WSJ What’s News - Trump Weighs 25% Tariffs on Cars, Chips, Pharmaceuticals

Episode Date: February 19, 2025

A.M. Edition for Feb. 19. The president says levies could go even higher over time but suggests countries could negotiate for lower tariffs. Plus, Brazil’s former President Jair Bolsonaro is charged with plotting a failed coup. And with the Trump administration turning up the pressure on Beijing, WSJ correspondent Brian Spegele details China’s race to become more self-sufficient. Luke Vargas 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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Register by March 15th. Additional terms apply. Learn more at wealthsimple.com slash match. President Trump floats 25% tariffs on chips, pharmaceuticals, and cars, setting up high-stakes talks with the EU's trade commissioner this week. Plus, Brazil charges former president Jair Bolsonaro

with plotting a coup, and China races to insulate its economy. As much as anything, this is about national security. This is about an insurance policy, if you will, that if relations with the West or just the world becomes more turbulent, China has what it needs at home to sustain itself. It's Wednesday, February 19. 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.

President Trump says he's considering imposing tariffs on automobiles, semiconductors and pharmaceutical pharmaceutical products telling reporters in Mar-a-Lago yesterday that he's just getting started. It'll be 25 percent and higher and it'll go very substantially higher over the course of a year. The administration has said those tariffs would likely come in after it completes a review of its trade policy on April 1st, and Trump said companies may be given time to move production to the US, thereby

avoiding the measures. He also suggested countries could negotiate for lower tariffs, comments that raise the stakes for the EU's trade commissioner, who's visiting Washington this week, and who journal European autos reporter Stephen Wilmot says faces the difficult task of sticking up for the continent's struggling auto sector. Interestingly, Trump said that the EU had cut its tariff on car shipments from the US, which is at 10%, down 2.5% matching the US tariff. There's been no official announcement and the EU denies the fact that it's cut it. The challenge is that within the WTO system, there's this provision, the most favored nation status, which means that you can't simply reduce the tariff

for one country and not do it for everyone else. So if it reduces its tariff from 10% to 2.5%, then the question is, what's it gonna do for all the other countries? And it takes away essentially its big point of leverage in its negotiations with any other trading partner, which is this 10% external tariff. Also yesterday, President Trump signed an executive order to rein in government agencies

that Congress established to operate with some independence from the White House, including the Federal Election Commission and Securities and Exchange Commission. The order would require them to submit major regulations for review by the White House Budget Office and give its chief, Russell Vogt, the power to adjust their budgets and write agency heads' performance standards and management objectives. Agencies must also align their legal positions with the president or attorney general, a requirement that may conflict with the autonomy Congress granted the likes of the Federal Trade Commission or Consumer Product Safety Commission to take positions in areas of the

law they enforce. On Capitol Hill today, President Trump's pick to run the Labor Department, former Republican Congresswoman Lori Chavez de Riemer is set to face a confirmation hearing. Journal reporter Paul Kiernan says that hearing could shed light on where the GOP is heading in its approach to workers, given that Chavez de Riemer's support cuts across traditional party lines. Her nomination by President Trump was encouraged by the Teamsters president, Sean O'Brien, who made waves during the 2024 campaign by not endorsing the Democrats as they had done

previously. As a Congresswoman, she was one of only three Republicans in the House to co-sponsor the PRO Act, the Protecting Right to Organize Act, which as its title suggests tries to make it easier for workers to form a union and fight back against employers that don't want their workplaces unionized. While union leaders and many Democrats are embracing Chavez de Riemers' pro-union positions, Trump has also taken more adversarial action since taking office, including dismissing a Democratic member of the National Labor Relations Board.

Last month, Kentucky Senator Rand Paul became the first Republican to oppose Chavez de Riemers' confirmation, saying her endorsement of the PRO Act is disqualifying. Paul sits on the Health and Labor Committee that will vote on her confirmation, and he told the press last month she may lose up to 15 Republicans on the Senate floor. Former Brazilian President Jair Bolsonaro has been charged with plotting to overturn his 2022 election laws. Brazil's Attorney General charged Bolsonaro and 33 of his right-wing allies over what police said was a plot to stop President Luis Ignacio

Lula de Silva from taking office in 2023, including plans to assassinate the leftist leader. Bolsonaro denies the accusations, saying he's the victim of a witch hunt by opposition politicians and judges. Though he has been barred from running for office until 2030, he told the journal in November that he's banking on support from the Trump administration so he can run again next year. Trump hasn't publicly responded to Bolsonaro's pleas, though people close to his administration say he's open to using tariffs to pressure Brazil. And on deck today, Apple is expected to announce a new product after CEO Tim Cook teased an

event to meet the newest member of the family. Housing Starts data for January are due at 8.30am Eastern, and the Fed will release minutes from its January policy-setting meeting at 2pm. Coming up, a few months ago we talked about how China was assembling an economic bazooka to revive growth. Well now, it's building an economic fortress to help insulate it from tensions with the West.

