WSJ What’s News - Trump Effect Starting to Show Up in Economic Data

Episode Date: July 16, 2025

A.M. Edition for July 16. New economic data is starting to reflect the president's tariff and immigration policies, which are filtering through to price tags and weighing on the job market. Plus, President Trump is expected to sign an executive order to help make private-market investments more available to 401(k) plans. And from golf to flattering text messages, WSJ’s chief European political correspondent Bojan Pancevski explains how a charm offensive by EU leaders has helped turn President Trump against Vladimir Putin. Azhar Sukri hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey, it's Luke Vargas and before we start the show today, I've got a little announcement, which is that I'm going on parental leave, or should I say I'm actually already on it, which means you won't be hearing from me for a few months. While I'm out, Azhar Sukri will be filling in for me until early winter. You're in great hands until then and I'll be back before you know it. And with that, over to the What's News team for today's episode. It's being called the Trump Effect. The president's policies are starting to show up in inflation and employment.

Plus, the Trump administration is planning on making it easier for your retirement plan to invest in private markets. And Europe's charm offensive. We look at how flattery and back-channeling with Washington could help Ukraine. Mark Rutte, the chief of NATO, he sent flattering text messages to Trump, the president of Finland. He's a great golf player. So they played this tournament in Trump's golf club in Florida. And ever since, they've been actually talking on the phone, communicating quite intensely.

It's Wednesday July 16th, 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. New data show that President Trump's policies, particularly on tariffs and immigration, are starting to be reflected in the economy. As we reported on our PM show yesterday, the June inflation report, one of the key measures that economists and investors watch closely, was up in line with analysts' expectations of a 2.7% annual increase. However, Journal Markets reporter Caitlin McCabe says that under the

surface there are signs that Trump's policies are beginning to bite. There were price bumps on what Americans pay for key imports such as furniture and clothing. Meanwhile, another closely watched indicator of economic health is the labor market. And that is starting to show some cracks too. Employment growth appears to have slowed and industries that rely heavily on workers who entered the country illegally and the foreign born labor force has shrunk significantly since March. Despite these cracks, Americans are still spending and employers are continuing to add

jobs. But Caitlin says the big question now is whether this will hold. Amid all of these tariff announcements, it's important to keep in mind that the full effect of tariffs might not be felt for a little while longer. So much of the situation remains in flux. The tariff rates that we've seen and the announcements that we've seen by no means are those final. But economists and others are actually projecting that we could see price increases feed through to households

at some point. The Yale Budget Lab, for example, projects that the resulting price increases could amount to the equivalent of a $2,800 hit in yearly household income. And you could see that show up in certain parts of the services sector. Already Tuesday's inflation report found that services inflation has softened, particularly for shelter, airfares and hotel rates were also weak. And to bring this conversation full circle, that could actually soften inflation down the road.

Canadian Prime Minister Mark Carney has said it may not be possible for Canada to escape U.S. tariffs even if the country has reached a new economic and security pact that has been under negotiation. Trump has given Canada until August 1st to reach a deal with the White House on trade, or face a higher 35% levy on imports not compliant with the USMCA trade pact. Currently, Canadian goods are subject to Trump's sectoral tariffs, including a 25% tariff on vehicles made north of the border, and a 50% levy on steel and aluminum, of which Canada is the largest foreign supplier.

Canada is also a major foreign supplier of copper, which Trump also plans to impose a 50% duty on. In Markets News, shares of Dutch chip-making equipment supplier ASML are falling after it said it could no longer guarantee growth in 2026 amid US tariff uncertainty. The stock is down more than 30% over the past 12 months. The warning from ASML comes days after Trump sent a letter to the European Union threatening 30% tariffs on imports from the bloc beginning August 1, as trade talks between Brussels and Washington continue. A group of EU trade negotiators are in Washington today. On Monday,

the bloc proposed retaliatory tariffs targeting US imports in a bid to revive talks, including on aircraft and alcohol, but said it doesn't plan any countermeasures before Trump's deadline. In the UK, inflation rose unexpectedly in June, echoing the situation in the US, where prices rose among items sensitive to Trump's tariffs, such as toys and clothes. The rise will likely keep policy makers at the Bank of England cautious, despite a limping economy stoking fears of entrenched higher inflation. And earnings season continues today, with reports expected from Bank of America, Morgan Stanley, Goldman Sachs and Johnson & Johnson, after yesterday's consumer price index print,

will also get another US inflation gauge for June, this time for producer prices. June, this time for producer prices. We're exclusively reporting that President Trump is expected to sign an executive order to help make private market investments more available to US retirement plans. That's according to people familiar with the matter, who added that the order would instruct the Labour Department and the Securities and Exchange Commission to provide guidance to employers on including investments like private assets in 401k plans. Although retirement plan sponsors can already put some investments in private funds, many companies have been concerned about being sued by employees over higher fees associated with private market investment products.

