WSJ What’s News - Market Turmoil Deepens as Trump Stands By Tariffs

Episode Date: April 7, 2025

A.M. Edition for April 7. Declines in global markets are snowballing into one of the worst routs in recent memory, with Hong Kong’s benchmark index recording its worst trading day in decades and the S&P 500 now poised to follow the NASDAQ into bear-market territory. The WSJ’s Peter Landers and Katy Barnato survey the damage and explain how big names on Wall Street are beginning to push back. Plus, reporter Hannah Miao breaks down how China is responding to U.S. tariffs as it stares down a major hit to its growth forecasts if it can’t find buyers for its exports. Luke Vargas hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Global markets sell off as President Trump doubles down on his tariffs. I don't want anything to go down. But sometimes you have to take medicine to fix something. Plus Beijing's tariff countermeasures raise the specter of an intensifying trade war with Washington and Wall Street speaks out warning of an economic nuclear winter as recession risks mount. It's Monday, April 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. Turmoil in global markets has snowballed into one of the worst routes in recent memory after President Trump said he'll stay the course with aggressive, economically disruptive tariffs. European shares are tumbling after Asian stock markets plunged this morning. The sell-off became particularly apparent when Japan's exchange operator briefly halted trading in response to an almost 10% drop in Nikkei futures. The index closed trading off nearly 8%, though as our Asia Finance Editor Peter Landers

told me, that wasn't the worst of it. The two worst hit markets were Hong Kong and Taiwan. The Hang Seng index in Hong Kong, which includes a lot of mainland Chinese stocks, was down more than 13 percent and it had its worst day since the Asian financial crisis in 1997. Taiwan's stock market was down 9.7 percent, which is pretty close to the maximum because shares can't go down more than 10 percent in one day on that market. Meanwhile, things are looking equally bleak back in the U.S., with futures suggesting

the S&P 500 is on course to enter bear market territory. And as Journal of Markets editor Katie Barnado explains, Wall Street is starting to speak out as the true economic effect of tariffs comes into focus. Goldman Sachs has raised the U.S.'s recession probability over the next 12 months to 45%. That's up from 35%. We've also had a range of big name investors and big names on Wall Street talking over the weekend. JP Morgan's chief executive, that's Jamie Dimon, in his annual letter to shareholders, he has raised concerns about President Trump's new tariffs. He specifically says whether or not it would cause a recession is in question, but it will slow down growth.

Bill Ackman, the billionaire investor, called specifically for a 90-day pause in the tariffs to allow for more negotiations with other countries. He has said that if the US goes ahead with all these tariffs, that could cause a self-induced economic nuclear winter. He specifies in a social media post, we are in the process of destroying confidence in our country as a trading partner, as a place to do business, and as a market to invest capital. Yet President Trump remains undeterred in his tariff stance, spending a long weekend at three of his Florida golf courses

and firing off social media posts, urging Americans to stay the course while promising a market reprieve. His administration is also defending the minimum 10 percent tariffs that have been imposed on countries around the world, with White House National Economic Council Director Kevin Hassett saying that more than 50 countries have reached out to start negotiations. Speaking to ABC News' This Week with George Stephanopoulos, Hassett rejected the idea that American consumers will face higher prices.

But if U.S. consumers are bearing the costs, there's no reason for the countries to be angry. So the fact is the countries to be angry. So the fact is the countries are angry and retaliating. And by the way, coming to the table, I got a report from the USTR last night that more than 50 countries have reached out to the president to begin a negotiation. But they're doing that because they understand that they bear a lot of the tariff. Israeli Prime Minister Benjamin Netanyahu is set to be the first world leader to hold in-person talks with Trump about the tariffs when he visits the White House today.

Meanwhile, EU trade ministers are also meeting today to discuss the bloc's response to US tariffs. Well, one country that's already responding is China. Coming up, we'll look at Beijing's sweeping retaliatory tariffs and get to the rest of the day's headlines after the break. China has come out in front as the only country to respond to U.S. tariffs immediately, announcing Friday it would put blanket tariffs of 34 percent on all U.S. goods. The bevy of retaliatory measures from Beijing includes restrictions on exports of rare earth minerals, controls on several American companies and a probe into U.S. chemicals manufacturer DuPont. Journal reporter Hannah Miao covers the Chinese economy for us.

