WSJ What’s News - Growing Debt, Tariffs Weigh on U.S. Outlook

Episode Date: March 26, 2025

A.M. Edition for Mar. 26. Ratings company Moody's raises red flags over ballooning U.S. debt and the negative effects of tariffs. Plus, Vice President JD Vance announces he’ll join a controversial visit to Greenland this week, sparking anger and confusion on the island and in Denmark. And WSJ reporter Clarence Leong describes how China’s space industry is racing to catch up to SpaceX. Luke Vargas hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Moody's raises red flags over ballooning U.S. debt and the negative effects of tariffs. Plus anger and confusion in Greenland, as Vice President Vance joins a planned visit to the island this week. And China's space ambitions take flight. Beijing is aware that the U.S. is speeding ahead with SpaceX being the prime example. And it feels a sense of urgency to catch up. It's Wednesday, March 26th. 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. The Trump administration is further limiting China's access to American technology, expanding a crackdown that began during Joe Biden's term. Eighty companies and institutes have been added to the export control list, including a U.S. affiliate of China's InSper group that is a large buyer of Nvidia chips. China tech reporter Lisa Lin says the move closes loopholes that had left room for blacklisted companies to still buy US technology.

This is probably one of the earliest signs from the Trump administration that they are ready to play hardball when it comes to US-China tech competition. Let's not forget that even though China's been on his radar over the last couple of months, it's mostly been about trade and not tech. So what this new rule does now is to give us an indication of how the Trump team may

react when it comes to dealing with sales of advanced technology to China in the future. A spokesman for China's foreign ministry called the U.S. action, quote, typical hegemonic behavior that severely violates international law. Ratings company Moody's is warning that America's fiscal strength is in for a multi-year decline amid the widening U.S. budget deficit and falling debt affordability. Journal reporter Caitlin McCabe has more. I think it's important to start with a bit of context. Moody's had assigned what it calls a negative outlook for America's sovereign rating in

November 2023. And it has remained the last of the credit rating agencies to maintain its AAA rating on the US. Both Fitch and S&P had issued downgrades in the past. And so now what Moody's is saying is that this toxic combination of widening federal budget deficits, a rising debt burden, and falling debt affordability has given the agency concerns about America's fiscal strength. And Caitlin says the report forecast ways that policy changes out of Washington could complicate the situation further.

Specifically Moody's points to sustained high tariffs as well as unfunded tax cuts, meaning that there's this expectation that there will be a full extension of the 2017 tax cuts that are set to expire at the end of this year. But Moody's warns that these may not be sufficiently offset by other revenues. The Moody's report also says it expects GDP growth to moderate to 2% this year and 1.8 the year after that. And it says that even in its most optimistic scenarios, the U.S. remains still materially weaker than other AAA rated sovereigns. The federal judge overseeing the criminal case against Boeing has ordered a trial over two deadly crashes of 737 MAX jets. Yesterday we reported the aerospace giant

had been seeking to withdraw an earlier agreement to plead guilty for deceiving regulators before the crashes which killed 346 people. Boeing and the Justice Department were expected to propose changes to the settlement by April 11, but a judge has now scrapped that deadline and ordered the sides to prepare for a trial in June, increasing the odds that Boeing will have to plead guilty or defend against a charge it already said it committed. Boeing said in a written statement that it continues good-faith discussions with the

Justice Department, while a spokeswoman for the department declined to comment. Vice President J.D. Vance is joining his wife, Second Lady Usha Vance, on her upcoming trip to Greenland, testing already strained relations between the U.S. and European allies as President Trump doubles down on his wish to own the self-governing Danish territory. And you know there was so much excitement around Usha's visit to Greenland this Friday that I decided that I didn't want her to have all that fun by herself and so I'm going to join her.

Vance made that statement in a video on his ex-account. Greenland has denounced the visit, which the White House said would include National Security Advisor Michael Walz and Secretary of Energy Chris Wright as, quote, highly aggressive. The U.S. has now shifted the visit's focus from a celebration of Greenlandic culture to one of national security. And according to White House officials, the Vances will be visiting American soldiers at a U.S. military base. We want to reinvigorate the security of the people of Greenland because we think it's important to protecting the security of the entire world.

