Troubled waters

[Bloomberg]( Follow Us //link.mail.bloombergbusiness.com/click/20447709.65453/aHR0cHM6Ly90d2l0dGVyLmNvbS9icG9saXRpY3M/582c8673566a94262a8b49bdB8b4361dc [Get the newsletter]( There’s an old saying about how a frog dropped into a pot of boiling water will just jump out again. Left to sit in a pot that slowly heats up, it doesn’t notice. The temperature between China and the U.S. [is clearly rising](. They’re [arguing over]( the Covid-19 outbreak, trade, telecoms giant Huawei, [and Hong Kong](. Amid talk of a [new Cold War](, a big question is how much the future may mirror the past. For years, the countries have been increasingly competing for economic and strategic influence. Bit by bit, Beijing has pushed outwards. It has staked its claim to large swathes of the disputed South China Sea, building military installations on reclaimed reefs and [escorting its fishing fleets]( with highly-armed coast guard vessels. As [Philip Heijmans]( explains, the American and Chinese navies are [both more active]( in what is a key conduit for global trade. The U.S. accuses Chinese warships and jets [of harassment](. Beijing says its military is carrying out normal activities in its own territory. They do have a communications system for “unplanned encounters” at sea. But it doesn’t cover the coast guard or fishing militias. U.S. President Donald Trump is in a difficult election campaign and seems to be betting that hitting out at China will help him. The U.S. plans to cancel the visas of thousands of Chinese graduate students and researchers with direct ties to universities affiliated with the People’s Liberation Army, the New York Times reports. China’s Xi Jinping is playing the nationalism card at home amid an economic slowdown. Against that backdrop, an incident in the South China Sea could quickly spiral into something bigger. Something neither side really wants. — [Rosalind Mathieson]( A sailor inspects an FA-18 hornet fighter jet during a routine training aboard the USS Theodore Roosevelt in the South China Sea on April 10, 2018. Photographer: Ted Aljibe/AFP Tell us how we’re doing or what we’re missing at balancepower@bloomberg.net. Global Headlines [Beijing's crackdown]( | China's rubber-stamp legislature approved plans to impose a sweeping new security law on Hong Kong, prompting the Trump administration to threaten retaliation. After Secretary of State Mike Pompeo said the U.S. [could no longer consider]( Hong Kong sufficiently autonomous from Beijing, pro-democracy activists in the Asian financial hub [called on Washington]( to punish China with harsh measures ranging from sanctions to revoking the city's special trading status. [Closing ranks]( | The unprecedented 2.4 trillion euros in recovery spending unveiled by the European Union, anchored by 750 billion euros of joint debt issuance, might help restore a sense of unity to a bloc under severe strain. As [Ian Wishart]( reports, the initiative marks a big step toward real fiscal union for the 27 member states and aims to recast the EU as a force for good rather than an irritating meddler. [Three-way tensions]( | A Canadian judge has dashed Huawei CFO Meng Wanzhou’s hopes of ending her U.S. extradition case, keeping her under house arrest. The ruling is a win for U.S. authorities in their global campaign against the tech giant, but is already further [straining relations]( between Ottawa and Beijing. A Chinese embassy spokesperson called the case “a grave political incident” and urged Canada to let Meng return home. [Trump’s ire]( | The U.S. president has been raging against Twitter since the social media platform, which helped vault him to the presidency, slapped [fact-check links]( on a pair of his tweets. Now, he’s poised to take action today that could unleash lawsuits on the company and other technology giants by narrowing liability protections they enjoy for third parties’ posts. [Food crisis]( | Millions of Africans put out of work by restrictions imposed to fight the coronavirus are struggling to feed their families. With livelihoods upended from Ivory Coast to Kenya, Nigeria to South Africa — and fragile government support systems — the continent will account for most of the 265 million people the United Nations World Food Programme estimates will be “acutely food insecure” this year. What to Watch: - The U.S. has [reached the grim milestone]( of 100,000 deaths from the coronavirus, more than a quarter of the world's total to date. - Japan’s government warned that the economy continues to [worsen sharply]( even as a nationwide state of emergency was lifted this week allowing businesses to reopen. - The Trump administration has [ended waivers]( that allowed Russian, Chinese and European companies to work at sensitive Iranian nuclear sites as the U.S. continues its “maximum pressure” campaign against Tehran. [And finally]( ... When U.K. Prime Minister Boris Johnson broke into a fit of coughing during a parliamentary grilling on a video call, it was a reminder of the tough times he’s faced in recent weeks — including surviving a bout of Covid-19. But as [Tim Ross]( explains, more damaging to his long-term prospects may be his decision to stick by senior adviser Dominic Cummings, who sparked widespread condemnation for violating lockdown rules by driving 260 miles with his sick wife to his parents’ home in search of help with childcare. Cummings arrives home in London on May 25. Photographer: Tolga Akmen/AFP The U.K. government is launching a track-and-trace system today, aimed at allowing the country’s economy to restart while suppressing the spread of coronavirus. Read [more here](. You received this message because you are subscribed to Bloomberg's Balance of Power newsletter. [Unsubscribe]( | [Bloomberg.com]( | [Contact Us]( Bloomberg L.P. 731 Lexington, New York, NY, 10022