WSJ What’s News - Beijing Prepares for Economic Warfare

Episode Date: December 10, 2024

A.M. Edition for Dec. 10. Sen. Tom Cotton says he sees President-elect Trump’s tariff threats as designed to get trading partners to the table–except when it comes to levies on China. And that’s not the only economic danger Beijing’s bracing for: The WSJ’s Georgi Kantchev says China is studying Russia’s sanctions-evasion playbook to prepare for the eventuality of war over Taiwan. Plus, 26-year-old Luigi Mangione is charged with murder in the killing of UnitedHealth executive Brian Thompson. Luke Vargas hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Amazon Q Business is the generative AI assistant from AWS because business can be slow, like wading through mud. But Amazon Q helps streamline work. So tasks like summarizing monthly results can be done in no time. Learn what Amazon Q Business can do for you at AWS.com slash learn more. Senator Tom Cotton warns U.S. businesses not to get in the way of Donald Trump's China tariff push, plus how Beijing is using Russia as a real-life case study to prepare for economic

warfare. Russia has found ways to dodge various penalties imposed by the West, and the goal is to have a toolkit in case the West imposes similar penalties on China. And a setback in Rupert Murdoch's bid to change who will control his media assets when he dies. It's Tuesday, December 10th. I'm Luke Vargas for the Wall Street Journal and here is the AM edition of What's News, the top headlines and business stories moving your world today.

We begin in Manhattan, where prosecutors overnight charged 26-year-old Luigi Mangione with murder in the killing of United Health executive Brian Thompson. Mangione, a former tech worker, was arraigned and denied bail yesterday in Pennsylvania after being arrested and charged separately with a range of lesser offenses. Pennsylvania Governor Josh Shapiro credited local law enforcement for apprehending Mangione, and he challenged the folk hero status the suspect had earned among some members of the public for striking a blow against America's health insurers. The suspect here who shot at that CEO and killed that CEO is a coward, not a hero. And we need to make sure that in this country we get back to having a civil discourse about our differences.

A UnitedHealth spokesman said they hoped Mangione's arrest would bring some relief to Thompson's family and others. We report that Rupert Murdoch has lost his bid to give control of his media empire to his oldest son Lachlan when he dies, rather than dividing it among four children. According to people familiar with the matter, the 93-year-old media mogul's attempt to amend a trust holding the family's assets, which include roughly 40 percent voting stakes in Wall Street Journal owner News Corp. and Fox News parent Fox Corp. was rejected by a Nevada probate commissioner. Three of Murdoch's other children, James, Elizabeth, and Prudence, who stood

to lose voting power, opposed the change, and a representative for them said they welcomed the commissioner's decision. An attorney for Rupert Murdoch said he plans to appeal. Well, the battle lines of the incoming Trump administration's trade fights are taking further shape this week. In America's backyard, Canadian Prime Minister Justin Trudeau is vowing to retaliate with tariffs on the US if Donald Trump places a 25% levy on imports from Canada as he's pledged to do. That would mirror what happened in 2018 when Ottawa responded to US steel and aluminum

tariffs with targeted levies on products like Kentucky Bourbon and Harley-Davidson motorcycles that were designed to pressure members of Congress from key states before a deal to drop tariffs was struck in 2019. Trudeau yesterday called Trump's proposed tariffs unfair, but in remarks courtesy of CTV, expressed to hope that cooler heads might prevail. President-elect Trump got elected on a commitment to make life better and more affordable for Americans. And I think people south of the border are beginning to wake up to the reality that tariffs on everything from Canada would make life a lot more expensive for Americans. Trudeau visited Trump at Mar-a-Lago last month to talk trade, the kind of bilateral engagement that U.S.

Senator Tom Cotton sees as validating Trump's approach to tariffs. Speaking at the WSJ's CEO Council Summit yesterday, the Arkansas Republican called Trump's tariff threats directed at countries like Canada and Mexico an effective negotiating tactic. However, he described promised U.S. measures against Beijing as a horse of a different color and said he has legislation backed by Trump and secretary of state nominee Marco Rubio that would revoke China's permanent most favored nation status. And he warned executives gathered for the event in Washington not to get in

the way. I really don't want to see any of your companies or you lobbying next year against our bill to repeal most favored nation status. And I'll just say, if you get in the ring on China's behalf, you should expect to be punched. I asked journal Asia economics reporter Jason Douglas what such a change would mean. The most favored nation status is what you grant to all countries with whom you don't have a free trade agreement.

