WSJ What’s News - U.S. Economic Growth Relies on Rich Americans More Than Ever

Episode Date: February 24, 2025

P.M. Edition for Feb. 24. While many Americans pulled back their spending due to inflation, the top 10% of earners increased theirs. WSJ reporter Rachel Louise Ensign explains the impact that has on the broader economy. Plus, the Trump administration proposes a plan that would charge millions of dollars in port fees to Chinese shipping companies and Chinese-built vessels. We hear from WSJ senior reporter Costas Paris about the proposal’s impact, if enacted. And why are NFL teams having trouble finding a new quality quarterback? Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

President Trump says he's working on an economic development deal with Russia. Plus, the U.S. is proposing huge port fees on Chinese shipping companies and Chinese-built vessels. And, the American economy depends more than ever on rich people. While everyone else is kind of feeling pretty pinched with prices up so much, affluent people are in a really different situation because they look at the value of their homes, their stock portfolios, and they're up like 45%.

It's Monday, February 24th. I'm Alex Osala 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. headlines and business stories that move the world today. President Trump has said he was in talks with Russian President Vladimir Putin about an economic development deal. It's the latest sign of thawing of relations between the two countries. After Russia invaded Ukraine in February 2022, the U.S. has sought to isolate Moscow through sanctions and other measures.

An economic deal with Moscow would mark a significant reversal of that policy. The White House didn't immediately respond to a request for comment about Trump's plans. Following a meeting today at the White House with French President Emmanuel Macron, Trump said that his administration is making a decisive break with Biden's approach and is on the verge of inking an agreement with Ukraine that would provide the US with access to that country's natural resources. Key to the deal, Trump said, is that US taxpayers can quote unquote recoup some of the billions spent defending the Eastern European nation. He also welcomed European involvement in securing a peace deal. I'm also pleased that President Macron agrees that the cost and burden of securing the peace must be borne by the nations of Europe, not alone by the United States.

Europe must take that central role in ensuring long-term security of Ukraine, which they want to do. which they want to do. Hackers with ties to the Chinese government breached internal communications at the Republican National Committee and had access to their internal emails for months. That's according to people familiar with the matter. The previously unreported breach is revealed in a forthcoming book by reporter Alex Eisenstadt. The Wall Street Journal viewed an excerpt of the book, which will be published next month, and verified the hack. The RNC declined to comment.

A spokesman for the Chinese embassy in Washington said that Beijing opposes and combats cyberattacks. Meanwhile, in other China-related news, the Trump administration is escalating its trade war with China with a plan to impose new shipping fees. The proposal, which was unveiled Friday by the Office of the U.S. Trade Representative, would impose millions of dollars in new fees each time one of these vessels enters a U.S. port.

The plan is in response to a U.S. probe that began under President Joe Biden in 2024. The proposal is open to public comments until a March 24th hearing, when the Trump administration will decide whether to impose the new fees. For more on this, I'm joined now by Costas Peres, who covers shipping for the Journal. Costas, tell me, just how big a deal is this? Well, it is quite a big deal for shipping. If any of this is adopted, it will certainly hit U.S. importers and exporters to put it in practical terms.

As far as container vessels are concerned, which move consumer goods, it will add about $50 to $100 to the cost of shipping a container to the United States. Would $50 to $100 on top be a real big hit to these companies? It would be a significant hit because rates are very, very volatile. They could go down to around $2,500. And it is not only the $50 to the $100 will be added. It is also delayed, which creates more expenses and more charges. The whole logistical chain is going to be rattled by this.

And in terms of the companies that are likely to be affected by this, which ones are kind of first up? It would mainly affect American importers and exporters, not so much Chinese companies. Amazon, Walmart, Home Depot, target all the big American retailers, and everything else that comes from abroad, everything from spare tires to electronics to furniture, basically

everything we have in our house or in our car or in our office. So what's the administration looking to accomplish with this proposal? The whole purpose of this was to try to stop the dominance of Chinese shipping and Chinese shipbuilding. That has happened a number of times in the past. The last time was during the Biden administration. So the Trump administration took that probe, that study, and they moved it forward. And now it looks like it's going to be more of a negotiating card in the tariff and the trade talks between the United States and China. That was WSJ senior reporter, Costas Peris. Thank you, Costas. Thank you.