Hannah, a pretty bold response from Beijing so far. What is the Chinese thinking around these tariffs? So the trade fight is really hitting China at a critical part of its economy. So exports last year actually accounted for nearly a third of China's GDP growth, which was the highest proportion since the late 1990s. So China's economy definitely is focused on exports as a driver of economic growth. And with the US being a major market, any continued trade barriers are really putting pressure on that part of the economy. At the same time, Trump's Liberation Day tariffs also hit many Southeast Asian countries

with pretty high levies as well. And part of the strategy for many Chinese manufacturers in the last several years has been to expand their operations to places like Vietnam, places like Cambodia, Indonesia, and those countries are also now facing high tariffs. And plus an overall global slowdown, which many economists are expecting if tariffs go this high around the world, could really hurt demand in general for Chinese goods around the world. So it's really pressuring this

part of the economy. I guess trying to find new markets presumably is going to be on the list, though the world has grown a bit wary of perceived Chinese dumping of its goods at a cheap price and harming local industry, for example. Yeah, in my conversations with Chinese manufacturers in the last few days, a few have brought up saying we are going to try to look for customers outside of the US. Some had mentioned, you know, the Middle East, Latin America. Of course, Southeast Asia is a huge trading partner.

But as you mentioned, we are seeing efforts from countries around the world to put up trade barriers to Chinese goods. There is a concern that a flood of cheap goods from China could hurt domestic industries in their countries. And of course, it's hard to find a replacement for the US market. I mean, it's such a huge component of final demand in world trade, so it's really hard to replace. So we saw in the last several days, some Wall Street research houses come out and say, we

think these increased tariffs as a result of all of these factors impacting China's export sector could lead to around one to two percentage points of decline in China's GDP growth rate for this year. Shifting over to encouraging domestic demand, we've had many segments on the show through the years about things Beijing is thinking about to try and incentivize Chinese consumption of its own products. What are we hearing there? Yeah, so there have been calls for quite some time from outside economists and government advisors to shift China's

economy more toward a consumption driven economy such as the US's economy and China has long prioritized using manufacturing and investments and infrastructure that kind of thing as a driver of growth. But this year we saw that China did identify boosting domestic consumption as its top policy priority for the year. There are efforts to increase money supply, make policy looser and encourage spending,

as well as efforts to implement policies such as subsidies for childcare and raising wages, expanding pensions, all of which would factor into expanding spending from households. There's also been a goods trade-in subsidy program that has been underway, and China is expanding that program this year, which already we have seen a correlating pick-up in retail sales of appliances and consumer goods. Pete Slauson Though what we're not hearing here, Hannah, is talk of significantly bolder stimulus action, if I'm hearing this correctly,

what we've described here on the podcast before as a bazooka stimulus. Hannah Yeah, a lot of investors have been waiting for that. It still remains to be seen, although we have seen this year more efforts to step up deficit spending in order to bolster the economy. We saw earlier this year, China's leaders set a fiscal deficit to GDP ratio target of about 4%, which is higher than last year's 3% target. And in recent commentary in places like People's Daily, which is the communist party's flagship newspaper, there's been commentary suggesting that China is willing to lower interest rates and also to increase deficit spending in an effort to boost household consumption, business

consumption. So it certainly seems like the momentum is shifting more towards stimulus. We're still awaiting more details on what exactly that will look like. And perhaps more importantly, we're waiting to see if this kind of pick up in consumer spending would be enough to make up for any hits to exports as a result of tariffs. Reporter Hannah Miao covers the Chinese economy for us out of Singapore. Hannah, thank you so much for the update. Thanks for having me.

Back in the U.S., a second child diagnosed with measles has died in Texas amid an outbreak that's sickened hundreds of people and spread to nearby states. The Texas Department of State Health Services said the school-age child was not vaccinated and didn't have any known underlying health conditions. Health Secretary Robert F. Kennedy Jr. traveled to Gaines County on Sunday, the center of the outbreak, where he was seen outside the funeral for the child. He did not attend a nearby news conference held by the U.S. Centers for Disease Control and Prevention about the outbreak, but in a post on X said that the MMR vaccine is the

most effective way to prevent the spread of measles. Health officials say two doses of the measles, mumps, and rubella vaccine is 97 percent effective in preventing the disease. And the Pentagon says that Defense Secretary Pete Hagzath will travel to Panama this week to attend a regional security conference. The visit follows President Trump's allegations of Chinese interference at the Panama Canal and threats to take back control of the vital shipping lane. Panama's government has denied Trump's claim that China exerts influence over the

canal. Following Trump's threats, a Hong Kong-based conglomerate agreed to sell its controlling stake in a subsidiary that operates ports near the canal to a consortium, including BlackRock. And that's it for What's News for this Monday morning. Today's show was produced by Daniel Bach and Kate Bulevent with supervising producer Sondra Kilhoff. I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.