WSJ What’s News - Why Has the Tariff Effect Been So Mild?

Episode Date: August 6, 2025

P.M. Edition for Aug. 6. President Trump’s tariffs have so far only caused minor disruptions. WSJ economics reporter Jeanne Whalen joins to discuss why we haven’t seen an economic earthquake. Plus, President Trump plans to meet with Russian President Vladimir Putin to discuss ending the war in Ukraine. And American carmakers are focusing less on electric vehicles and more on gas-guzzling vehicles like pickups and SUVs. We hear from Sharon Terlep, who covers the auto industry for the Journal, about what’s changed. 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 plans to meet with President Putin to discuss ending the war in Ukraine. Plus, why have the U.S. tariffs effects been so mild so far? And for Detroit, gas guzzlers reign supreme once again. They're talking about a world in which they can shift some of these huge investments that they've made in EBs and putting some of that money into gas-powered vehicles, V8s or SUVs or pickup trucks. It's Wednesday, August 6th. I'm Alex O'Sullough 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. We begin this evening with the latest tariff news. President Trump has signed an executive order imposing an additional 25% tariff on imports from India. That's in response to the country's continued purchases of Russian oil. oil, a practice that India has repeatedly defended. India condemned the new tariffs, calling them, quote, unfair, unjustified, and unreasonable. The latest levy, which would go into effect in 21 days, comes on top of the 25 percent tariff on Indian imports Trump announced last week. India now faces combined U.S. tariffs of 50 percent. That'll bring it to the same level as the punitive tariffs

imposed on Brazil, which take effect today. Last week, President Trump signed an executive order citing legal action against former Brazilian President Jair Bolsonaro and U.S. tech firms as justification for the levies. Tariffs on scores of other nations go into effect at 12.01 a.m. tomorrow. When President Trump first announced his tariffs, he and his supporters claimed that they would slash the trade deficit and bring manufacturing back to the U.S. in droves. Critics said that inflation would skyrocket and that consumers would be faced with shortages. Neither extreme has happened, at least not so far. WSJ economics reporter Gene Waylon joins me now. Gene, what impacts our tariffs actually having? What we've seen is inflation has ticked up a little

bit because of the tariffs, but it hasn't taken off uncontrollably, as some feared. Store shelves are not empty, as some also predicted they would be. And then also, we haven't seen a rush of reshoring yet, which is one thing Trump promised. We haven't seen. We haven't seen, an enormous drop in our trade deficit. We did see a drop in June, but that was maybe more for a technical reason rather than a sign of a long-term downward trend in the trade deficit. One of the main things that we have seen happen is that the government is collecting a lot more money in tariff revenue, and that is something Trump said would happen. It won't, though, be enough to replace income taxes in the way that Trump has suggested that it might.

Many U.S. companies are actually absorbing the extra tariff costs because they don't want to lose customers by hiking their prices unless they absolutely have to. So is that one of the reasons why we haven't seen such dramatic changes? Absolutely. Yeah, that is probably the main reason. What we've seen so far is that inflation in June rose 2.7% from a year earlier. And that was faster than the rate in May. but what we have seen is U.S. companies that import goods and have to pay the tariffs are largely absorbing those costs for now and not passing them along yet to customers. That's partly because they stocked up a lot before tariffs got here, so they didn't really need to raise prices right

away, and partly because they just don't want to raise prices until they absolutely have to. Most economists believe eventually U.S. companies will be forced to pass more of the tariff costs along to consumers. It's really just a matter of time before they do that. one way or another. So everyone expects inflation to continue rising due to the tariffs, but perhaps not as sharply or for such a long period as maybe it was originally predicted. That was Wall Street Journal economics reporter Gene Waylon. Thanks so much, Gene. Sure thing. Major U.S. stock indexes edged higher today. The Dow closed up about 0.2%. The S&P 500 was up about 0.7%, and the NASDAQ, about 1.2%.

Apple will pledge to invest another $100 billion in U.S. operations at a White House event today, adding to the tech industry's efforts to meet President Trump's request to expand domestic manufacturing. The investment pledge adds to a $500 billion four-year commitment Apple made in February that, according to analysts, repackaged much of Apple's existing spending plans in the U.S. a spokeswoman called the announcement a win for the U.S. manufacturing industry. An Apple spokesman declined to comment. President Trump will meet soon with Russian President Vladimir Putin after an offer Russia made during a trip to Moscow by special envoy Steve Whitkoff.

That's according to a senior administration official. The official added that Trump is open to meeting with both his Russian counterpart and Ukrainian President Volodymyr Zelensky. It isn't clear when or where the meeting would take place. Coming up, how American car makers rediscovered their love for giant gas guzzlers. That's after the break. Workday knows there are two kinds of people in business, backward thinkers and forward thinkers.