So it's a sort of baseline for global trade. Removing that status means you automatically shift to another list of tariffs and those are all an awful lot higher. The only other countries that face these kind of tariffs are pariahs of one sort, another Russia, Belarus, North Korea and Cuba. So the immediate effect would be lots of higher tariffs on all sorts of Chinese goods and much more leeway for the US Administration to raise or lower those tariffs as it saw fit but the bigger impact is that this would create this huge sort of uncertainty around operating out of China because what it means is that

Tariffs on imports from China would be subject to an annual review Which means that if you were a business and you wanted to plan for your operations the next few years, you just simply couldn't do that. So one of the effects of this and one of the goals perhaps of those people advocating it is that you would force multinationals and US companies in particular to move their operations out of China. So will the Senate pass Cotton's bill? Tune in tomorrow morning as Congressional reporter Siobhan Hughes joins us to discuss where members of Congress stand on the hallmark items on Trump's to-do list. And in markets news today, Treasury yields are rising as investors await tomorrow's

release of U.S. inflation data, a key report ahead of next week's Fed interest rate decision. Traders are growing more confident about a rate cut after the latest jobs report showed unemployment ticking higher. Well coming up, potential Trump tariffs aren't the only economic dangers that China is bracing for. We'll discuss how policymakers in Beijing are studying Russia's efforts to evade Western sanctions and what they've learned after the break. AI is coming to your industry if it isn't already here. But AI needs lots of speed and computing power.

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See if your company qualifies at oracle.com slash wall street. In a journal exclusive, Georgi Konchev and Lingling Wei report that Chinese officials are studying Russia's efforts to evade Western sanctions with a very specific goal in mind – drawing lessons that could be useful if a conflict over Taiwan prompts economic warfare targeting Beijing. And Georgi joins me now with more from Berlin. Georgi, tell us what you've learned about how this is all taking place. Yeah, absolutely. I mean, ultimately, China and Russia have grown closer over the course of the Ukraine war.

We know over the past almost three years, Russia has found ways to dodge various penalties imposed by the West. And that's of great interest to China. What we've learned from people familiar with the effort is that there's inter-agency groups set up by China in the months following the full-scale war against Ukraine. They're looking at sanctions impacts in Russia. They're looking at Russia's mitigation strategies.

They often visit Moscow to meet with Russian officials. And the goal is indeed to have almost like a blueprint, a toolkit in case there is a Taiwan contingency. They call it an extreme scenario of an armed conflict. But they do caution that it doesn't mean that the country is ready for any invasion anytime soon. I should note that the Russian Central Bank and the Russian Finance Ministry didn't respond to requests for comment on this story, while the Chinese foreign ministry did respond but said that quote,

the country has always been committed to conducting normal exchanges and cooperation with all countries around the world, including Russia, on the basis of equality and mutual benefit, end quote. Let's get into the meat of it then, Georgi. What are some of the lessons that Chinese officials are coming away from Russia with, and how applicable could those lessons be for China? China could be taking a lot of lessons from the Russian experience here. Number one, of course, is the preparation even before any sanctions are imposed. Russia had for years been diversifying its foreign reserves, trying to de-dollarize to

build its own financial plumbing would make success, we have to say, but it did buy some time for Moscow in the initial phase of the invasion and that obviously helped them to safeguard the economy. What we've also seen, and this is really important for China, is that coalitions are really valuable here. The West was able to come together, impose unprecedented sanctions on Russia. At the same time, Moscow was able to couple together a smaller coalition of its friends, including China, Iran, North Korea, and specifically the China-Russia trade has indeed increased a lot during the war.

That relationship since the start of the war has gone more in the benefit of Russia though, has it not? And that's exactly the other point here. Absolutely is that Russia would not be able since the start of the war has gone more in the benefit of Russia though, has it not? And that's exactly the other point here, absolutely is that Russia would not be able to be as much of a help to China, Chinese to Russia right now. The lesson for China is that they need to find those other players that would be helpful.

And that's why China is of course, as we know, going around the world investing and bringing benefits to various countries, really around the globe. But again, it's really important to have a global list of partners in such a sanction scenario. And there are a few more potential lessons, one of which we don't really have time to get into, but Moscow has owed a decent amount of its economic durability to its oil exports, not something so easily applicable to China as far as I understand. Another though, where

we kind of split the difference right sanctions could really disrupt Domestic manufacturers that are connected to the global supply chain That's something China is quite vulnerable on if I understand correctly and then you've got kind of on the flip side The positive effect potentially of sanctions incentivizing domestic production which given many of the headlines we have about the Chinese economy It may be something they could fare a little bit better on so it's a mixed bag across some of these other lessons, right? It is a mixed bag, but protecting your supply chains is a big lesson for China here from the Russian side. Indeed, Russia has before the war tried for many years to make its economy self-sufficient. But when the sanctions actually hit, Russia did find itself still deeply reliant on Western

parts. Indeed, when the car manufacturing Russia rebooted after the initial wobble of the sanctions, they made cars without airbags for a while without other safety features. So that's a big lesson for China that supply chains are global and they need to protect them as well. Nat. George, lots of lessons there. And I guess we would imagine these visits will continue. There's still quite a bit more for Beijing to learn. Absolutely. China itself has been under sanctions from the US for a number of years, of course, not as substantial as the ones on Russia. But we do know obviously under President-elect

Donald Trump in his second administration, he's planning to turbocharge the use of economic warfare. He's talking about tariffs a lot recently. And in such a world, China is likely to need those lessons even more. Georgi Konchev is a foreign correspondent for The Wall Street Journal based in Berlin. Georgi, thank you so much for the update. Thank you. And that's it for What's News for Tuesday morning. Additional sound in this episode was from Reuters.

Today's show was produced by Kate Bulevent with supervising producer Christina Rocca and I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. And until then, thanks for listening.