WSJ What’s News - U.S. Businesses Stockpile, Weigh Price Hikes Ahead of China Tariffs

Episode Date: November 20, 2024

A.M. Edition for Nov. 20. WSJ China economics reporter Hannah Miao explains the preemptive steps companies reliant on Chinese imports are taking as they brace for a possible trade war between Washington and Beijing. Plus, Donald Trump picks Linda McMahon to lead the Education Department. And Comcast greenlights a spinoff of NBCUniversal’s cable channels, once considered among its most attractive assets. Luke Vargas hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

My parents have had a lot of time on their hands lately. At first, it was nice. Hey mom, can you drive me to soccer practice? Sure can. We're having slow cooked ribs for dinner. It was awesome. And then it became a lot. Some friends are coming over to watch a movie. Oh what are we watching? I'll make some popcorn. Thanks to Voila, they can order all our fresh favorites from Sobeez, Farmboy, and Longos online, which is super reliable. And now my parents are reliable, a little too reliable. Voila, your groceries delivered just like that.

Donald Trump unveils more picks to staff his future administration while American businesses try to get ahead of his promised China tariffs. Some of them are planning or have already ordered more of their imports from China in advance. Business owners are planning to raise prices and one of the trends that we've been seeing is this continued diversification of the supply chain. And Comcast greenlights the spin-off of its cable networks, once considered among its most attractive assets. It's Wednesday, November 20th. 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. Donald Trump says he will nominate Linda McMahon, the co-founder of World Wrestling Entertainment, to be his education secretary, putting her at the helm of a department that the president-elect has vowed to dismantle. McMahon is a former head of the Small Business Administration in Trump's first term, and has said she supports choice through charter schools, tougher accountability, and local oversight in education. Whether Trump and McMahon could actually shut down the education department, something that

would require an act of Congress and likely a supermajority in the Senate remains to be seen. Some conservatives say Trump shouldn't waste political capital doing so, and instead say he should use the agency to fight left-wing ideology in schools and universities. And Trump has named celebrity doctor Mehmet Oz to lead the Centers for Medicare and Medicaid Services, the agency that helps to shape health coverage for more than 130 million people enrolled in Medicare, Medicaid, and plans obtained through Affordable Care Act marketplaces. Oz's nomination sends mixed signals to the health care business sector.

During a 2022 Senate campaign, he pledged to crack down on policies that increased prescription drug prices for seniors. However, he's also backed private insurers having a major role in covering Americans, including via Medicare Advantage plans that have recently come under scrutiny from government watchdogs. Though there are still more than two months to go until Inauguration Day, American businesses are already preparing for a deepening trade war with China should Donald Trump act on a promise to hit Chinese goods with 60% import tariffs.

The likelihood of that seemed to grow this week with Trump's Commerce Secretary pick, Cantor Fitzgerald Chief Executive Howard Lutnick, who's described tariffs as an amazing tool that would help the next administration to pursue a made in America strategy. Journal China economics reporter Hannah Miao has been learning about the preemptive steps that businesses are taking ahead of the change in administrations. Hannah, could you remind us just how US businesses coped the first time around under Trump's tariffs on China? Hannah Yeah, so we saw in the short term that US

businesses did frontload some of their imports. So they tried to get products from China that they knew would end up being affected by the tariffs. And in the last several years, we've seen US businesses shift some of their imports from other countries, diversifying their manufacturing and sourcing. And really, a lot of businesses said that they just raise prices. That's something that economists have found that when tariffs are put on products, those end up oftentimes being mostly transferred to customers. Nat. And it sounds like we're kind of seeing at least the first part of that prior response

being replayed now, is that right? Yeah. So many economists expect that imports from China will jump in the next few months and remain strong. We already saw really strong Chinese exports growth last month, which some economists say could in part have been driven by uncertainty around election results. But of course that is really a short-term strategy to navigating tariffs. Alright then, so when it comes to the longer term, how are the businesses that you spoke to preparing?

Yeah, so we are definitely hearing that business owners are planning to raise prices. I talked to a natural stone and porcelain wholesaler who imports natural stone from China and actually has been working with the same supplier for about 20 years. In addition to importing goods from China, she also imports materials from Europe and other places. So she's really not just worried about increased tariffs on China,

but increased tariffs on all products, which is something that Trump did propose on the campaign trail. And in that case, she expects to increase her prices, which many of her competitors also will be doing. All right, so we've talked about short-term stockpiling, medium-term price hikes, but what about shifting supply chains, something the Trump administration wants to see occurring toward the U.S.? For instance, a survey this year by Bain & Company found that nearly 70% of CEOs and COOs plan to reduce dependence on China up from 55% two years ago, though where they shift to is definitely a big question.

What are you hearing? What Trump proposed on the campaign trail, he really framed it as a way to bring back manufacturing to the US, bring back jobs. And what I've been hearing from both economists and business owners is that in many cases, the manufacturing has moved on already. And it's quite unrealistic that that will really come back in a big way in the US. A lot of businesses are more likely to continue to move manufacturing away from China, but to places like Southeast Asia and Latin America as long as they can find suitable suppliers.

