WSJ What’s News - President Trump Threatens New Tariffs on the EU and Smartphones

Episode Date: May 23, 2025

P.M. Edition for May 23. In posts on social media and statements from the Oval Office today, President Trump threatened a 50% tariff on imported goods from the European Union, as well as new duties on iPhones and other smartphones made overseas. WSJ reporter Gavin Bade joins to discuss how the EU might negotiate with the president, and whether Apple can make iPhones in the U.S. Plus, a weak bond auction earlier this week pushed some long-term bond yields higher. WSJ chief economics commentator Greg Ip digs into what’s behind this recent bond turmoil. And a judge temporarily blocked the government’s move to prevent Harvard from enrolling international students. Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

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President Trump threatens 50 percent tariffs on the European Union. You're seeing a number of things build up here. It's hard to know which one is the straw that broke the camel's back, but there's a lot of ongoing frustrations from the U.S. side. Plus, what's behind the recent turmoil around U.S. bonds? And a federal judge halts the government's move to prevent Harvard from enrolling international students. It's Friday, May 23rd.

I'm Alex Osela 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. President Trump fired new salvos in the global trade war today. He threatened a 50 percent tariff on imported goods from the European Union, as well as new duties on iPhones made overseas. In comments at the Oval Office this afternoon, the president said he's not looking for a tariff deal with the EU. I'm not looking for a deal. I mean, we've set the deal. It's at 50 percent. But again,

there is no tariff if they build that plant here. I'm joined now by Gavin Bade, who covers trade for the Journal. Gavin, where are the president's comments about the EU coming from? Are they out of the blue here? Well, certainly for the EU, they feel out of the blue for them. The European diplomats really felt like they were making progress in these trade talks. Certainly, they did not go to lunch on Friday expecting to see this sort of online missive from the president. But when you ask the administration, the frustrations are kind of multifold here.

We've heard Trump talk often about tariffs and non-trade barriers, about European union lawsuits against companies like Google, something he brought up in the Oval Office today again. And then I think there are some unstated frustrations as well, especially when it comes to how they want the EU to approach China. And then you just see that this is a little bit of art of the deal stuff, right? Like Trump is dissatisfied with the pace of these negotiations. He and his team certainly don't like to be lectured by EU officials like we saw this week at the G7. And so I think you're seeing a number of things build up here. There's a lot of ongoing frustrations

from the US side. Have the EU responded to any of this? Not publicly yet, but I think there's going to be a redoubling of an effort to get to a deal here. Treasury Secretary Scott Besson said on Fox this morning, we want to light a fire under the EU. The president is dissatisfied with the pace here. And so far from blowing up the negotiations, I think the two sides are still going to come

back to the table. And maybe this just is the push they need to get some of the more intractable issues solved here. Let's shift now to talk a bit about Apple. So Trump was threatening a tariff of at least 25% on iPhones made overseas. During his comments in the Oval Office this afternoon, he said that could be expanded to other phone makers like Samsung. But what is going on here with Apple and Trump? Tim Cook is probably one of Trump's closest corporate contacts.

However, a 25% tariff is going to be felt by consumers of phones in the United States. We're just not going to see another economy or Apple eat that entire tariff. It's going to be significant. But I don't think they can do soup to nuts, entire iPhone in the United States for anywhere near the price point. It's all about the industrial ecosystem. We simply don't have that here yet. So there's going to be significant challenges to building anywhere near the amount of iPhones

that are demanded by U.S. consumers in this country. That was WSJ reporter Gavin Bade. Thank you, Gavin. Thanks, Alex. President Trump's threats against the EU and Apple sent U.S. stocks lower, with the iPhone maker's stock ending the day down 3%. Major indexes closed lower today. The Dow dipped about 0.6%, the S&P 500 dropped roughly 0.7 percent, and the NASDAQ fell 1 percent.

We're exclusively reporting that Apple has recently stepped up efforts to fight Texas legislation that would require the iPhone maker to verify the ages of device users. Apple CEO Tim Cook called Texas Governor Greg Abbott last week to ask for changes to the legislation or, failing that, for a veto. That's according to people familiar with the call. Abbott has yet to say whether he will sign the bill, though it passed the Texas legislature with veto-proof majorities. An Apple spokesman said that the company wants to strengthen online safety for children, but that the Texas bill threatens user privacy. Ahead of NVIDIA's earnings next week, the chipmaker and its competitors have been striking

deals with sovereign nations. For example, Saudi Arabia recently agreed to buy large amounts of NVIDIA's AI chips for local infrastructure projects, and NVIDIA has described India as a major customer. But though it can be very lucrative to cut deals like these, they can also be polarizing. WSJ heard on the street columnist Dan Gallagher told our tech news briefing podcast about the challenges that these kinds of deals can present. I don't think there's a business right now that's more politicized than chips, especially AI chips. These AI chips are front and center in the trade war with China between the U.S. and China.

