WSJ What’s News - India Strikes Pakistan, Escalating Kashmir Standoff

Episode Date: May 7, 2025

A.M. Edition for May 7. India says it conducted military strikes on sites in Pakistan in retaliation for a deadly militant attack on tourists in Kashmir last month. Journal South Asia bureau chief Tripti Lahiri assesses the risk of the conflict intensifying. Plus, in one of the first signs of detente since the U.S. and China announced tariffs, top Trump administration officials head to Switzerland to meet with Beijing’s economic czar, with both countries facing pressure to re-engage in trade talks. And Cardinals kick off a tense election to select a new pope. Luke Vargas hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

India hits Pakistan with military strikes, ratcheting up tensions between the nuclear-armed states. Plus, the U.S. and China schedule talks in a trade war first. My sense is that this will be about de-escalation, not about the big trade deal. But we've got to de-escalate before we can move forward. And Novo Nordisk cuts its guidance as copycat versions of Ozempic hit sales. It's Wednesday, May 7th. 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 confrontation between India and Pakistan has intensified after India carried out strikes on nine sites in Pakistan overnight, and Pakistan claimed to have shot down five Indian aircraft. The fighting came despite diplomatic efforts by the US to dial back tensions between the nuclear-armed neighbors, which have fought several wars over the disputed Kashmir region. Tripty Lahiri is The Wall Street Journal's South Asia bureau chief. Tripty India is claiming these strikes were retaliation for an incident in April when gunmen killed more than two dozen people in a popular tourist spot within Indian-administered Kashmir.

Prime Minister Narendra Modi had vowed justice and deployed troops to hunt down the assailants, which India had accused Pakistan of having links to. So I guess we expected some sort of response here. What do you make of what we've now seen? So I think we were expecting some sort of airstrikes. India said that it targeted nine different sites, some of them in Pakistan-occupied Kashmir and some of them even into Pakistan. India has said that it didn't target any Pakistan military installations and it described that as showing that India is trying to proceed with restraint and only pursue, you know,

militant groups that it believes are associated with the attack on civilians in April. Nat. How might we expect Pakistan to respond to this? So, Pakistan has been saying all along that while they would not act first, if India took any kind of action, then Pakistan would respond very, very strongly. And indeed, the Prime Minister of Pakistan has said that India's act is an act of aggression. And so, I think we should very much expect to see some kind of action from Pakistan. Pakistan has said that in fact it has even already downed about five Indian jets.

We haven't heard any confirmation of that from the Indian side. This story, Tripty, is obviously of foremost importance to India and Pakistan, though the world is certainly watching closely given that these are both nuclear states. How should we understand the risk here that this could escalate, potentially spiraling into something much more severe? I think there is a lot of concern from experts who have been observing India and Pakistan for a long time. You know, the tempers are perhaps warmer than they have been in a while. I think the biggest fear here is sort of the threat of some sort of a miscalculation. But I don't think that they actually do want to go to war.

I mean, I think India has a lot to lose from going into a conflict at this time. First of all, it would then take attention away from being that good trade partner, being that alternative to China in terms of supply chains. I think it'd be very difficult to wage a war while also doing all the economic things that India needs to do.

And there's more at play here as well, beyond India and Pakistan. You know, India is closer to the US now, while China has been kind of the main arms provider for Pakistan. So what happens here also has those larger ramifications of how those two powers are trying to balance out in Asia. Have we heard anything from Beijing on this? So to some extent, I mean, China has also been echoing similar things to what the US has said, that they're very worried about escalation and wanting the countries to de-escalate. And Iran is saying, Russia is saying, China and the UN is kind of issuing pleas to de-escalate.

But certainly India has moved forward and I think Pakistan will also then take another step. Tripty Lahiri is The Wall Street Journal's South Asia Bureau Chief. Tripty, thank you so much for the update. Thank you so much for having me. For the first time since the start of the trade war between the U.S. and China, both countries are signaling a willingness to move forward. Treasury Secretary Scott Bessent and U.S. Trade Representative Jameson Greer are heading to Switzerland tomorrow,

where they'll meet with China's vice premier over the weekend. Bilateral trade has all but dried up in recent weeks, after China responded to President Trump's 145 percent tariffs on Chinese goods with its own 125 percent retaliatory tariffs. Speaking on Fox News' The Ingram Angle, Besson said the meetings in Switzerland could be the start of de-escalation. Look, we have shared interest that this isn't sustainable, as I said before, especially on the Chinese side. And you know, 145 percent, 125 percent is the equivalent of an embargo.

