Beijing Retaliates Against Trump Tariffs

Summary

WSJ What’s News: Beijing Retaliates Against Trump Tariffs Episode Release Date: February 4, 2025

Introduction In this episode of WSJ What’s News, hosted by Luke Vargas from The Wall Street Journal, the focus is primarily on the escalating trade tensions between the United States and China, President Trump's administration policies, and significant international developments impacting global markets. The discussion also touches upon the intriguing world of sports investing, providing a comprehensive overview for listeners seeking to stay informed on pivotal economic and political events.

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1. Beijing's Retaliatory Tariffs Against U.S. Tariffs

The episode opens with China's strong response to President Trump's recent imposition of a 10% tariff on Chinese goods. In retaliation, China announced a variety of new tariffs targeting American imports, signaling a significant escalation in trade tensions.

Key Points:

• Tariff Details: China imposed a 15% tariff on U.S. coal and liquefied natural gas, alongside increased levies on crude oil, agricultural machinery, and certain vehicles.
• Export Controls: China added several critical minerals and metal-based products to its export control list.
• Antitrust Actions: The Chinese antitrust regulator initiated an investigation into Google for potential antitrust violations, highlighting increased regulatory scrutiny despite Google's limited presence in China since 2010.

Notable Quote:

"China hits back at the US with tariffs Though with investors not yet panicking about President Trump's trade policies..." – Luke Vargas [00:45]

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2. Market Reactions and Analysis with James McIntosh

James McIntosh, the Wall Street Journal’s senior Markets columnist, provides insightful analysis on how markets are interpreting the ongoing tariff saga. He delves into whether President Trump's strategy is primarily aimed at extracting concessions or if it's part of a larger, more complex strategy.

Key Points:

• Investor Sentiment: McIntosh observes that markets did not react strongly to the tariffs on China, suggesting that investors might view Trump's tariff threats as leverage for concessions rather than immediate economic disruption.
• Comparative Impact: The tariffs on China are deemed less severe compared to those on Mexico and Canada. For instance, a hypothetical 25% tariff on Mexico and Canada would have been devastating for closely integrated supply chains within North America.
• Economic Coping Mechanisms: China’s tariffs are manageable, potentially leading to price increases and a depreciation of the renminbi, but are less likely to cause immediate consumer price shocks or significant bureaucratic shortages.

Notable Quotes:

"Is he just watching the markets? In which case he'll be encouraged to go a lot further by the fact the markets didn't freak out." – James McIntosh [00:45]

"These are all things that are much easier to cope with than 25% on Mexico and Canada..." – James McIntosh [02:41]

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3. Potential Escalation of Trade Tensions

The conversation shifts to the broader implications of Trump’s tariff strategy and its potential future trajectory with other major economies like the European Union and the UK.

Key Points:

• Trump’s Strategy: McIntosh questions whether Trump is engaging in a calculated, multi-dimensional strategy ("three-dimensional chess") or reacting impulsively based on market reactions ("playing Snap").
• Future Targets: Europe presents a more challenging opponent for tariff negotiations compared to Mexico and Canada, with less flexibility for face-saving deals.
• Market Feedback Loop: There's a possibility that limited market reactions may embolden Trump to implement further tariffs, potentially leading to more significant turmoil if markets respond negatively in the future.

Notable Quote:

"If he's playing Snap and doing this stuff by watching what the S and P does, then the fact that you didn't get these big falls might encourage him to do more next time..." – James McIntosh [04:47]

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4. U.S. Political Developments: Potential Dismantling of the Education Department

Transitioning from international trade, the episode covers internal U.S. political maneuvers, specifically the Trump administration’s consideration of dismantling the Department of Education.

Key Points:

• Executive Actions: Trump officials are reportedly contemplating an executive order to either shut down non-statutory functions of the Education Department or transfer certain responsibilities to other departments.
• Legislative Steps: Full abolition of the department would require an act of Congress, aligning with Trump's campaign promises to reduce federal government size.
• Political Tensions: These moves have sparked controversy, with Democratic lawmakers accusing President Elon Musk and his allies of overstepping congressional powers by attempting to dismantle federal agencies unilaterally.

