X, the social media platform owned by Elon Musk, has sharply criticized Australia’s proposal to strengthen enforcement of its landmark under-16 social media ban, warning the measures would grant the country’s internet regulator sweeping investigative powers, undermine international legal principles and potentially conflict with U.S. law.

In a submission to an Australian Senate committee published on Tuesday, X opposed legislation that would expand the powers of the eSafety Commissioner, including broader authority to compel companies to hand over documents and information during investigations. The proposal would also double the maximum financial penalty for non-compliance to A$99 million ($69 million).

The dispute marks the latest escalation in a long-running clash between Australia’s government and major U.S.-based technology companies over online safety regulation. It also injects a geopolitical dimension into the debate, with Musk noting that Australia’s regulatory approach could have implications beyond its borders.

Australia’s world-first legislation prohibiting children under the age of 16 from holding social media accounts took effect last December. The law requires platforms to take reasonable steps to prevent underage users from accessing their services or face substantial penalties, making Australia one of the most aggressive jurisdictions globally in regulating youth access to social media.

Technology companies have consistently raised concerns about the legislation, arguing that reliable age verification remains technically challenging, while privacy advocates have questioned how platforms can verify users’ ages without collecting additional personal information.

In its submission, X said the proposed enforcement amendments failed to adequately balance regulatory objectives with legal safeguards. The company said the measures did not give “due regard to procedural fairness, privacy, the broader impacts on online services, and Australia’s digital economy.”

A central concern for X is the proposal allowing Australian authorities to compel individuals or entities outside Australia to produce documents if they are affiliated with companies under investigation. According to the company, such powers would extend Australia’s regulatory reach beyond its borders and create conflicts with established principles governing international legal cooperation.

The proposal would “compel any person outside Australia … to provide information and documents merely because they are ‘affiliated’ with a company,” X said, describing the measure as being “in clear conflict” with international legal principles.

The company added that the amendments could have “a severe impact on international comity,” referring to the longstanding principle under which countries respect one another’s legal systems and jurisdictions.

The debate has increasingly attracted attention in the United States. A U.S. congressional committee has asked Australia’s eSafety Commissioner to testify, accusing the regulator of threatening Americans’ free speech rights through its approach to regulating online platforms.

Musk has previously criticized Australia’s under-16 social media law, calling it “a backdoor way to control access to the internet by all Australians” in a post on X.

The regulator, however, argues that stronger investigative powers are essential if the legislation is to be effectively enforced.

According to the eSafety Commissioner, its current authority to compel companies to produce documents is significantly weaker than that of many other Australian regulators, forcing investigators to rely largely on information voluntarily provided by platforms regarding their own compliance.

The regulator also said it lacks authority to require documents from independent age assurance providers hired by social media companies to verify users’ ages, creating what it described as “significant” obstacles to investigating whether platforms are complying with the law.

Those limitations have delayed planned enforcement action. The regulator has previously said it is preparing potential legal proceedings against five social media platforms but has indicated that its existing investigative powers have slowed the process.

The proposed legislation has also drawn criticism from the broader technology industry.

Digital Industry Group Inc. (DIGI), which represents several major online platforms, told the Senate inquiry that the eSafety Commissioner already possesses extensive enforcement powers that have yet to be fully tested. The industry group also called for greater clarity over which entities could legally be compelled to provide documents under the proposed amendments.

Meanwhile, Google’s YouTube and TikTok submitted separate responses stating that there is currently no foolproof method of accurately identifying and blocking every underage user from accessing social media platforms, underscoring one of the central technical challenges facing implementation of the law.

Data released by the eSafety Commissioner, along with independent studies conducted since the ban took effect, indicate that a majority of Australian teenagers under 16 continue to maintain social media accounts, highlighting the practical difficulties of enforcing age-based restrictions at scale.

The Senate has yet to approve the legislation expanding the regulator’s enforcement powers. A parliamentary committee examining the bill is scheduled to deliver its recommendations on August 25, following public hearings involving regulators, technology companies and industry representatives.

The U.S. trade deficit in goods narrowed in June as imports declined across most major categories, but the improvement is unlikely to prevent international trade from weighing on economic growth for a second consecutive quarter, exposing the uneven impact of shifting trade flows, lower oil prices and cautious business activity.

Data released Tuesday by the Commerce Department’s Census Bureau showed the goods trade gap narrowed 4.2% to $101.5 billion in June from the previous month. While the deficit was smaller than in May, it came in slightly wider than economists’ expectations of $100 billion in a Reuters poll.

The narrowing reflected a broad-based decline in imports, although exports also weakened, falling to their lowest level in five months as lower crude oil prices reduced the value of petroleum shipments abroad.

Economists quoted by Reuters said the latest figures suggest trade will again subtract from gross domestic product (GDP) growth in the April-to-June quarter, even as other parts of the economy continue to show resilience.