At the same time, China really has a level of dominance in the manufacturing world. It has very highly developed infrastructure, you know, highways, ports, the like, and they offer really low prices that are hard to compete with. What we've seen since Trump's first term is that though China's share of US imports has declined over the last several years, the overall trade surplus of China, meaning its exports over imports, and the overall trade deficit of the U.S. has only grown. So these countries are still relying on, respectively, their exports and their imports. It hasn't really

changed that dynamic on a global stage. I've been speaking to Wall Street Journal China economics reporter Hannah Miao. Hannah, always a pleasure. Thanks so much. Thanks for having me. Coming up, big cities take aim at algorithm-based rents, and AI makes further inroads in Hollywood. We've got those stories and more after the break. My parents have had a lot of time on their hands lately. At first, it was nice. Hey Mom, can you drive me to soccer practice?

Sure can. We're having slow-cooked ribs for dinner. It was awesome. And then it became a lot. Some friends are coming over to watch a movie. Oh what are we watching? I'll make some popcorn. Thanks to Voila, they can order all our fresh favorites from Sobeys, Farm Boy, and Longos online, which is super reliable. And now my parents are reliable. A little too reliable. Voila, your groceries delivered just like that. Back in the summer, the US government launched a sweeping lawsuit against rental software firm RealPage, alleging it illegally collects and crunches confidential data to help

landlords set rents, which the Justice Department says inflates prices and violates antitrust laws. But rather than wait on a case that could take years to resolve, housing markets reporter Will Parker says that local governments are already restricting how the software is used. Will Parker, Housing Markets Reporter The first two that have passed a law are San Francisco and Philadelphia. These new laws would not act as complete bans. They would prohibit the use of non-public information specifically,

and that is one of the allegations in the government's case against RealPage, is that the way that they collect certain confidential data is part of what makes it illegal. RealPage has said that they have changed their software to allow users in cities where non-public data is banned to opt out of that. But it remains to be seen how that will affect the efficacy of rent pricing through their system and how it would affect rents, if at all. In the meantime, Chicago, San Jose, San Diego and Jersey City have also drafted or discussed

similar laws, as have state legislatures in New Hampshire, New York, New Jersey, Rhode Island and Colorado. RealPage denies the allegations made in the federal suit and says its landlords aren't required to use its price recommendations. Meanwhile, Hollywood is also being reshaped by technology, with prominent investors including Andreessen Horowitz and veteran media exec Peter Chernan backing a new studio that will primarily use generative artificial intelligence to make shows and movies. The studio is called PROMIS, and journal reporter Jessica Tunkel told our tech news briefing

podcast about its plans, which include putting out new releases within three years. The way they view it is if we can get in this first and create a company that is starting from the ground up using these tools, as opposed to these traditional studios, many of which are trying to figure out how to sprinkle it into existing processes, they think they'll have an edge. We are in a new era of Hollywood.

Production is not at the levels that it once was before the COVID pandemic because the money's not there. So as a result, tools like generative AI are pretty attractive because you can create things that are much less expensive and you can do things much faster. We are exclusively reporting that Comcast is expected to announce today that it's moving forward with a plan to spin off its NBCUniversal cable TV networks once it's crown jewel. The company will separate off news and entertainment channels including MSNBC, CNBC, and E. It's

betting that NBCUniversal's remaining assets, including in broadcast TV, sports, movies, and theme parks, will be better positioned for growth and that it can absorb the loss of still-healthy profits from cable networks. Comcast shares are up in off-hours trading. And elsewhere in markets, shares of Tokyo Gas rose sharply today after Elliott Investment Management disclosed a stake in the utility. It's the latest move by an activist investor to target Japanese companies, as the government there pushes them to communicate better with investors to revitalize the market.

The UK's annual rate of inflation increased to 2.3% for October, above the Bank of England's target, driven by a rise in home energy prices. That was the largest jump in the annual rate in two years, but tallies with resurgent inflation in the US and the Eurozone over the same period. And on deck today, it's the event WSJ's Take on the Week co-host Gunjan Banerjee told us is practically the Super Bowl for investors. Nvidia is reporting earnings after the closing bell. Its stock rose nearly 5% yesterday, the latest feather in its cap in a year that's already

seen it add $2.2 trillion to its market value. And before we go, heads up, because later today we're going to be trying something new and dropping a special bonus episode into this feed this afternoon, taking a look at the main theme standing out from this season's corporate earnings reports. Again, that's ahead of tonight's PM edition of What's News. Take a listen, let us know what you think. And that's it for What's News for Wednesday morning. Today's show was produced by Kate Bulevent and Daniel Bach with supervising producer Christina Rocca, and I'm Luke Vargas for The Wall Street Journal. Thanks as always for listening. We'll see you back here soon.