Notable Quote:

"We are exclusively reporting that Trump administration officials are weighing executive actions to dismantle the Education Department..." – Luke Vargas [07:17]

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5. El Salvador’s Unprecedented Migratory Agreement

The discussion highlights U.S. Secretary of State Marco Rubio’s announcement regarding El Salvador’s offer to accept deportees from the United States, including incarcerated American citizens.

Key Points:

• Policy Details: El Salvador has offered to take in any illegal immigrant from the U.S. deemed a dangerous criminal, including American citizens, to alleviate U.S. immigration challenges.
• Diplomatic Relations: Rubio praised President Nayib Bukele of El Salvador for this significant migratory agreement, though the U.S. response and the legal feasibility of sending American citizens to foreign prisons remain uncertain.
• Government Stance: The White House has not commented on the potential implications or the practicality of implementing such an agreement.

Notable Quote:

"El Salvador would take in any... illegal immigrant in the United States who's a dangerous criminal." – Marco Rubio [08:19]

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6. Sports Investing: A Lucrative Opportunity

Shifting gears to the financial markets, the episode explores the burgeoning field of sports investing. Chris Marangi, Co-Chief Investment Officer of Value at Gabelli Funds, discusses why sports teams are becoming attractive investment assets.

Key Points:

• Market Performance: Over the past decade, major sports leagues and their teams have seen an average annual return of 16%, outperforming the S&P 500’s 13%.
• Investment Accessibility: Retail investors can participate in sports team investments with relatively low entry barriers, such as purchasing shares of major league franchises like the Atlanta Braves.
• Intrinsic Value: Sports teams offer durability and resilience, being less sensitive to economic fluctuations and appealing across diverse demographics.

Notable Quotes:

"Sports teams historically have been great stores of value. That's because they're very durable..." – Chris Marangi [10:07]

"All you need is $40 and you can be an owner of a major league franchise." – Chris Marangi [11:06]

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Conclusion The episode of WSJ What’s News provides a nuanced analysis of the current U.S.-China trade tensions, potential shifts in U.S. federal agency structures, unexpected international migratory agreements, and emerging investment opportunities in the sports sector. With expert insights from James McIntosh and Chris Marangi, listeners gain a comprehensive understanding of the complexities shaping today’s economic and political landscapes.

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Additional Information

• Upcoming Reports: The U.S. Labor Department is set to release December job opening statistics at 10:00 AM Eastern Time.
• Earnings Reports: Companies like Alphabet, Mondelez, and AMD are scheduled to report their quarterly results post-market close.
• Weekend Preview: The episode wraps up with a teaser about the upcoming Super Bowl and a discussion on sports investing in WSJ’s Take on the Week podcast.

Production Credits: Produced by Kate Bullivant and Daniel Bach, with supervising producer Christina Rocca. Host: Luke Vargas.

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For more detailed discussions and full conversations, listeners are encouraged to visit WSJ's Take on the Week on YouTube or their preferred podcast platform. New episodes are released every Sunday.

Transcript

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[Luke Vargas]

China hits back at the US with tariffs Though with investors not yet panicking about President Trump's trade policies, Journal columnist James McIntosh looks at how that could affect Trump's strategy going forward.

[James McIntosh]

It comes back to this question that we kind of don't know the answer. Is he just watching the markets? In which case he'll be encouraged to go a lot further by the fact the markets didn't freak out. Which then leads to the weirdness that maybe next time the markets do freak out because he goes further.

