middle East, where it has been forced to expend limited stocks of extremely costly precision-guided munitions.

Previously, the South China Morning Post (SCMP) reported that Chinese scientists had developed a combat algorithm known as HG-STR based on a “kill them all” concept.

The algorithm was said to enable swarms of fixed-wing drones to autonomously scan the battlefield and destroy enemy targets even if communications are disrupted and lines of sight are obstructed.

In April, The New York Times, citing three sources within defense and intelligence agencies, reported that the Pentagon assessed Russia’s and China’s drone development programs to be more advanced than those of the United States.

The assessment regarding China’s drone capabilities was reportedly based on analysis of a military parade held in China in September 2025.

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