That story after the break. Sick of dreaming smaller? Sick of high fees eating away at your investments but just don't have the time to invest on your own? Just because you don't have time to manage your investments doesn't mean you should With President Trump turning up the heat on Beijing, Get yours. Questrade. With President Trump turning up the heat on Beijing, China is racing to become more self-sufficient, part of a decade-long effort by Chinese leader Xi Jinping to make the country's economy less reliant on products and technology from the outside world. But as journal China correspondent Brian Spiegel told our Kate Bullivant,

that strategy has come at a considerable cost. Brian, tell us about this self-sufficiency drive. How comprehensive is it? Yeah, this is an across the board effort throughout the Chinese economy to advance high-tech manufacturing and industry. There's really 10 sectors in particular China has been focused on.

They include things like electric vehicles, biotechnology, robotics. These are all categories the Chinese government has earmarked as being critical to the future of their economy. So it's hard to understate living in Beijing right now. We've seen the change has been so dramatic in recent years. I walk outside and it's full of the streets of Chinese electric vehicles, people using quite advanced Chinese cell phones. Even now at the airport they're starting to have Chinese passenger jets instead of Boeing and Airbus. Last year, you know, electric and plug-in hybrid cars, they made up 48% of car sales in China and a huge portion of that is coming from Chinese branded vehicles that wouldn't have existed, you know, even just a few years ago.

So some considerable wins here for China in this self-sufficiency drive, but I think I'm right in saying that that's not the whole picture. Yeah, that's right. It's not. The way they've managed to do this is through a state-led top-down approach to economic development and technology development. And what they've needed to do is to incentivize through state subsidies, state investment, and that is incredibly expensive. One of the estimates I looked at for this article found that as of 2019, annually China was spending something around $250 billion to advance these strategic industries, which,

mind you, that's coming as the Chinese economy has been slowing, as government revenues have been stagnating. But I think we should also just mention that there is another cost in all of this for China. It's in the form of their trade tensions with the West. So Western countries are grappling in industry after industry with a flood of Chinese exports. And one of the reasons for this is that state subsidies have supported these sorts of strategic high-end industries as a way to advance the Chinese economy. Well, demand in China for many of the products that they're producing is not sufficient to soak up all of the supply, so that leads to more exports.

So there's a certain paradox in all of this in that China is seeking to protect its national security by promoting this mass manufacturing but at the same time this sort of strategy is also serving to undermine its relations with other countries which I think is one of the things that is very very interesting to watch going forward. Definitely something we will be watching but Brian what do economists you spoke to for this story make of this strategy? Do they think it will succeed despite these high costs? So one of the questions they have is will this state-led top-down approach to technology

development, will it spur the sort of gains in productivity that the Chinese economy needs to actually make its people wealthier over the long term? And so far we're not actually seeing very much evidence that this is actually good for the economy overall. Is China making progress technologically? Absolutely. But at the same time, when you look at the macro data out of China, this has not been enough to turbocharge the Chinese economy by any means. So as much as anything, this is about national security. This is about an insurance policy, if you will, that if relations with the West or just the world becomes more turbulent, China has

what it needs at home to sustain itself. So what does this all mean for Western firms? Will they be slowly or maybe quickly pushed out of the Chinese market? As we've been reporting for a while now, Western firms across the board in China have been struggling, all sorts. On one hand, in many sectors, they're coming up against increasingly advanced domestic competition. At the same time, the sorts of products that Chinese firms really want to buy, the really advanced things like semiconductors that China's not able to produce on its own, Western companies, especially American companies are being told

by the US government, don't sell these products to China. And actually, American companies are really finding themselves in the middle being squeezed from both sides. That was Journal China correspondent Brian Spiegel. Brian, thanks so much for your time. Thank you. And that's What's News for this Wednesday morning. Before we go, heads up, we've got another bonus episode for you later today. In our next What's News and Earnings, we'll be looking at big oil and how the boom times of a few years ago are looking now that President Trump has come into office promising to bring gas prices down.

That'll be in the feed around midday, and then we'll have our usual PM show tonight. Today's show was produced by Daniel Bach and Kate Bullivant with supervising producer Christina Rocca. I'm Luke Vargas for The Wall Street Journal, and as always, thanks for listening.