[Luke Vargas]

Plus, President Trump's advisors weigh a plan to dismantle the Education Department and El Salvador offers to take back U.S. deportees. It's Tuesday, February 4th. 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, Beijing is responding to new 10% tariffs on Chinese goods announced by President Trump over the weekend by enacting tariffs of its own in moves announced. And today, China will place 15% tariffs on imports of American coal and liquefied natural gas, and raise levies on crude oil, agricultural machinery and certain vehicles. Separately, China added several critical minerals and metal based products to an export control list, and the country's antitrust regulator announced an investigation into Google for possible antitrust violations, though it didn't cite a reason or provide other details. Google, whose search engine and consumer Internet services have been largely unavailable in China since 2010, didn't immediately respond to requests for comment. Joining us now with some insight into these moves and how markets are reacting to them, I'm joined by Wall Street Journal senior Markets columnist James McIntosh. James, you have written that the stock swings we saw in US Markets yesterday basically falling on the prospect of looming tariffs against Mexico and Canada, but then gradually gaining as Trump cut deals with both of those countries to postpone those moves suggest that investors see his tariff threats as more about extracting concess than anything else. Does that assessment hold given that we didn't see the US And China Blink here.

[James McIntosh]

Yes, the China tariffs are significantly less serious than the Canada Mexico situation. 25% on Canada and Mexico, where there are very closely integrated supply chains, would have been catastrophically bad for a bunch of US Industries. Obviously the US imports a lot from China, but it imports significantly less than it used to. More Chinese stuff arrives in the US via Vietnam. It gets processed there a bit and it in some other East Asian countries, we'll see more of that. We'll see some price rises. We'll probably see a bit of depreciation of the renminbi. In fact, when Trump initially put his tariffs on China in his first term, they were almost entirely offset by the falling Chinese currency. Now, China, Trump might be a bit more awake to that this time, but these are all things that are much easier to cope with than 25% on Mexico and Canada, which would have shown up immediately in consumer prices, potentially in shortages in very large amounts of bureaucracy.

[Luke Vargas]

Okay, potential North American trade chaos narrowly avoided though, just for a month. But back to your question about the investor response to Trump tariff threats. What do you see the dynamic shaping up here to be? Can we read or should we read very much into how markets acted yesterday?

[James McIntosh]

So yeah, I think it mattered. What it showed is that people didn't really expect that much because if you believed that you were going to get this chaos in North American trade, share prices should have been down an awful lot more. And even before the deals were cut, investors clearly thought this wasn't going to last very long. It wasn't catastrophically bad for anybody. Even the most exposed people, like General Motors, you had big falls, but they weren't out of the ordinary for a bad earnings day.

[Luke Vargas]

I guess the question then going forward is does that encourage the President to rattle the cage a bit with respect to other countries? I guess the North Americ, the American bid, as you mentioned, is only on hold for a month, but we've heard the eu, the UK also tossed around just this week.

[James McIntosh]

Well, here's where we have the question of is he playing three dimensional chess or is he playing Snap and we don't know the answer. Right. If he's playing three dimensional chess, then of course he should be fully aware of the market reactions and shouldn't really matter. If he's playing Snap and doing this stuff by watching what the S and P does, then the fact that you didn't get these big falls might encourage him to do more next time to push harder. And of course for Europe, which is next in the crosshairs, it's potentially harder for them to offer, you know, a sort of face saving deal. So Mexico and Canada didn't really give up very much, if anything, in order to get rid of the tariffs. It's not clear Europe has such an easy sort of get out of jail free card. They did manage it last time. They promised to do some things that they were going to do anyway, like buying more gas from the U.S. maybe they'll do that again, whether Trump accepts that as a face saving deal or not. Again, it comes back to this question that we kind of don't know the answer. Is he just watching the markets? In which case he'll be encouraged to go a lot further by the fact the markets didn't freak out, which then leads to the weirdness that maybe next time the markets do freak out because he goes further and you get this feedback loop.

[Luke Vargas]

That was Wall Street Journal senior Markets columnist James McIntosh. James, thanks so much.

[James McIntosh]

Thanks, Luke.