“Our model mapping the trade data onto the national accounts now points to net trade subtracting around one percentage point from second-quarter GDP growth,” said Oliver Allen, senior U.S. economist at Pantheon Macroeconomics.

The government is scheduled to publish its advance estimate of second-quarter GDP on Thursday. Economists surveyed by Reuters expect the U.S. economy to have expanded at an annualized pace of 2.1%, matching the growth rate recorded in the first quarter.

Imports Retreat After Earlier Surge

Goods imports fell $8.2 billion to $306.2 billion in June, although they remained 16.6% higher than a year earlier, highlighting that import demand remains historically strong despite the monthly decline. The slowdown likely indicates that businesses are scaling back purchases after months of front-loading imports to avoid potential supply disruptions and higher costs linked to the conflict in the Middle East.

Consumer goods imports led the decline, falling 3.8% during the month.

Imports of capital goods dropped 2.0%, though they remained 37.4% higher than a year ago, underlining sustained investment in equipment, including infrastructure supporting artificial intelligence and data center expansion.

Food imports declined 2.5%, automotive vehicle imports fell 2.5%, while industrial supplies imports slipped 1.9%, largely due to lower oil prices.

Although imports weakened in June, analysts caution that the decline could prove temporary.

Business investment remains robust, particularly in AI-related infrastructure, which depends heavily on imported semiconductors, servers and other advanced equipment. The Commerce Department reported Monday that orders and shipments of non-defense capital goods rose strongly in June, suggesting companies continue to expand productive capacity.

Exports Hit Five-Month Low

Exports of goods declined $3.8 billion to $204.7 billion, the lowest level since January. Industrial supplies exports dropped 4.4%, reflecting lower crude oil prices following a fragile ceasefire between the United States and Iran that eased concerns about global supply disruptions.

Food exports fell 3.1%, while capital goods shipments declined 1.1%.

Some sectors, however, remained resilient.

Automotive exports increased 5.1%, while consumer goods exports rose 3.2%, indicating continued overseas demand for U.S.-manufactured products outside the energy sector.

Despite June’s improvement, the average goods trade deficit during the second quarter remained wider than the average recorded in the first quarter, reinforcing expectations that net exports will again weigh on GDP.

Trade has now reduced U.S. economic growth for two consecutive quarters.

Financial markets reacted positively to the broader economic picture, with Wall Street stocks moving higher, the U.S. dollar weakening against major currencies and Treasury yields edging lower.

While trade remains a headwind, economists expect strong business investment and resilient household spending to cushion the broader economy.

Inventory levels also remain an important variable in the GDP calculation.

Wholesale inventories increased 0.3% in June, matching May’s gain. Retail inventories were unchanged overall after rising 0.5% the previous month, although inventories at motor vehicle and parts dealers increased 0.4%. Excluding automobiles, retail inventories fell 0.2%, a component closely watched because it feeds directly into GDP calculations.

The inventory data suggest businesses remain cautious about rebuilding stockpiles after drawing down inventories over the previous four quarters.

Consumer Confidence Slips As Households Remain Cautious

Separate data from the Conference Board showed U.S. consumer confidence weakened unexpectedly in July. The Conference Board’s Consumer Confidence Index fell to 90.8 from 92.2 in June, missing economists’ expectations for an increase to 92.3.

The decline was driven largely by continued concerns about the labor market, persistent inflation and the prolonged conflict in the Middle East, now entering its sixth month.

Confidence weakened among respondents identifying as Independents and Democrats, while Republicans remained relatively more optimistic.

“Consumers’ write-in responses on factors affecting the economy continued to be mostly pessimistic in July,” said Dana Peterson, chief economist at the Conference Board.

“Comments about food and grocery prices increased. Notably, references to jobs and unemployment picked up slightly.”

The share of consumers who described jobs as “plentiful” fell to its lowest level since February 2021, while fewer respondents also said jobs were “hard to get.”

The Conference Board’s labor market differential, calculated from perceptions of job availability, narrowed to 3.1 in July from 3.8 in June. The measure closely tracks changes in the national unemployment rate.

Christopher Rupkey, chief economist at FWDBONDS, said households remain weighed down by high living costs even though the economy continues to expand.

“Whatever hopes that the public had for change in Washington after the elections in November 2024 have now been replaced by the same old concerns about the future as a result of inflation’s higher prices and the ongoing affordability crisis,” he said.

“The latest reading does not herald a pullback or downturn in the economy, but economic growth is likely to remain moderate.”

Housing Affordability Remains Under Pressure

Additional data from the Federal Housing Finance Agency illustrated the continued strain on the housing market. Single-family home prices rose 2.2% year over year in May, following a 2.0% increase in April, extending the upward trend in home values.

At the same time, mortgage borrowing costs remain elevated.

