WSJ What’s News - Fed Chair Warns of Difficult Choices as Trade War Rages

Episode Date: April 16, 2025

P.M. Edition for April 16. Federal Reserve Chair Jerome Powell warned today that the central bank could face difficult trade-offs in trying to cushion the U.S. economy from the fallout of President Trump’s trade war. His comments deepened a rout on tech stocks, fueled by trade restrictions on chipmaker Nvidia. We speak to WSJ Heard on the Street columnist Asa Fitch about what the rules mean for the company’s relationship with Wall Street. And research projects go on pause at Harvard after the Trump administration said it would stop more than $2 billion in federal grant money. WSJ science reporter Nidhi Subbaraman discusses the implications for researchers and the university writ large. Alex Ossola hosts. How Harvard Ended Up Leading the College Fight Against Trump Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

U.S. tech stocks fall as Nvidia pays the price for turning into the biggest marketing chip between the U.S. and China. Plus, Jerome Powell is warning that the Fed may find itself in a tough spot, choosing between whether to focus on inflation or fostering a healthy labor market. We may find ourselves in the challenging scenario in which our dual mandate goals are in tension. And how funding cuts at Harvard are already affecting the university's research. It's Wednesday, April 16th. I'm Alex Osoloff 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. Stocks took another turn lower after Federal Reserve Chair Jerome Powell warned that the central bank could face difficult tradeoffs in trying to cushion the U.S. economy from the fallout of President Trump's trade war. Wall Street's fear gauge, the SIBO Volatility Index, jumped nearly 9% after falling for three trading days. The dollar, meanwhile, extended its decline. Earlier, the Commerce Department had said

that retail sales rose a better than expected 1.4% in March from the previous month, and before President Trump's Liberation Day announcement of sweeping new tariffs on April 2nd. And a survey of global fund managers by the Bank of America conducted in the days after that announcement found that almost half of them expected a hard landing for the global economy in the next 12 months. In the end, U.S. markets ended the day down.

The Dow dipped about 1.7 percent, and the S&P 500 lost more than 2 percent. The tech-heavy Nasdaq closed down just over 3 percent, dragged by Nvidia that lost more than 7 percent. Federal Reserve Chair Jerome Powell has warned that the central bank could face difficult trade-offs in trying to cushion the U.S. economy from the fallout of President Trump's trade war. In remarks at the Economic Club of Chicago today, Powell said large tariff increases that push up consumer prices while weakening economic activity would put the Fed in the uncomfortable position of having to choose, promote low inflation, or foster a healthy

labor market. The Fed chair implied that the central bank could elevate its inflation goal over its labor market mandate if the two were in conflict. In the discussion that followed, Powell described the possible effects of the significant policy changes the administration is making, particularly in trade. The effects of that are likely to move us away from our goals. So unemployment is likely to go up as the economy slows in all likelihood and inflation is likely to go up as the economy slows in all likelihood and inflation is likely to go up as tariffs find their way and some part of those tariffs come to be paid by the public."

Powell repeated his view that the central bank doesn't need to rush to lower interest rates while nodding to a fluid economic outlook. As we reported this morning, Nvidia told investors that the US is banning the sale of its H20 AI chips in China and a handful of other countries. Nvidia is now caught between the world's two superpowers as they jockey to take the lead in AI development and could hurt the company's relationship with Wall Street. WSJ herd-on-the-street columnist Asa Fitch joins me now with more. Asa, the H20 is not a huge part of Nvidia sales,

yet it seems the government's restriction could create an issue for the company's performance on Wall Street, right? Expectations for Nvidia are always very high in terms of its revenue and its outlook for the coming period. Investors have gotten used to Nvidia always beating expectations for revenue and growing at a insane rate. This problem in China, which represents a pretty significant part of their revenues, creates some uncertainty about how much Nvidia can beat those expectations in the future.

As we mentioned in this morning's show, the company says it'll take a $5.5 billion charge in the current quarter. Is that all the financial effect they're expecting from this or is there a longer-term impact? There's a longer-term impact. $5.5 billion in the current quarter relates to inventory and other sorts of supplies and things they need to put these things together. Those supplies and that inventory and that other stuff that they're taking a charge on represents a much greater amount of revenue that the company would otherwise

have received. Some analysts estimate it's about $13 billion. I've seen one analyst report suggesting something like $20 billion of revenue in this year. So it is a pretty significant hit beyond just the $5.5 billion charge that made the headlines. This move from the government comes a day after Nvidia says it'll make supercomputers entirely in the US. Where does that fit in with all of this? Well, there's a bit of tension between companies who want to please the Trump administration

