WSJ What’s News - Automakers Are Scrambling Ahead of Trump’s Tariffs

Episode Date: February 19, 2025

P.M. Edition for Feb. 19. Overseas automakers were counting on the U.S. market to keep their business humming; now, proposed tariffs could threaten it. WSJ European autos reporter Stephen Wilmot joins to talk about how car companies are preparing. Plus, startup data company Crunchbase is launching an AI-powered prediction tool. Belle Lin, who covers AI and enterprise technology for WSJ, talks about what could make that useful to investors. And President Trump trades barbs with Ukrainian President Volodymyr Zelensky. Alex Ossola hosts. Listen to “The Unraveling of Trevor Milton” on the Bad Bets podcast.  Sign up for the WSJ's free What's News newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

President Trump and Volodymyr Zelensky trade barbs in a growing rift between the U.S. and Ukraine. Plus, global automakers are scrambling ahead of Trump's proposed tariffs. The whole thing is so uncertain that they would be very reluctant to invest purely on the basis of tariffs alone. That said, the U.S. is a very important market for them and they've been investing in it for decades. And can AI predict the next big IPO? A data company thinks so.

It's Wednesday, February 19th. I'm Alex Osola for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. world today. First, in international news, President Trump has stepped up attacks on Volodymyr Zelensky, calling the Ukrainian president a, quote, dictator without elections. The comments come after Zelensky said Trump was repeating Russian propaganda points. The exchange marks a significant escalation in a feud that could complicate efforts to end the war. Yesterday, Trump accused Zelensky of starting the war in Ukraine, which began after Russian President Vladimir Putin ordered a large-scale invasion of the country three years ago. Zelensky told reporters earlier today that Trump is, quote, living in this disinformation space.

Trump responded with several accusations, saying Zelensky had misused US aid and quote, done a terrible job as president. The barbs between the two leaders highlight a widening gap between Ukraine and the US, the country that has been Kyiv's most important backer. Meanwhile, Denmark said today it plans to increase its military spending as the Russian threat to Europe grows

and President Trump demands allies pay more for their security. Denmark will inject $7 billion over two years to its existing annual defense budget of $5 billion. This will make the country the first European nation outside Poland and the Baltics to commit to spending more than 3% of gross domestic product on its military. Faced with intense competition in China and heavy regulation in Europe, overseas automakers were counting on the U.S. to keep their business humming. Now President Trump's proposed tariffs could threaten that important market.

As we mentioned on this morning's show, the president said yesterday that tariffs on the auto industry in particular could be quote, in the neighborhood of 25% and could rise even higher. And these could come on top of reciprocal tariffs on imports from other nations based on their trade restrictions. WSJ European Autos reporter Stephen Wilmot is here to tell us what this could mean for the industry. Stephen, how could foreign car makers be affected by these tariffs? How exposed are they?

They're very exposed, firstly, because the US is, in many cases, their most important market. And secondly, because they rely on shipping vehicles from their home markets to the US. Although they've built up manufacturing facilities, notably the Japanese, they still rely on shipping a lot of cars from their home markets. So just under 16 million cars were sold in the US last year. notably the Japanese, they still rely on shipping a lot of cars from their home markets. So just under 16 million cars were sold in the US last year. Of those, 8 million were imported. Half of those again, so 4 million were imported from Mexico and Canada, so within the USMCA free trade area. That's obviously subject to its own tariff threats. So that

leaves another 4 million imported from principally Japan, South Korea and Germany. And you know, we were primarily talking about international carmakers, but could domestic carmakers also be affected by this? Absolutely. Domestic carmakers are obviously very worried about the proposed 25% tariff on Mexican and Canadian manufactured cars, because they rely very heavily on trading parts and vehicles across the US land borders. That's also an issue for the German and Japanese carmakers and Kia a bit because they have Canadian

and Mexican plants too, particularly Volkswagen has a huge base in Mexico and relatively little manufacturing in the US. That's one issue, but then all of these other tariff threats come on top of that. So the reciprocal tariffs, that seems to be kind of beyond North America kind of risk. And it does seem like Japan, South Korea, and the European Union are particularly

in the firing line here. Sounds like these tariffs could be kind of a big deal for these companies' business. What are the companies doing to prepare for this? Does it mean that they're looking to bring production into the US? Well, that's what President Trump would obviously love them to do. It's really not simple for a carmaker to simply move production from here to there because it costs a lot, it takes a lot of time to set up production for a vehicle in a new factory and they don't know how long these tariffs are going to last.