We don't want to decouple what we want as fair trade." Well news of the meeting between U.S. and Chinese officials, paired with a raft of new policy easing measures from Beijing, have seen Chinese shares shoot higher this morning. To help boost the economy, the People's Bank of China said it would lower key rates, including for mortgages, and relax requirements on the amount of cash that lenders must hold in reserve. The measures were Beijing's first concrete step since President Trump ratcheted up tariffs

on Chinese goods in April. The UK and India have struck a long-awaited trade deal, ensuring the tariff-free exchange of goods within a decade. Among the terms of the agreement, most British goods to India won't be taxed, and the UK is making it easier for Indian professionals to enter the country. Journal reporter Kim McCrail in Brussels says the breakthrough comes as many other countries are doubling down on free trade as the U.S. erects new barriers. In December, the EU came to an agreement with Mercosur, which is a South American customs

union, includes four South American countries. That's a really big deal for the EU. This year, they also reached a deal with Mexico, and they're speeding up talks with a few other countries, including Indonesia, the United Arab Emirates, the Philippines, and Thailand. And Kim says those EU deals represent a two-pronged approach to trade. They don't want to lose their trade opportunities with the U.S., but at the same time, the U.S. is looking a little bit less reliable as a long-term trading partner, and maybe there

are opportunities to expand trade with other parts of the world. The EU's trade commissioner likes to bring up some numbers to try to illustrate this and often says, yes, the U.S. represents about 13 percent of trade opportunities for the EU. That's really significant and it matters a lot, but there's another 87 percent with the rest of the world. Coming up, we'll hit the rest of the day's markets news, including Novo Nordisk downgrading its guidance, and Cardinals gather at the Vatican to start the process of electing a new pope. We've got those stories and more after the break.

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In other markets news today, Danish pharma giant Novo Nordisk has downgraded its guidance amid U.S. competition from copycat versions of its blockbuster weight loss and diabetes drugs. That competition, though, should theoretically let up soon, as the U.S. Food and Drug Administration has told anyone distributing copies of Novo's Ozempic and Wigovie to stop by months end. Compounded versions of the drugs had been allowed during an earlier supply crunch. Weight Watchers has filed for bankruptcy. Founded in 1963, the health and wellness company has struggled to adjust to

the increased use of drugs for weight loss, despite offering them alongside its legacy food consumption and exercise plans. Weight Watchers intends to be taken over by the institutions that own its loans and bonds, and its stock will largely be wiped out. U.S. electric vehicle sales declined by 5 percent in April in spite of 10 percent growth in the broader car market, according to research firm Motor Intelligence. Tesla, which accounts for half of all U.S. EV sales, reported a drop of nearly 13 percent, though Kia, Hyundai, Ford, and Rivian also saw sales declines. Dealers cited multiple factors for the pullback, from cooling customer interest to fewer promotions

and discounts that had juiced sales in the past. Well, we will get more insights into the state of the auto market when used car dealer Carvana reports earnings later today. Updates are also due from Uber and Walt Disney this morning, and the Federal Reserve will announce its latest interest rate decision at 2 p.m. Eastern. It's widely expected to hold rates steady, though investors will be listening for clues on how policymakers gauge the risks of tariff-induced inflation pressure against the odds of an economic slowdown.

And heads up that we have got a bonus episode coming later today. In the next What's News in Earnings, we'll dig into the latest quarterly results from the aforementioned automotive sector, including how car companies are reacting to President Trump's tariff plans, and whether and when consumers might see higher prices passed along to them. That'll be in the feed around midday, ahead of our usual PM show tonight. And finally, Cardinals will close themselves in the Vatican's Sistine Chapel today to cast their first ballots in the conclave to choose a new pope.

Journal editor Stacey Maitrey says that after weeks of alliance building and unusually blunt campaigning, all eyes are on this year's frontrunner. So Cardinal Pietro Parolin is the secretary of state for the Vatican, which means he's basically the number two official under Pope Francis. And so therefore, you know, if you're looking for somebody who is going to maybe provide a bit of continuity with a previous pope, Padolin is your man. But the thinking among the experts here and also some of the cardinals is that if Padolin doesn't manage to get enough votes in the

early rounds, his candidacy could start to fade. And if his candidacy does fade, then we'll start to see some of the dark horse candidates emerge. Well, speaking of dark horses, Stacey says there has been an unusual amount of intrigue around this conclave rivaling a recent Oscar-nominated dramatization. Usually you don't see this level of politicking going on in the College of Cardinals because it's supposed to be, and it is, a sacred vote. The fact that one of the cardinals

who had been banned by the pope from participating in this conclave decided to show up at the beginning of the pre-conclave deliberations demanding that he be admitted into the voting session. And the only reason he wasn't allowed in is because Parolin, the front runner, produced not one but two letters from the Pope from beyond the grave reiterating the fact that

this particular cardinal was persona non grata. So there's been a lot of drama around this particular conclave. And that's it for what's news for this Wednesday morning. Today's show was produced by Kate Bulevent and Daniel Bach. Our supervising producer is Sondra Kilhoff. I'm Luke Vargas for The Wall Street Journal. And as always, thanks for listening.