Trade Tensions, France Downgrade, Kering’s $4.7B Deal

With the US-China trade truce approaching its expiration date, President Trump has identified rare earth minerals as a top priority in ongoing negotiations, signaling potential escalation in the long-running trade conflict. These seventeen metallic elements, essential for manufacturing everything from smartphones to military equipment, represent a strategic vulnerability for Western nations given China’s dominance in global supply chains. The timing of this renewed focus suggests the Trump administration views rare earths as critical leverage points as both sides maneuver for advantage in the final stages of negotiations.

The emphasis on rare earths comes amid broader concerns about supply chain security and technological sovereignty. China currently controls approximately 80% of rare earth exports globally, giving Beijing significant influence over key industries including electronics, renewable energy, and defense. Market strategist Lale Akoner of eToro noted that this development reflects growing recognition of how trade disputes are evolving beyond traditional tariffs into battles over strategic resources and technological supremacy.

France’s economic challenges intensified as S&P Global Ratings stripped the nation of its double-A credit rating, marking the country’s second downgrade and reflecting persistent concerns about fiscal sustainability and growth prospects. The downgrade places additional pressure on the French government as it navigates complex economic headwinds including rising debt levels, sluggish growth, and structural reforms. The loss of the coveted double-A status could increase borrowing costs for both the government and French corporations, potentially dampening investment and economic activity.

Robert Dafforn, Chief Investment Officer of Opportunistic Credit at Polus Capital Management, observed that the downgrade reflects broader European economic vulnerabilities at a time when global markets face multiple pressures. The French downgrade comes amid ongoing concerns about the Eurozone’s ability to stimulate growth while maintaining fiscal discipline, particularly as major economies face the dual challenges of inflation control and economic stimulation. The rating action signals that international credit agencies remain skeptical about France’s medium-term economic trajectory despite government efforts to implement reforms.

In a major corporate development, French luxury house Kering is offloading its beauty arm to cosmetics giant L’Oréal in a landmark $4.7 billion transaction. The deal represents the first significant strategic move by Kering’s new CEO, Luca de Meo, and signals a sharpened focus on the company’s core luxury fashion and accessories businesses. The transaction allows Kering to monetize a non-core asset while providing L’Oréal with valuable beauty brands and intellectual property in the competitive luxury beauty segment.

Alex Ferrara, Partner at Bessemer Venture Partners, highlighted that this type of portfolio optimization reflects how leading companies are streamlining operations amid economic uncertainty. The deal structure suggests Kering is prioritizing operational focus and capital allocation efficiency, potentially using the proceeds to strengthen its position in core luxury categories where it maintains competitive advantages. For L’Oréal, the acquisition represents an opportunity to expand its luxury portfolio and capture synergies in distribution, marketing, and product development.

The timing of this major transaction during a period of economic volatility and trade tensions demonstrates how corporate leaders are proceeding with strategic initiatives despite macroeconomic headwinds. The $4.7 billion price tag indicates robust valuation metrics for quality beauty assets, suggesting that premium brands continue to command significant investor interest even amid broader market concerns. The deal also underscores the ongoing consolidation in the beauty and personal care sector as major players seek scale and portfolio diversification.