The whole thing is so uncertain that they would be very reluctant to invest purely on the basis of tariffs alone. That said, the U.S. is a very important market for them and they've been investing in it for decades, but it's not going to be a quick and easy decision for them to respond to whatever comes out of these proposals in early April. That was European Autos reporter Stephen Wilmot. Thanks Stephen. Thank you Alex. Elsewhere in the auto industry, Nikola, the hydrogen truck maker that briefly

sported a market value comparable to Ford Motor, has filed for bankruptcy with plans to wind down its business. The company, which was once a darling of green investment, filed for Chapter 11 in a Wilmington, Delaware court, intending to conduct a court-supervised auction of its assets. And you can hear more about the story of Nikola founder Trevor Milton in one of our previous podcast series, Bad Bets, hosted by Ben Foldy. We'll leave a link in today's show notes. Major U.S. indexes closed higher today, even as President Trump's threat of tariffs weighed on sectors including auto stocks.

The S&P 500 was up about a quarter of a percent, the Dow rose about 0.2 percent, and the Nasdaq inched up less than a tenth of a percent. Minutes from the Fed's most recent meeting late last month show that central bank officials were broadly comfortable with their decision to hold interest rates steady and offered nothing to suggest an immediate change to their wait-and-see stance on interest rate cuts. The Fed's next meeting kicks off on March 18th. And Apple has unveiled a new phone, the iPhone 16e, which relies on the company's first

in-house cellular chip. The chip, called the C1, is part of Apple's effort to wean itself from having to pay billions annually to the cellular chip maker and rival Qualcomm. Coming up, one company is hoping that AI could help investors choose which startups to bet on. More on that after the break. If you're a startup founder, venture investor, or simply an observer of Silicon Valley, chances are you've heard of Crunchbase.

It's a company that's made its name as a database for startup financing data. Well, today it's launching something different, an AI-based prediction engine that uses the company's extensive startup data to predict where Silicon Valley's hottest startups are heading. I'm joined now by reporter Belle Lin, who covers AI and enterprise technology for the journal. So, Belle, how are these predictions useful for investors? Investors are always looking for their next hottest target,

whether it be an acquisition target or a startup that's looking to fundraise. And so these are potentially very valuable pieces of information, because Crunchbase says that they can predict not only when companies are seeking to fundraise, but also the sort of heat index if they're growing or maybe they're not growing. And maybe they're shutting down or they're

looking to be acquired. And just how accurate are these predictions? Well Crunchbase says that they are up to 95% accurate for certain types of data. And they're able to say that because they do what's called back testing, meaning they go back through their 17 years of startup data and they say, can we, based on these signals within our data, determine whether the startup was about to do any of the things that we think they're going to do. And then they say, okay, there's up to a 95% chance that we were right.

In terms of the accuracy rate for startups that shut down, Crunchbase says that's less than 50%. And those are for a variety of reasons. But most often it's because startups can continue to putter on with slowed growth for an indeterminate amount of time. And that continues to happen for a while. I'm curious why Crunchbase decided to do this at all. I mean, it seems like business was going fairly well for doing exactly the kind of database things that you just said. That's right.

Business was going pretty well, but it really faced this sort of existential crisis moment as their CEO described to me when chat GPT was released. And so like other companies that rely on a model in which users are searching for data, that data can be relatively accessible on the internet and is provided to you in a pretty digestible fashion, they were really concerned if users could get all the started information from chat GPT, why would they need to go to crunch base? And so that's where the idea emerged to be more of a forward-looking company and to provide predictions based on their valuable usage data rather than just simply looking backwards

in time. That was WSJ reporter Belle Lin. Thanks Belle. Thanks for having me. And finally, do you feel like you're spending an arm and a leg on subscriptions to apps every month? There are TV streaming services and music apps and workout apps. The list goes on.

Well, now a growing number of apps are offering a lifetime subscription. Yes, they cost more upfront, hundreds or even thousands of dollars. But could it be worth it? WSJ personal tech columnist Nicole Nguyen told our Your Money Briefing podcast about the advantages and disadvantages of the lifetime subscription. It forces people to really pause and reflect on whether or not that service is useful in their life, which is a great thing. That's one benefit.

And another benefit is it just gets rid of that monthly fee. You just you don't really have to worry about these recurring costs adding up over time. If you can stick with the service and amortize that cost, then it can save you money. One downside is that the company ceases to exist in a shorter amount of time than you expected. Another downside is maybe a bigger tech company copies that app idea and offers it to you for free or at low cost. And another downside is that without that reminder hitting your credit card bill every month that you're paying for the service, you might forget that you even have access to it and you might be less motivated to use it. To hear more from Nicole, listen to tomorrow's episode of

Your Money Briefing. And that's What's News for this Wednesday afternoon. Before we go, heads up, we had another bonus episode for you today. In our What's News and Earnings, we're looking at big oil and how the boom times of a few years ago are looking now that President Trump has come into office with promises to bring gas prices down. That's in the What's News feed just before this show. Today's show was produced by Anthony Bansi and Pierre Bienneme with supervising producer Michael Kosmitis. I'm Alex O'Sulliv for The Wall Street Journal.

We'll be back with a new show tomorrow morning. Thanks for listening!