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will allow the auto industry to keep selling big, gas-powered vehicles for the foreseeable future. Detroit is thrilled. U.S. automakers are tearing up the playbooks they created when EVs were in high demand. Sharon Turlop covers the auto industry for the journal and is here to tell us more. Sharon, how did we get here? Certainly, there has been a much slower pickup in demand for EVs,

and that has something that's been happening over more than the last year. But the very dramatic and very quick shift has been the dismantling of these regulations, some of which have been in effect for years or decades, that really have underpins both automakers' plans to build electric vehicles and a shift toward smaller vehicles, maybe limiting bigger SUVs. And so that's been a very quick shift in a matter of recent months. Okay, whole new world for these automakers. How are they actually responding?

What are they doing? They're talking about a world in which they can shift some of these huge investments that they've made in EVs, and they are still making EVVs. but this is all a matter of proportion. And putting some of that money into gas-powered vehicles, whether it be V8s or SUVs or pickup trucks or could be smaller vehicles as well, but the real profit is in these very big trucks.

There certainly is the question of how many of these can you sell. It's a really competitive segment. The thing with these cars are they are so much more profitable. You don't need to sell as many of them as you do the sedan or a very small SUV to make a good amount of money. So what does this mean really for these companies' bottom line in the short term? More profitability, they say. Ford's CEO, Jim Farley, said this is a multi-billion-dollar opportunity for the company. The bigger questions are long-term, and what does this mean long-term?

Okay, these are more profitable vehicles, but they're also faced with these tariffs. So all told, what is the impact going to be altogether on their balance sheet? The automakers have been taking multi-billion-dollar hits on tariffs. Different automakers are affected differently. And the Trump administration has made this point also that as much as tariffs are costing the industry deregulation financially is helping it. Does this mean that these companies are really going to be shifting away from EVs altogether for their sort of long-term picture? Certainly the companies are saying clearly we're still working on EVs. GM's putting out new models.

Ford next week on Monday is announcing its EV strategy. So the idea that they're just going to stop building EVs is not that likely. there's also the question of markets outside of the U.S. EVs are growing very fast elsewhere. China's BYD has been on a huge role. So it's a line that they're walking, which is serving a U.S. market that increasingly isn't looking like markets elsewhere in the world. That was W.S.J reporter Sharon Turlip.

Thanks so much, Sharon. Thank you. The Trump administration is ramping up its attacks on public universities, setting its Sites on the University of California, one of the nation's biggest public school systems. UC President James Milliken said today that the university agreed to talks with the administration to resolve allegations that University of California, Los Angeles, fostered anti-Semitism during campus protests in spring 2024. At risk is $584 million in UCLA's federal research funds, which Milliken said that the Trump administration

suspended following a letter sent by the Justice Department last week. The U.C. President said that these cuts do nothing to address anti-Semitism. The Justice Department said it is still investigating whether other U.C. campuses, which include Berkeley, U.C. Irvine, and U.C. San Diego, violated civil rights laws. Two more public universities, the University of Virginia and George Mason University, are also under pressure from the Trump administration. President Trump's firing of the Bureau of Labor Statistics head on Friday has sparked worries among economists about the reliability of its data. That matters because these numbers don't just provide a snap reading of the health of the U.S. economy. WS.J reporter Heather Gillers says that the BLS data play a crucial role in Americans' financial lives.

The Bureau of Labor Statistics is a federal agency that collects all kinds of data, but one of its most famous outputs is the consumer price index. They collect all kinds of information about prices of everything from eggs to vegetables to car insurance in order to determine the rate of inflation, which varies considerably over time. So the idea that these numbers are totally nonpartisan means that we can agree on and trust all other calculations based on them. The $2.1 trillion market for inflation protected bonds, treasury inflation protected securities. And the IRS relies on Bureau of Labor Statistics inflation data to determine how much you can contribute to your 401k, how much you can

contribute to your health savings account. Medicare, the government health insurance program for elderly people, uses inflation data from the BLS to decide how much you need to pay to be on it. Food stamps is another program that relies on the Bureau of Labor Statistics Data. And finally, a suspect is in custody after shooting and injuring five soldiers at the U.S. Army's Fort Stewart base in Georgia. A defense department official said that the suspect is a soldier. Fort Stewart's senior commander said that all the injured are in stable condition and are expected to recover. The motivations of the shooter identified as a 28-year-old sergeant

weren't yet known. And that's what's news for this Wednesday afternoon. In case you missed it, we've got a bonus episode out today. In What's News and earnings, we're looking at the food business and the future of how we eat. We dig into how food companies are balancing inflation and tariffs on one hand and the need to appeal to budget conscious buyers on the other. You'll find it in your What's News feed just before this podcast. Today's show was produced by Pierre Bienname, with supervising producer Michael Cosmites. I'm Alex Oscella for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.