WSJ What’s News - Beijing Retaliates Against Trump Tariffs

Episode Date: February 4, 2025

A.M. Edition for Feb. 4. China hits back with levies on some American imports and an antitrust investigation into Google. WSJ columnist James Mackintosh explains what the past day’s stock-market swings tell us about how investors are weighing President Trump’s moves. Plus, Trump administration officials discuss executive actions to dismantle the Education Department. And El Salvador offers to take U.S. deportees of any nationality. Luke Vargas hosts.  Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

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China hits back at the U.S. with tariffs, though with investors not yet panicking about President Trump's trade policies, journal columnist James McIntosh looks at how that could affect Trump's strategy going forward. It comes back to this question that we kind of don't know the answer. Is he just watching the markets, in which case he'll be encouraged to go a lot further by the fact the markets didn't freak out, which then leads to the weirdness that maybe next time the markets do freak out because he goes further.

Plus, President Trump's advisers weigh a plan to dismantle the Education Department, and El Salvador offers to take back U.S. deportees. It's Tuesday, February 4th. 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. Beijing is responding to new 10 percent tariffs on Chinese goods announced by President Trump over the weekend by enacting tariffs of its own. In moves announced today, China will place 15% tariffs on imports of American coal and

liquefied natural gas, and raise levies on crude oil, agricultural machinery, and certain vehicles. Separately, China added several critical minerals and metal-based products to an export control list and the country's antitrust regulator announced an investigation into Google for possible antitrust violations, though it didn't cite a reason or provide other details. Google, whose search engine and consumer internet services have been largely unavailable in China since 2010, didn't immediately respond to requests for comment. Joining us now with some insight into these moves and how markets are reacting to them,

I'm joined by Wall Street Journal senior markets columnist James McIntosh. James, you have written that the stock swings we saw in US markets yesterday, basically falling on the prospect of looming tariffs against Mexico and Canada, but then gradually gaining as Trump cut deals with both of those countries to postpone those moves, suggest that investors see his tariff threat says more about extracting concessions than anything else. Does that assessment hold given that we didn't see the US and China blink here? Yes, the China tariffs are significantly less serious than the Canada-Mexico situation. 25% on Canada and Mexico where there are very closely integrated supply chains would have

been catastrophically bad for a bunch of US industries. Obviously, the US imports a lot from China, but it imports significantly less than it used to. More Chinese stuff arrives in the US via Vietnam. It gets processed there a bit. And in some other East Asian countries, we'll see more of that. We'll see some price rises. We'll probably see a bit of depreciation of the renminbi. In fact, when Trump initially put his tariffs on China in his first term, they were almost entirely offset by the falling Chinese currency. Now China, Trump might be a bit more awake to that this time, but these are all things

that are much easier to cope with than 25% on Mexico and Canada, which would have shown up immediately in consumer prices, potentially in shortages, in very large amounts of bureaucracy. Okay, potential North American trade chaos narrowly avoided, though, just for a month. But back to your question about the investor response to Trump tariff threats, what do you see the dynamic shaping up here to be? Can we read or should we read very much into how markets acted yesterday? So yeah, I think it mattered. What it showed is that people didn't really expect that much because if you believe that

you were going to get this chaos in North American trade, share prices should have been down an awful lot more. And even before the deals were cut, investors clearly thought this wasn't going to last very long. It wasn't catastrophically bad for anybody. Even the most exposed, people like General Motors, you had big fools, but they weren't out of the ordinary for a bad earnings day. I guess the question then going forward is, does that encourage the president to rattle

the cage a bit with respect to other countries? I guess the North American bit, as you mentioned, is only on hold for a month, but we've heard the EU, the UK also tossed around just this week. Well, here's where we have the question of, is he playing three-dimensional chess or is he playing snap? And we don't know the answer, right? If he's playing three-dimensional chess, then of course he should be fully aware of the market reactions and shouldn't really matter. If he's playing snap and doing this stuff by watching what the S&P does,

then the fact that you didn't get these big falls might encourage him to do more next time to push harder. And of course, for Europe, which is next in the crosshairs, it's potentially harder for them to offer a face-saving deal. So Mexico and Canada didn't really give up very much, if anything, in order to get rid of the tariffs. It's not clear Europe has such an easy sort of get out of jail free card. They did manage it last time. They promised to do some things that they were going to do anyway, like buying more gas from the US. Maybe they'll do that again.