Major U.S. indexes were mixed today as many technology stocks remained in a slump. Individual stocks that led declines included Palantir, Constellation Energy, and China's PDD. The Nasdaq fell about 1.2 percent and the S&P 500 dipped half a percent, while the Dow rose less than a tenth of a percent. In other news, Elizabeth Holmes, the founder of defunct blood testing company Theranos, lost her bid to overturn her conviction. Holmes had been convicted of four counts of defrauding investors in early 2022.

She's currently serving an 11-year sentence at a federal prison camp in Bryan, Texas. Her loss today narrows her legal options. Starbucks said it would lay off more than 1,000 corporate employees and not fill hundreds of open roles. CEO Brian Nicol said in a message that the cuts would remove corporate layers and would help the coffee company become more focused. Starbucks has been struggling with a string of quarterly sales declines as customers have sought out cheaper coffee or balked at long lines. The layoffs are among the largest rounds of cuts in Starbucks's history. And Apple said today it plans to spend more than $500 billion over the next four years in a mixture of new and existing initiatives that it said will expand its manufacturing footprint in the U.S. The company's announcement included increased spending on chips manufactured in the US by

Apple's partners, and a new factory in Houston that would produce servers supporting Apple Intelligence, the company's generative AI system. The announcement also said that Apple plans to hire around 20,000 people over the next four years. Coming up, why it matters that the economy these days is even more dependent on the wealthy. That's after the break. While lower and middle income families in the U.S. are cutting back on their spending because of things like inflation, the top 10% of earners, households making about $250,000

a year or more, are splurging. According to Moody's Analytics, those consumers now account for nearly half of all spending, a record in data going all the way back to 1989. Here to tell us more is Rachel Ensign, who covers wealth for The Wall Street Journal. So Rachel, what is going on with that top 10th of earners that they're able to spend so much?

Where's that money coming from? The main reasons for this are two really big factors. First is that in the pandemic, people across income groups saved a lot. And then a lot of it was also government stimulus. And people saved a lot of money across the board, but obviously there's been a lot of money across the board, but obviously there's been a lot of inflation and working class and middle class people have pretty much spent most of

that extra money, whereas well off people haven't. So they're sitting on all this extra savings and then on top of that, well off people are more likely to own homes, have stock portfolios, and those have gone up in value tremendously. So while everyone else is kind of feeling pretty pinched with prices up so much, affluent people are in a really different situation because they look at the value of their homes, their stock portfolios, and they're up like 45%.

Okay, so they have all this extra money. What are the kinds of things they're spending it on? So they're spending on all sorts of stuff. Travel is a big category. A lot of folks are like, well, I didn't get to travel for four years. Time is precious and I'm going to splurge now. And then Bank of America has data on spending. And they found that the top 5% of households spent more than 10% more

on luxury goods abroad compared to a year earlier. It sounds like inflation isn't really hitting this group much at all. Is that right? These people are often pretty highly educated. They're aware of inflation and they notice it. There was one family in the story where they know that their grocery bill is higher, but buying organic is just important to them and they can afford it. So the bottom line is inflation has had a tremendous impact on people in the bottom

80%, but the top 10%, they know that it's happened, but they're fine. In fact, they're better than they were before. Okay, so that purchasing power, as we discussed, comes from the stock market and housing. But of course, those things could change at any time. So if that happened, what would be the impact on economic growth? Right? Well, that is that is the risk, right? Because in the data analysis that we have from Moody's Analytics, what they found is that last year, the bottom 80% of earners cut spending and the top 10% increased spending by 12%.

So this group is really driving the economy. And if they start to feel less confident, it could be a big hit to economic growth in this country because they're pretty much the only ones who are living large these days. That was WSJ Reporter Rachel Ensign. Thank you, Rachel. Thank you. And finally, here's something to spice up your fantasy football group chat if it's got a little quiet in the offseason. Thursday kicks off the NFL scouting combine to showcase for new talent. It's a hopeful time as teams begin to build up their roster for the season ahead, but

some of that hope might already be starting to dim. This year, an unusually high number of NFL teams need a new quarterback, and it also just so happens that this is a year when there are simply not as many of them to be had. Teams desperate for a QB upgrade will have to sift through a draft class that's considered one of the weakest in years, and consider free agents who are mostly guys who flopped on other teams or are old enough that they're merely band-aids. For football fans, that's something to keep an eye on ahead of the draft in April. And that's what's news for this Monday afternoon. Today's show was produced by Pierre Bienimé and Anthony Bansi with supervising producer

Michael Cosmitis. I'm Alex Osala for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.