WSJ What’s News - Markets Jump on Hopes of a New E.U. Trade Deal

Episode Date: July 24, 2025

A.M. Edition for July 24. Japan’s TOPIX hits a new record high and European markets surge on trade optimism. So are 15% tariffs the new benchmark for trade with the U.S.? The WSJ’s Kim Mackrael discusses. Plus, Tesla’s profit plunges as EV sales continue to slip, and Elon Musk urges investors to look to future revenue streams. And Microsoft says human waste could be the key to offsetting the climate impact of its AI data centers. Azhar Sukri hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Global markets are surging and so is hope for peace in the trade war. Plus, Tesla shares drop as its sales suffer their biggest fall in a decade, but Elon Musk remains upbeat. We have done what we said we were going to do. We're always on time. But we get it done. And on these years, we're sitting there with egg on their face. And how your poop could help power Microsoft to its AI-driven future.

It's Thursday, July 24th. I'm Azhar Sukri for The Wall Street Journal. Here is the AM edition of What's News, the top headlines and business stories moving your world today. Trade optimism is fuelling a global market rally, with Japan's topics hitting a new record high this morning, and European stocks surging on signs that the US and European Union are nearing a trade deal. President Trump's push to introduce a new standard for global trade is coming into sharper focus, with officials on either side of the Atlantic converging on a possible 15% tariff deal. The Journal's Kim McRaele has been

following EU trade negotiations closely and told our Kate Bulevant that it comes on the heels of a similar agreement with Japan earlier this week. We heard yesterday is increasingly the view that trade officials on both sides in the EU and the US seem to be converging on this idea that maybe an outline deal could have 15% tariffs for most EU exports to the US and interestingly for Europe that could potentially include cars, which has been a key sticking point for them. So that looks a lot better than the 30% level that Trump had threatened just quite recently. The caution I would issue here, and I think

it's important to keep in mind that that doesn't necessarily mean a deal will be done until it actually has President Trump's approval. And the Europeans actually thought they were close to a deal before, just a couple of weeks ago. And their hopes for the deal that they had been negotiating before ended up being dashed when Trump issued a letter threatening those 30% tariffs.

So some optimism, but by no means completely over the line yet. How does this potential deal compare to other deals struck so far? And what does this tell us about the new trade standard set by President Trump? Yeah, so what's being discussed right now for Europe has a lot of similarities to what we saw announced in terms of the deal with Japan. So the 15%, that's the same level for a baseline tariff for most goods and the inclusion of

cars at that level would be the same as what was agreed for Japan. This is interesting because actually there was some sense that not too long ago, perhaps the US would not be moving from its 25% tariffs on automotives because of the administration's desire to try to reshore more manufacturing. So the fact that Japan was able to get a 15% level, I think, does fuel quite a bit of optimism that there is a possibility for something below 25%. Whether or not Europe is able to get something like that as well, we'll see. So with all these different factors still being up in the air, if this deal doesn't go ahead, what can we expect the response from Europe to be?

Yeah, that's a great question. And I think it's good context actually in thinking about where we stand in terms of the talks between Europe and the US right now. Because even as we're hearing quite a bit of optimism on the European side about where talks may be headed, they're also simultaneously preparing potential countermeasures, so tariffs that they could put on the US if there's no deal and if Trump were to go ahead with the 30% tariff that was threatened. So, there will actually be a vote today from European member states who are combining two different packages that were put forward on tariffs on US goods. It covers more than 100 billion US dollars worth of American

imports to Europe. So they'll probably approve that today, but it won't take effect before August 7th. So they're kind of holding that out as something that they could use to push back if a deal isn't reached and if Trump were to raise tariffs after August 1st. That was The Journals' Kim McRaele. Kim, thanks so much. Thanks so much for having me. Columbia University has agreed to pay more than $200 million to the federal government over allegations the school violated anti-discrimination laws. In return, the Trump administration will restore nearly all the research grants it had pulled from Columbia back in March. The New York City school will also be able to access federal funding in the future. The

Trump administration's battle with Columbia was the first of a series of broadsides against research universities that depend on federal funds to operate. The White House says President Trump will visit the Federal Reserve today, a surprise move that could add more pressure on Fed Chair Jerome Powell. Trump has been a harsh critic of a multi-billion dollar renovation programme for the Fed's Washington DC headquarters. And as we've reported, Trump has repeatedly pushed Powell

to aggressively cut interest rates, criticised his performance and threatened to end his tenure early. And in a slew of earnings out this morning, Hyundai Motor reported a 22% drop in profits from a year earlier amid higher US tariffs. The carmaker's investors will be keenly watching Friday's meeting between US and Korean trade officials in Washington, hoping for a trade reprieve. Meanwhile, diverging fortunes for two key tech suppliers, STMicro, which supplies chips to Apple and Tesla, has added to months of disappointing sales as orders for chips in electric vehicles lag behind the surging demand for AI chips.