[Luke Vargas]

And markets across Asia, which had been rallying after the US Averted tariffs with Mexico and Canada, pared back many of their gains, though the Hang Seng in Hong Kong closed up near 3%, led by Chinese tech stocks on deck today. The U.S. labor Department will report on December job openings at 10:00am Eastern. And after a flurry of earnings updates this morning, Alphabet snack maker Mondelez and chip supplier AMD are due to report their quarterly results after the closing bell. Coming up, the rest of the day's news and a look at the world of sports investing after the break.

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[Luke Vargas]

We are exclusively reporting that Trump administration officials are weighing executive actions to dismantle the Education Department, one of the agencies that Elon Musk and his allies are looking at as part of their efforts to shrink the federal government, according to people familiar with the matter. The officials have discussed an executive order that would shut down all functions of the agency that aren't written explicitly into statute or move certain functions to other departments. The order would also call for a legislative proposal to abolish the department, laying the groundwork to deliver on a Trump campaign promise. The White House didn't respond to a request for comment. Fully eliminating the department would require an act of Congress. Meanwhile, President Trump says there are curbs in place to prevent Elon Musk from doing anything in the government without the White House's blessing.

[Indeed Representative]

Well, he's got access only to letting people go that he thinks are no good if we agree with him, and it's only if we agree with him. He's a very talented guy from the standpoint of management and costs.

[Luke Vargas]

Trump's comments in the Oval Office yesterday came just hours after a Musk led team effectively shut down the US Agency for International Development. The billionaire's moves to dismantle multiple agencies have caused confusion about who's overseeing the push and sparked anger among Democratic lawmakers, with Representative Jamie Raskin of Maryland calling them an interference with congressional power. U.S. secretary of State Marco Rubio says that El Salvador has offered to accept deportees of any nationality from the U.S. including incarcerated American citizens who would be held in the country's maximum security prison. Rubio said on his visit to the country yesterday that El Salvador would take in any, quote, illegal immigrant in the United States who's a dangerous criminal, end quote. And he thanked President Najib Bukele. The president, in an act of extraordinary friendship to our country, knowing the challenges we face in the US has agreed to the most unprecedented and extraordinary migratory agreement anywhere in the world. Rubio says he's discussed the offer with President Trump, though it's unclear whether the US Plans to accept it or the legality of sending American citizens to a foreign prison. A State Department spokesperson declined to comment on what such a plan could entail. And finally, as we gear up for this weekend's super bowl, our colleagues over on WSJ's take on the Week podcast have been digging into the world of sports investing. Co hosts Gunjan Banerjee and Telestimo spoke with Chris Marangi, co chief investment officer of value at Gabelli Funds, whose funds are heavily invested in the sector, about why he's so bullish on that space. And here's an excerpt from that chat.

[Chris Marangi]

There has been a large secular trend of experience versus things. I think some of that has to do with the alienation that comes with technology. Some of it's just generational. But sports are certainly a part of that. And sports teams historically have been great stores of value. That's because they're very durable. They are not particularly sensitive to economic conditions necessarily. They cross all demographic boundaries, young, old, different ethnicities obviously. And they've actually performed quite well. Hard to measure because it's a private market, but one measure of how well, they've done. If you compile the annual valuations of the big four leagues and their sports teams that comprise them over the last 10 years, they've compounded about 16% on average. That's versus the S&P at 13%.

[Luke Vargas]

And while that's a great trend for wealthy franchise owners, Marangi said that retail investors can get in on the trend as well.

[Chris Marangi]

All you need is $40 and you can be an owner of a major league franchise. That's the Atlanta Braves baseball club, which trades for about $40 a share. So you know, there are a limited number of ways to participate in the growth of sports assets directly. You don't have to be a billionaire.

[Luke Vargas]

And for the full conversation, check out WSJ's take on the week on YouTube or wherever you get your podcasts. New episodes drop on Sundays. And that's it for what's news for this Tuesday morning. Today's show was produced by Kate Bullivant and Daniel Bach with supervising producer Christina Rocca. And I'm Luke Vargas for the Wall Street Journal. We will be back tonight with a brand new show and until then, thanks for listening.