Whether Trump accepts that as a face saving deal or not, again, it comes back to this question that we kind of don't know the answer. Is he just watching the markets, in which case he'll be encouraged to go a lot further by the fact the markets didn't freak out, which then leads to the weirdness that maybe next time the markets do freak out because he goes further and you get this feedback loop. That was Wall Street Journal senior markets columnist James McIntosh. James, thanks so much.

Thanks, Luke. And markets across Asia, which had been rallying after the US averted tariffs with Mexico and Canada paired back many of their gains, though the Hang Seng in Hong Kong closed up nearly 3% led by Chinese tech stocks. On deck today, the US Labor Department will report on December job openings at 10am Eastern. And after a flurry of earnings updates this morning, Alphabet, Snackmaker, Mondalis, and chip supplier AMD are due to report their quarterly results after the closing bell. Coming up, the rest of the day's news and

a look at the world of sports investing after the brain. We are exclusively reporting that Trump administration officials are weighing executive actions to dismantle the Education Department, one of the agencies that Elon Musk and his allies are looking at as part of their efforts to shrink the federal government. According to people familiar with the matter, the officials have discussed an executive order that would shut down all functions of the agency that aren't written explicitly into statute or move certain functions to other departments. The order would also call for a legislative proposal to abolish the department, laying the groundwork to deliver on a Trump campaign promise.

The White House didn't respond to a request for comment. Fully eliminating the department would require an act of Congress. Meanwhile, President Trump says there are curbs in place to prevent Elon Musk from doing anything in the government without the White House's blessing. Well, he's got access only to letting people go that he thinks are no good if we agree with him. And it's only if we agree with him. He's a very talented guy from the standpoint of management and costs."

Trump's comments in the Oval Office yesterday came just hours after a Musk-led team effectively shut down the U.S. Agency for International Development. The billionaires' moves to dismantle multiple agencies have caused confusion about who's overseeing the push and sparked anger among Democratic lawmakers, with Representative Jamie Raskin of Maryland calling them an interference with congressional power. U.S. Secretary of State Marco Rubio says that El Salvador has offered to accept deportees of any nationality from the U.S., including incarcerated American citizens who would be

held in the country's maximum security prison. Rubio said on his visit to the country yesterday that El Salvador would take in any, quote, illegal immigrant in the United States who's a dangerous criminal, end quote, and he thanked President Najib Bukele. The president, in an act of extraordinary friendship to our country, knowing the challenges we face in the U.S. has agreed to the most unprecedented and extraordinary migratory agreement anywhere in the world." Rubio says he's discussed the offer with President Trump, though it's unclear whether the U.S. plans to accept it or the legality of sending American citizens to a foreign

prison. A State Department spokesperson declined to comment on what such a plan could entail. And finally, as we gear up for this weekend's Super Bowl, our colleagues over on WSJ's Take on the Week podcast have been digging into the world of sports investing. Co-hosts Gunjan Banerjee and Telestemos spoke with Chris Morangi, Co-Chief Investment Officer of Value at Gabelli Funds, whose funds are heavily invested in the sector, about why he's so bullish on that space. And here's an excerpt from that chat. There has been a large secular trend of experience versus things. I think some of that has to do with the alienation that comes with technology. Some of it's just generational. But sports are certainly a part of that.

And sports teams historically have been great stores of value. That's because they're very durable. They are not particularly sensitive to economic conditions necessarily. They cross all demographic boundaries, young, old, different ethnicities, obviously. And they've actually performed quite well. Hard to measure because it's a private market, but one measure of how well they've done. If you compile the annual valuations of the big four leagues and their sports teams that comprise them over the last 10 years, they've compounded about 16% on average. That's versus the S&P at 13%. And while that's a great trend for wealthy franchise owners,

Moranji said that retail investors can get in on the trend as well. All you need is $40 and you can be an owner of a major league franchise. That's the Atlanta Braves Baseball Club, which trades for about $40 a share. So there are a limited number of ways to participate in the growth of sports assets directly. You don't have to be a billionaire. And for the full conversation, check out WSJ's Take on the Week on YouTube or wherever you get your podcasts. New episodes drop on Sundays. And that's it for What's News for this Tuesday morning. Today's show was produced by Kate Bulevent and Daniel Bach, with supervising producer Christina Rocca, and I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a brand new show, and until then, thanks for listening.