The AI boom has benefited Nvidia supplier SK Hynex though, which notched a record second quarter and plans to ramp up spending on high-performance chips. Coming up, we've got more on big tech and dig into Tesla's surprisingly gloomy results with Elon Musk's first earnings call since leaving the Trump administration. That story and more after the break. Tesla shares have slipped off hours after Elon Musk said he expects a few more bumpy quarters after the EV maker announced another steep decline in sales. Tesla's net income dropped 16% in the second quarter.

Still, Musk encouraged investors to focus their attention on future revenue streams as he promised to expand Tesla's robo-taxi service to half the country by the end of the year. Because still at the relatively early stages of autonomy. On the other hand, autonomy is most advanced and most available from a regulatory standpoint in the U.S. So, I mean, does that mean like we could have a few rough quarters? Yeah, we probably could have a few rough quarters. Journal Auto's reporter Stephen Wilmot joins me now. Stephen, let's start with the numbers here. They seem bad. The stock has reacted in turn. What's your take? The big takeaway from this report is that the gap between the promise that Elon Musk is making to investors around autonomy and the reality of

Tesla's numbers and finances is getting more extreme. The numbers were pretty bad, certainly relative to a year ago. Free cash flow has basically evaporated. So the company is investing all of the money it's making, leaving very little for shareholders, whereas a few years ago it was really churning out huge amounts of free cash flow. And that's because vehicle deliveries have declined, of course, and Elon Musk is admitting that particularly fourth quarter of this year, first quarter of next year, second quarter of next year could be really bad because not only is the operating environment already difficult, but it's about to lose incentives in the US, the $7,500 tax credit, which is disappearing as a result of President Trump's spending bill. Not just that, but also the income that Tesla has got historically, and it's been a really large part of its cash flows historically from regulatory credits, that is also under threat because of the changes that President Trump has made to the regulations around vehicle emissions. But yeah, as you rightly pointed

out, he's doing everything he can to shift the focus to a totally different business, which is autonomy, and saying that from the very, very small launch that they had in Austin, Texas in June, they're going to expand exponentially so that it starts being a more meaningful part of Tesla's business next year. I guess the extent to which investors believe him is reflected in the slightly weak share price reaction. The hype around autonomy wasn't quite able to overcome the sense that the next few quarters are not going to be great. It seems like there is a fairly radical shift in the business model overall. How are investors reacting to how that's going? Well, on the one hand, Tesla hasn't participated in the massive AI rally that

we've seen elsewhere to the same extent. But on the other hand, it has outperformed automakers quite significantly. And it's still valued totally disproportionately to GM and Ford and any other automaker, despite the fact that it's no longer in any way benefiting from EV growth in Europe, for example, and in China, it's being displaced essentially, it's losing market share to rivals, to BYD in China and to Volkswagen in Europe. But it's still valued like a tech stock essentially. So it seems almost as if it's a stock with a bit of an identity crisis. Absolutely. This quarter really demonstrates how big the gap is between its history and its future, as Elon Musk would like to portray it.

But he needs to keep Tesla's valuation anywhere near it is. He needs to keep this hope, this flame alive. And he's amazingly effective at keeping this flame alive despite having little in the way of concrete evidence for the extraordinary robo taxi future that he likes to talk about. There was very little in terms of concrete details that would back up this future. Stephen Wilmot, Wall Street Journal, Autos Reporter, thank you so much. My pleasure. Now sticking with the Mag7 and Microsoft is betting that your poop can reduce the

company's huge carbon footprint. The tech giant is investing in American startup, vaulted deep, that takes bio-waste such as sewage and paper mulch and sends it thousands of feet underground. Journal reporter Yusuf Khan says the process generates carbon credits for Microsoft by capturing the carbon that would have been released as the waste decomposes. So Microsoft is betting on a variety of technologies to try and bring down its carbon footprint while also reducing its emissions by going to clean power and things like that. So Microsoft is betting on a variety of technologies to try and bring down its carbon footprint, while also reducing its emissions by going to clean power and things like that.

Like any big tech company, they're really expanding with things like AI data centers and that really drives up your carbon footprint as the energy costs go up. And so like any tech company, or really like any company at the moment, first you have to try and reduce your emissions and then after that the question is what you do with your residual emissions That's where things like carbon removals climate scientists say can come in Microsoft is very big on this. They are by far the biggest buyer in the market So we're learning about these technologies, you know in real time these have only been developed in the last few years

We're still learning about the science how much carbon they actually trap So we're very much in the early stages and you know Microsoft has taken a very early bet on these things. I guess the phrase one person's trash is another person's treasure takes on a whole new meaning. And that's it for What's News for this Thursday morning. Today's show was produced by Daniel Bach and Kate Bullement, our supervising producer Sandra Kilhoff. I'm Azhar Sukri for The Wall Street Journal. We'll be back tonight with a new show. Until then, thanks for listening.