Danish Prime Minister Mette Frederiksen dialed up the rhetoric against Washington yesterday, saying that the scheduled visit puts completely unacceptable pressure on both Greenland and Denmark. Trump on Monday rejected the notion that the upcoming visit was a provocation. Despite the lack of an official invitation, he claimed that the delegation has been invited by people in Greenland. Back in Washington, President Trump signed a raft of executive orders yesterday, including one that could overhaul how American elections are carried out, marking a major push in executive branch influence over voting processes typically

administered by states. The order creates new proof-of-citizenship requirements for those registering to vote through federal forms, enlists the DOJ and the Commissioner of Social Security to find ineligible voters, and directs federal election funding to be withheld from states that count mail-in or absentee ballots received after election day. The directive is likely to be challenged in court, and some left-leaning advocacy groups said the president lacked the authority to issue it in the first place.

And in a separate order yesterday, Trump widened his retribution campaign against law firms that he perceives as enemies, stripping security clearances from lawyers at Jenner and Block and restricting them from access to federal buildings. The firm recently backed lawsuits challenging the administration's policies on behalf of transgender individuals and asylum seekers, and has ties to Andrew Weissman, a top member of the special counsel investigation into Russian interference in the 2016 election. The order follows moves punishing other major law firms, including Covington & Burling,

Perkins, Cooey, and Paul Weiss, though the order against Paul Weiss was rescinded after it cut a deal with the White House to provide pro-bono services to support the administration's initiatives. Coming up, we'll go inside China's efforts to challenge SpaceX, as Beijing gives a boost to private rocket companies. That story after the break. The competition in space is heating up once more, with China's commercial space industry racing to catch up with Elon Musk's SpaceX. This year alone, at least six Chinese rockets, designed with reusability in mind, are planned to have their maiden flights.

Journal reporter Clarence Leung told our Kate Bullivant how Beijing is injecting billions of dollars into private sector companies as it aims to create a domestic space industry that isn't dependent on Western technology. Beijing is aware that the U.S. is speeding ahead with SpaceX being the prime example and it feels a sense of urgency to catch up. is speeding ahead with SpaceX being the prime example. It feels a sense of urgency to catch up. The Chinese leader Xi Jinping has been emphasizing on high quality development, which is anything from electric vehicles to quantum computing

and any sort of next generation technology and space is also part of this. Local governments in China have hit the call, so to speak, and invest money in promising commercial space companies to have them set up factories in their locales. There are a few rockets designed with reusability in mind a mind developed by commercial companies already up there in orbit. And so it's still far behind, but they are intent on catching up and building up this capacity. You mentioned that the space industry in China is driven by the government and the state.

So why are we seeing this push now from Xi Jinping into the commercial space sector? So Beijing has been proud of its space programme for many years, and the orbital resources are finite. So it's getting more crowded by the day, and the slower they get this off ground, literally, the more difficult it will be for them to compete. So there is an urgency there. And China's space industry is still very much state-driven, compete.

They're forced to be efficient, they're forced to be innovative. And perhaps it can help China develop the industry or come up with new technology faster. And Beijing sees a point in nurturing these private space companies and having them complement what is already happening in the space sector. And this race to catch up with the US, is this something that the US is concerned about? How close behind is China in terms of posing serious competition? In China, the space program has had successes in some aspects, and in some other aspects, it's further behind.

And at this point, it doesn't pose that big of a challenge. So for example, with reusable rockets, and at this point doesn't pose that big of a challenge. For example, with reusable rockets, China has yet to develop a rocket that can be reusable. They haven't successfully landed a booster yet. And where SpaceX is right now is they've been able to develop where they can reuse a booster more than 20 times. And last year, SpaceX accounted for more than half of the whole world's number of launches in total.

But in other regards, China is quite successful with not only being the first to bring back sample from the far side of the moon, but they are also planning to send human to the surface of the moon by the end of this decade. So then again, that causes some worries in the US that China could pull off a pretty symbolic space mission before the US does. Clarence, thanks so much for breaking this down for us.

Thank you. And that's it for What's News for this Wednesday morning. Additional sound in this episode was from Reuters. Today's show was produced by Kate Bulevent and Daniel Bach with supervising producer Sandra Kilhoff. And I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening. Thanks for watching!