WSJ What’s News - Markets Shrug Off Trump’s Latest Tariff Threats

Episode Date: November 26, 2024

P.M. Edition for Nov. 26. Israel approves a cease-fire with Hezbollah in Lebanon. WSJ chief economics commentator Greg Ip makes sense of President-elect Donald Trump’s threat to hit trade allies Canada and Mexico with steep tariffs. Pharma reporter Peter Loftus explains why a highly anticipated obesity-drug candidate disappointed investors. And retail reporter Sarah Nassauer discusses Walmart’s reversal on its DEI initiatives. Tracie Hunte hosts.  Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

You let him try violin because you love him. And if you love him that much, love him enough to make sure he's buckled up and in the back seat. Find out more at nhtsa.gov slash the right seat. Brought to you by the National Highway Traffic Safety Administration and the Ad Council. What President-elect Donald Trump's threats of tariffs against Mexico and Canada say about how he'll approach the economy. What it tells you, I believe, is that notwithstanding the effort to reassure Wall Street and the establishment with people like Scott Besson at Treasury, it is still Trump calling the

shots. And the results from a closely watched obesity drug study are in. And investors don't like what they see. Plus, why Walmart is rolling back its DEI efforts. It's Tuesday, November 26. I'm Tracy Hunt 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.

But before we get to those stories, Israel has approved a ceasefire with Hezbollah that would end more than a year of fighting in Lebanon. In a televised address, Israeli Prime Minister Benjamin Netanyahu said ending the fight would give the country's military time to rest and rearm so it could focus on the threat from Iran and isolate Hamas. Lebanese officials say the agreement is expected to go into effect on Wednesday. The announcement came after a day of heavy bombardment of Beirut, while Israeli ground forces advance deeper into Lebanese territory.

President-elect Donald Trump's threat to impose 25 percent tariffs on imports from Mexico and Canada on his first day in office caused the Canadian dollar and the Mexican peso to move lower against the US dollar today. Meanwhile, shares of global automakers declined as traders considered what impact tariffs might have on supply chains. Investors, though, are largely taking a wait-and-see approach to Trump's trade policy, betting that he won't come close to following through on all his threats. The S&P 500 and the Dow notched fresh records, and the Nasdaq gained 0.6%. Trump's promise of tariffs came just days after he nominated hedge fund manager Scott Besant to be Treasury Secretary. Besant has a reputation as a deficit hawk, but he's a late convert to tariffs.

Here to explain all this is Greg Ip, the Wall Street Journal's chief economic commentator. So Greg, what does this say about Trump's overall approach to the economy? When Trump nominated Scott Besant to be the Treasury Secretary, people said, oh, that's good. Besant's a head fund manager. He's very smart about markets. He has good ideas about bringing the deficit down. And at least to date, what he said about tariffs, that he thinks they're only a negotiating

ploy. So you actually saw the markets rally somewhat on Monday. But then Trump comes along with this announcement out of the blue that he's going to hit Mexico and Canada and then also China with tariffs. That's forced to rethink. What it tells you, I believe, is that notwithstanding the effort to reassure Wall Street and the establishment with people like Scott Bessinet, Treasury, it is still Trump calling the shots and Trump loves tariffs and he is a protectionist at heart.

This announcement suggests that Trump is eager to reopen the 2018 United States-Mexico-Canada agreement or the USMCA. Wouldn't these tariffs violate the USMCA? You're absolutely right. The USMCA was a successor agreement to the North American Free Trade Agreement or NAFTA. And under both of those agreements, products moved from Canada to the United States and Mexico and back, tariff free. So imposing these 25% tariffs would be a clear violation of that agreement.

But it appears from the way that Trump's been talking for the last year, that even though he negotiated that agreement, he's not very happy with it. He doesn't like that a lot of cheap Mexican products are coming in in greater volumes. He has talked, for example, about hitting Mexican car imports with very high tariffs in order to stem that inflow, which he thinks is bad for American jobs. And he believes that Mexico is simply not doing enough to halt the flow of illicit fentanyl in the United States, and he would like to see Mexico do more to stem the flow of illegal immigrants

across the US southern border. Now, it's an open question whether fentanyl or legal immigration can really be part of the US MCA. But I think what Trump is basically doing is seizing upon the renegotiation of that treaty as a leverage point to achieve a lot of different things. Are Trump's tariff threats a sign that a trade war with American rivals and allies much more

likely now? A lot of folks were expecting that he would wait until he was actually president and then would enter a series of negotiations and he would start low with tariffs, not high. But that's not what we're getting. He's not even the president yet and he's starting with a very high bid on tariffs. But the thing we don't know is whether these are still a negotiating tactic. It seems not hard to believe that between now and when he takes office, Canada and Mexico will undertake certain actions that will please Trump and allow him to claim victory and set