The Trump administration and the Biden administration before that really wanted to make sure China did not get its hands on the latest AI chips to get more competitive with the US. And so that governs everything Nvidia can do in terms of how it can sell its chips into other countries. And it's been a back and forth. The Trump administration did recently kill a rule that the Biden administration had set up where it was going to be a lot harder for Nvidia to sell chips into other countries, even like friendly ones to the U S there's going to be all these different rules. Those were scrapped, but the signs now are that Nvidia's ability to sell into

other countries might hinge on bigger picture stuff. Are these countries striking trade deals with us? Is there a concern that chips sold to one country could eventually find their way to China? So it's just going to be a much more complicated business than Nvidia just getting the country to sign on the dotted line to make some sales. There's going to be a lot of politics involved. For more on this, listen to Tech News Briefing next week. Coming up, what the recent upheaval with bonds says about long-term bets on the U.S. government. That's after the break. A weak auction for 20-year bonds on Wednesday exacerbated worries about rising deficits in Washington and drove sharp declines for stocks and bonds.

The 30-year treasury bond yield reached its highest level since 2023, though it's come down a bit since. For more on what the recent bond turmoil means for the broader market, I'm joined by WSJ's Chief Economics commentator, Greg Ip. So Greg, it doesn't seem like this upheaval with bonds is a sign of widespread panic per se, but what does it mean? It's very important to look at the individual behavior inside the bond market to kind of understand the message that's going on.

When bond yields go up, that's essentially a very long-term interest rate, and it's telling you what the market thinks the cost of long-term borrowing should be. Usually, movements in bond yields are driven by what they think the Federal Reserve is going to do with short-term interest rates. But if that was what was going on right now, we should see the biggest movement in two-year bond yields. Those are the most sensitive to what people think the Fed will do, but they've barely moved. Instead, we've seen 10-year yields go up and we've seen 30-year yields go up a lot. So what's going on right now seems to be that investors are becoming specifically quite nervous or uneasy about owning US Treasury bonds and are asking for higher returns associated with the risk. The most obvious reason they're nervous is because the US is already running very large

budget deficits on the order of 6% of GDP. Republicans in Congress and President Trump are about to pass a budget package which will not only maintain those deficits but probably see them rise to over 7% of GDP as far as the eye can see. That basically means that we are going to be selling a lot of bonds to people and we need them to buy those bonds and they're asking for a higher return in order to do that. Where does inflation fit in with this? You did talk about the Fed but are there concerns about inflation baked into this?

So the overall environment you have out there is one where inflation used to be very benign, that kept interest rates low, and it was an easy time for governments to borrow. Now, because the inflation environment is no longer benign and central banks are on the case, that alone makes it a more difficult time for people to borrow money for very long term, including our government. So you mix the inflation picture with the deficit picture and you have a bunch of reasons why people might be more nervous than they used to be about lending money for very long term to the US Treasury. Right now the dollar is the preferred currency for central banks around the world to hold.

Is there a threat here to the dollar's reserve currency status? So first of all, the most important reason why the dollar is probably going to stay the world's reserve currency for a while is that there's really not an alternative. But that doesn't mean people aren't going to look for alternatives to the dollar. They will look for alternatives. They seem to be buying a lot of gold. They're buying a lot of Bitcoin. And I don't think a reserve currency status is the sort of thing a country loses overnight,

but it happens bit by bit. And you do see some evidence that's happening now. The fact that the dollar fell instead of going up as bond yields went up is very unusual. And it does suggest that investors as a whole are trying to reduce their holdings of US dollar assets. So what I'm trying to say is that no, the reserve currency status ain't going away tomorrow or next year, but you can see that bit by bit is probably going to be something

that the US can't take for granted the way it used to. That was WSJ Chief Economics Commentator, Greg Ip. Thank you, Greg. All right, thanks very much for having me. And finally, a federal judge has temporarily blocked the government's bid to prevent Harvard University from enrolling international students. The judge granted the university a temporary restraining order, giving it a reprieve from the Trump administration's revocation of its ability to enroll foreign students.

The ruling doesn't permanently resolve the matter, but allows Harvard to continue enrolling foreign students for now. A White House spokesperson objected to the judges blocking the government's revocation. Earlier today, Harvard sued the Trump administration over its move to block international student enrollment. And that's What's News for this week. Tomorrow you can look out for our weekly Markets Wrap-Up, What's News in Markets. We'll take the rest of the weekend off from Memorial Day in the U.S. and we'll be back to our normal schedule Tuesday morning.

Today's show was produced by Pierre Bienimé with supervising producer Michael Kazmides. Michael Laval wrote our theme music. Aisha El-Muslim is our development producer. Scott Salloway and Chris Inslee are our deputy editors, and Filana Patterson is the Wall Street Journal's head of news audio. I'm Alex Osola, thanks for listening.