The details of the order aren't yet final and are still subject to review. Coming up, how a surprise late-night phone call on German Chancellor Friedrich Mertz's cell phone signalled a turn in US-European relations over Ukraine. That story after the break. A European charm offensive aimed at getting Trump to toughen his stance against Russia seems to be working. Earlier this week, Trump set a 50-day deadline for Putin to begin negotiating in earnest, announced a major arms package for Ukraine to be financed by NATO countries, and threatened to impose additional economic sanctions on Moscow if it didn't move to end the war. And now we report that European backchannel contacts with the Trump administration, direct

diplomacy and a multi-billion dollar deal for US weapons have helped align Washington and Europe on arming Ukraine. Boyan Pancevsky is the Journal's chief European political correspondent. Boyan, talk us through what we know about how European leaders have steered Trump's thinking on Ukraine. Well, they worked really hard in the past couple of months or so to essentially get him to acknowledge that Putin is not really interested in negotiating peace in Ukraine and is only interested in grabbing land.

This is an early bet that the European leaders made when Trump came into office in January, you know, they worked at all levels. made when Trump came into office in January. They worked at all levels. The finance minister of Germany was working with the secretary of treasury, kind of back channeling the secretary of treasury Besant emerged as actually a proponent of the sanctions and of a tougher stance towards Putin. So he seems to have worked behind the scenes to persuade President Trump to take that tougher stance.

They worked with Congress, they worked with the Senate, they worked with Marco Rubio, the Secretary of State, who's also kind of positively predisposed towards Kiev, I suppose. And at the end, I think we saw on Monday when Trump, for the first time, openly threatened Putin with a specific measure that in 50 days, he would impose these very heavy

economic measures on every country that buys energy from Russia. And he also pledged to open the floodgates for exporting American weapons to Ukraine, provided that NATO countries pay for them. You mentioned about the money there. That's absolutely crucial, I i think to this deal but also different european countries have been taking slightly different approaches have they. Yes exactly you've got mark rooted the chief of nato is a former dutch prime minister of many years and now he's head of the. Military alliance and he send flattering text messages to Trump praising his role in getting the Europeans to spend more on defense, which they did.

All of them pledged to spend around 5% of their GDP on defense, which is a major boon for Trump. The president of Finland visited Trump and he's a great golf player. So they played this tournament in Trump's golf club in Florida and apparently won the tournament in doubles. So Trump and President Stubb. So that was a great thing for Trump. He tweeted extensively about it. And ever since they've been actually talking on the phone, communicating quite intensely.

And you report that Germany's leader has also been key to all of this. So, Maez has emerged as the kind of new leader in Europe and he's also got access to much more money than his predecessor because they changed the German constitution and made themselves able to borrow from the markets in order to give Ukraine what it needs to defend itself. He made certain fortune in the private sector. He pilots his own aeroplanes. So he's a figure that I think Trump understands. Last Friday, the 11th of July, Trump was watching television apparently, and he saw some footage of this horrible destruction wrought by Russian aerial attacks on Ukraine and he picked up his

mobile phone and he just called Friedrich Mertz out of the blue and he immediately agreed to an offer that Mertz had previously made to buy American Patriot system, the famous aerial defense that Ukraine desperately needs. So that was a great success and things like that eventually led to this change of tech that we're seeing now. So for my report the White House spokeswoman said that Trump is now exporting weapons to Ukraine in order to stop the killing. That's a major major shift in rhetoric because I think a couple of months prior they were saying that weapons will bring nothing and that diplomacy is required and I think now couple of months prior, they were saying that weapons will bring nothing and that diplomacy is required.

And I think now they've come to the conclusion that Putin is not really interested in diplomacy, he's interested in winning more land. And therefore they've changed to a position that's much closer to that of the Europeans. And of course, all of that must be followed with the ginormous caveat that we don't actually know what Trump will do next. So this week, it seems like the Europeans feel fairly triumphant with the caveat that you never know what happens next. Boyan Pancevsky, thank you so much.

Thank you for having me on. And that's it for What's News this Wednesday morning. Today's show was produced by Kate Bulevend. Our supervising producer was Daniel Bach. I'm Azhar Sukri for The Wall Street Journal. We'll be back tonight with a new show. Until then, thanks for listening.