aside these threats. It wouldn't be the first time that Trump has dangled the threat of tariffs only to essentially set them aside saying he had gotten what he wanted. But there were many tariff threats in the past that he actually did carry through on, most notably on China. How much leeway will Trump's economic appointees

have in setting policies or curbing Trump's impulses on tariffs? What we saw this week is that ultimately Trump is the policy decider here. Now on balance, a mixture of voices inside the policy room is probably still going to moderate the overall thrust of policy. Besant has a reputation for being concerned about the deficit, so he'll probably team up with Elon Musk to look for spending cuts to bring the deficit down. But Trump's also laid out a bunch of tax cuts that he wants. It may be difficult for Besant and other people in his team to achieve the kind of deficit reduction

that they want. The other thing to keep in mind is that Trump hasn't finished filling out his economic team yet. We don't yet know who will have as the director of his National Economic Council or as his trade ambassador. And if he chooses more protectionist individuals or people with more outside the mainstream economic ideas for those positions, that would once again force everybody, I think, reconsider and recalibrate exactly just how populist a president they have now. Greg Ip is The Wall Street Journal's chief economic commentator. Thank you so much, Greg. Thanks for having me. Coming up, Walmart does a 180 on its DEI initiatives.

That and more after the break. A highly anticipated obesity drug candidate from Biotech Amgen helped patients shed a significant amount of weight in a mid-stage study, but fell short of the loftier expectations of some investors. Amgen Today said that subjects taking its drug candidate Maritide

lost 20% of their body weight compared with those who received placebos. But WSJ Pharma reporter Peter Loftus said analysts had expected more for a drug that some thought could break the duopoly held by Eli Lilly and Novo Nordisk. A lot of investors were expecting or hoping that the magnitude of the weight loss could have been much bigger and therefore it could be a more viable competitor. The other issues that some people had with it were whether the drug is tolerable for

patients. Something like 11% of the people dropped out of the study or stopped taking the drug because they were having a tough time tolerating it. And as we told you this morning, the Biden administration is proposing a plan for Medicare and Medicaid to pay for these new drugs. With price tags of more than a thousand dollars a month, the plan could add up to tens of billions of dollars, and it would have to be finalized by the Trump administration.

But Trump's nominee to run the Department of Health and Human Services, Robert F. Kennedy Jr., and his pick to run Medicare, Dr. Mehmet Oz, have differing opinions on the popular drugs. Here's Peter again. Robert Kennedy, he has expressed skepticism about these drugs, essentially saying that a better way to deal with obesity is just eating healthier. Whereas Mehmet Oz has said that obesity is a real condition, it shouldn't be stigmatized, it's not easily dealt with by diet and exercise alone, and that these could be a real option for people. So it remains to be seen how this is gonna play out.

In the wake of George Floyd's killing in 2020, many US companies vowed to support diversity, equity and inclusion or DEI efforts. Chief among them was Walmart, whose CEO Doug McMillan spoke publicly about these issues. Walmart now says it's ending some of its diversity programs. It'll wind down the Center for Racial Equity, a nonprofit it funded with $100 million for five years in 2020, and programs that assist suppliers that are majority owned by women,

minorities, veterans, or members of the LGBTQ community. The moves make Walmart the latest big company to shift gears under pressure from a conservative activist following in the steps of Harley Davidson and tractor maker Deere. Sarah Nassauer writes about large retailers for the Wall Street Journal. Sarah, why are all these companies rolling back their DEI programs now? Basically, we've hit a point where it's really been years of companies backtracking on a lot of their DEI LGBTQ corporate activities under pressure from conservative activists. And now in the wake of the Trump election, you see renewed vigor around some of these efforts and companies afraid of backlash from customers and their workers who are against some of these policies. One of these anti-DEI activists, Robbie Starbuck,

he is taking credit for Walmart ending some of its diversity efforts. Do you know what other companies he plans to target? He's talked about in his videos about targeting other companies. He's name checked several. We do know that he has had success with other smaller than Walmart companies, tractor supply, manufacturing firms like Ford and Deere, getting them to publicly sort of disavow some of the things that they have done

in the past. And he's pretty strategic about it. I talked to him and he said he waited to target Walmart knowing it was a big fish until he had some experience with these other companies and also ahead of the Black Friday shopping season. This is a really important time for retailers and he thought they would be more perceptive to a campaign like his now. Does this set a precedent for other big companies? It definitely sets a precedent because it's Walmart. Walmart is the largest retailer in the country by revenue and the country's largest private employer.

So they have a bit of a outsized role when it comes to setting the tone on labor practices or even political movements. So I do think that this marks a real inflection point for how companies are handling this issue. That was our reporter Sarah Nassauer. And that's what's news for this Tuesday afternoon. Today's show was produced by Anthony Bansi with supervising producer Matthew Walls. I'm Tracy Hunt for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.