The average interest rate on a 30-year fixed mortgage has climbed 60 basis points since the United States and Israel launched military operations against Iran in late February. According to Freddie Mac, the average rate reached 6.58% last week, the highest level in 11 months.

Higher borrowing costs combined with rising home prices continue to price many first-time buyers out of the market.

“Affordability and demand are still challenged,” said Michael Gapen, chief economist at Morgan Stanley.

“Housing activity is bouncing along the bottoms. Given we do not expect much more support to affordability through the price channel, we likely need lower rates to spark demand.”

Together, the latest economic data portray an economy that continues to expand at a moderate pace but faces persistent headwinds from weaker trade, elevated borrowing costs and cautious consumers. While strong business investment, particularly in AI-related infrastructure, remains a key source of support, economists say sustained growth will likely depend on an improvement in consumer confidence, easing financing conditions and a stabilization in global trade flows.

Mercedes-Benz has pledged to protect its U.S. operations from any potential restrictions stemming from Washington’s growing scrutiny of Chinese influence in the automotive industry, as proposed legislation could complicate the German luxury carmaker’s access to one of its strongest-performing markets.

The commitment comes after the U.S. Senate Commerce Committee last week advanced legislation aimed at tightening restrictions on Chinese automakers operating in the United States. While the bill is primarily designed to curb the expansion of Chinese vehicle manufacturers, its broad language has raised questions about whether companies with significant Chinese ownership, including Mercedes-Benz, could also face heightened regulatory scrutiny.

Chief Executive Officer Ola Kaellenius said the company would take whatever steps are necessary to preserve its position in the United States.

“If we need to make adjustments to comply with anything, we will make sure that we protect our presence and our business in the U.S.,” Kaellenius said while presenting the company’s second-quarter results.

“We are not naïve about the geopolitical environment and the competition between the United States and China,” he added, noting that Mercedes is closely monitoring developments in Washington and remains “deeply involved” in discussions with relevant stakeholders.

The concerns stem from Mercedes-Benz’s shareholder structure. Chinese state-owned automaker BAIC Group and Geely founder Li Shufu together own nearly 20% of the company’s listed shares, making them its two largest shareholders. Although these holdings do not give Chinese investors operational control over Mercedes, they have become a focal point as Washington broadens efforts to limit China’s influence over strategic industries and critical technologies.

The issue underpins how geopolitical tensions are increasingly reshaping the global automotive industry, where ownership structures, supply chains and investment partnerships are receiving the same level of scrutiny once reserved for telecommunications and semiconductor companies.

The United States has become an important pillar of Mercedes’ global strategy as its business in China continues to deteriorate.

Like other German premium manufacturers including BMW and Volkswagen, Mercedes has struggled to maintain market share in China amid the country’s rapid transition to electric vehicles. Domestic manufacturers such as BYD and several emerging Chinese EV makers have gained ground with technologically advanced models, aggressive pricing and faster product development cycles, eroding the dominance long enjoyed by European luxury brands.

Against that backdrop, Mercedes has accelerated investment in the United States, where demand for its high-margin combustion-engine SUVs and luxury vehicles remains resilient. The company has committed more than $7 billion to expand its U.S. operations, including $4 billion through 2030 to increase SUV production at its Alabama manufacturing facility. The investment aligns with President Donald Trump’s broader push to encourage foreign manufacturers to expand domestic production and reduce reliance on imports.

Kaellenius also said Mercedes is evaluating the possibility of establishing engine production in the United States, depending on the outcome of ongoing negotiations to revise the North American trade agreement. Any new local-content requirements could encourage the automaker to deepen its manufacturing footprint in the country.

Building more vehicles and components in America would not only help Mercedes navigate possible regulatory changes but could also reduce its exposure to tariffs and strengthen its competitive position in one of the world’s most profitable luxury vehicle markets.

The strategy appears justified. Mercedes reported that U.S. sales rose 15% during the first six months of the year, providing an important offset to weakness in China. The company’s American business is also more profitable because consumers continue to favor larger gasoline-powered SUVs and premium vehicles that generate substantially higher margins than electric models, whose production remains more expensive.

Independent automotive analyst Matthias Schmidt said the economics strongly favor expanding U.S. production.

“If you are manufacturing locally in the U.S., it is a license to print money,” Schmidt said.

Washington has steadily expanded restrictions on Chinese participation across sectors ranging from semiconductors and artificial intelligence to connected vehicles, citing concerns over technology transfer, data security and strategic dependence.

If enacted, the proposed legislation could establish a precedent in which foreign companies with substantial Chinese ownership or investment face greater regulatory examination, even when they are headquartered in allied countries.

However, Mercedes-Benz safeguarding its U.S. business has become more important now. With China no longer delivering the growth and profitability it once did, the United States is emerging as one of the company’s most critical earnings engines. That makes preserving unrestricted access to the U.S. market a strategic priority.