by doing more stuff in the US and a Trump administration that wants companies to disentangle themselves from China. Nvidia is playing this game just like everybody is and they made this commitment. Some analysts see that as part of a quid pro quo. We'll scratch your back, Trump administration, you scratch ours. Trump administration in making this move

seems like they're not scratching Nvidia's back too much. And that move a few days ago to invest in the US does not seem to have changed the calculus of the folks in charge in Washington. So for Nvidia, maybe that's a hard lesson. We'll see how it plays out, though. One thing that we've seen in the past is that the policy around tariffs, around export restrictions, these things are changing all the time. That was WSJ herd on the street columnist Asa Fitch. Thanks so much, Asa. Thank you. Coming up, research goes on pause after Harvard pushes back against the Trump administration.

That's after the break. Talking about guns with others might not always feel comfortable, but it could save a life. Here's a way to start a conversation. Your family is going over to your neighbor's home for dinner for the first time. How would you ask if there are any unlocked guns in the home? Hey! Hey, we're so excited for tonight. Before we come over though, may I ask if there are any unlocked guns in your home?

Our guns are stored securely, locked in a safe that the kids can't access. Awesome. Learn how to have the conversation at AgreeToAgree.org, brought to you by the Ad Council. Harvard University scientists are facing the prospect of laying off staff, euthanizing research animals, and bringing years-long science projects to a halt, as a freeze on federal funds looms. On Monday, after the university rejected government demands to change its operations and how it admits students, the Trump administration said it would stop more than $2 billion in funds previously awarded to the school. Stop work orders began arriving

soon after. For more on what this means for Harvard, I'm joined by Nidhi Subbaraman, who covers science for the journal. So, Nidhi, what does the pause in grant funding mean for research at Harvard? This is something that researchers are still trying to put together. I spoke to a few people who had received these stop work notices after Harvard had announced its decision to reject the administration's demands as far as how it operates and how it picks students. And they were looking at basically icing work

that in some cases had been going on for a long time. One researcher who was running a international tuberculosis study, she has to potentially euthanize her research monkeys that are involved in the study and bring work that affects 14 different labs to a halt. Another researcher is looking at early detection of ALS, Lou Gehrig's disease from the blood,

and he's looking at seeking other sources of funding, but the fact that this has come so suddenly overnight means that he's not sure where he's going to assign the qualified staffers who are working on these projects. And more broadly, it's concerned that advances that could help patients and bring health and treatment to them more quickly will be delayed. How will this pause in funding affect the university's ability to attract and keep top researchers?

They're certainly concerned that uncertainty about funding will mean that people aren't going to see Harvard as much of a star place to land. I did hear that new recruits are considering not coming and together with the other turbulence that research has been facing as far as broader uncertainty about whether federal agencies will have money when they will come and the other disruptions. Certainly, staffing is a key concern at faculty and labs across not just Harvard, but universities everywhere. So what are Harvard's options in terms of funding? I mean, could it find another way to back its research?

The truth is, federal research support is the bulk of support that Harvard gets for research. 68% of its incoming funding for science last year. This is not something that they could make up easily. I know people talk about the Harvard endowment of over $50 billion, but a lot of that funding is committed and has restrictions on it. It's not something you can liquidate easily. And certainly if you're talking about nearly $700 million per year, it's not something that you can look at recouping overnight. – That was WSJ reporter Nidhi Superaman. Thank you so much, Nidhi. – Thank you. – To read more about how Harvard ended up leading the college fight against Trump,

check out the link we've left for you in the show notes. And be sure to check out our upcoming What's New Sunday episode as we explore what a loss of grant funding means for universities' bottom line. In other news, a federal judge has found that the Trump administration willfully disregarded a court order when it failed to return planes full of migrants on their way to a prison in El Salvador. The judge ordered the government to act quickly to avoid possible prosecution for criminal contempt. He ordered the government by next week

to either show him an attempt to remedy the violation or provide information from administration officials under oath about the decision. Republican representative Elise Stefanik is considering a run for New York governor in 2026. That's according to people familiar with the matter. President Trump nominated her late last year to be the U.S. Ambassador to the United Nations, but the administration withdrew her

nomination last month, citing concerns about the tight margins for Republicans in the House. And the U.K. Supreme Court ruled today that only those born female can be considered women. The landmark judgment excludes transgender women from the legal definition and paves the way for stricter limits on female-only spaces and services. Britain's top court said trans people would still be protected from discrimination on the basis of gender reassignment, and a trans woman could claim sex discrimination

because she is perceived to be a woman. And that's what's news for this Wednesday afternoon. Today's show is produced by Pierre Bienamé with supervising producer Michael Kosmitis. I'm Alex Osila for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.