China Bets Trump Will Cave on Tariffs

Summary

WSJ What’s News: China Bets Trump Will Cave on Tariffs

Episode Release Date: April 24, 2025
Host: The Wall Street Journal

In this episode of WSJ What’s News, The Wall Street Journal delves into the intricate dynamics of the US-China trade relationship, explores shifts in the US housing market, examines Florida’s controversial labor policies, and reviews significant developments in the business sector. This comprehensive summary captures the key discussions, insights, and conclusions presented throughout the episode.

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1. US-China Trade Tensions: Trump’s Tariff Strategy and Beijing’s Response

Host Introduction:
The episode opens with Alex Osolo highlighting a pivotal development in US-China relations: President Trump's recent softening stance on tariffs against China. This shift has buoyed financial markets and ignited hopes for a de-escalation between the two economic giants. However, Chinese leaders interpret this as a tactical move, believing that Trump will eventually relent under sustained pressure.

Jason Douglas on Beijing’s Strategy [00:36 – 02:20]:
Jason Douglas, WSJ’s Asia economic reporter, provides a deep dive into Beijing’s strategic positioning. He states, “Beijing's strategy is certainly to suggest to Trump that they're not rattled by what he's doing at all” ([01:37]). Douglas explains that China is signaling resilience and a higher tolerance for economic pain than the US, aiming to pressure Trump into concessions by demonstrating that they can withstand prolonged trade tensions without immediate negotiations.

He further warns of the potential spillover effects of the trade war into other sectors beyond tariffs. Douglas notes, “The real risk here is that the trade war spills over into arenas that are removed from tariffs” ([01:55]). He highlights concerns such as the US possibly delisting Chinese stocks or imposing further investment restrictions, actions that could exacerbate tensions and complicate economic relations.

Meredith McGraw on Presidential Influence [02:20 – 04:52]:
White House reporter Meredith McGraw joins the discussion to analyze President Trump’s dual objectives: stimulating market gains while reshoring American manufacturing. She observes, “The president and the White House basically say they can walk and chew gum at the same time”—referring to their ability to implement substantial trade realignments while fostering domestic manufacturing ([04:11]).

McGraw elaborates on the complexities of reshoring, pointing out that while numerous companies have announced investments in US-based projects, these initiatives often span decades and involve intricate negotiations. She expresses skepticism about the feasibility of achieving immediate market gains alongside long-term manufacturing realignment, stating, “there are still a lot of outstanding question marks about whether it's possible to do both at the same time” ([04:11]).

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2. Market Movements and the U.S. Housing Sector

Stock Market Rally [04:59 – 07:38]:
Despite ongoing trade uncertainties, US stocks rallied on the day of the episode’s release. Major indexes saw significant gains: the Nasdaq surged by approximately 2.25%, the S&P 500 increased by around 2%, and the Dow Jones Industrial Average rose by about 1.2%. Investors remain optimistic, anticipating that volatility may persist but choosing to hold onto positive sentiments.

Nicole Friedman on Declining Home Sales [06:03 – 07:38]:
Nicole Friedman, covering the housing market, sheds light on a troubling trend in the US real estate sector. She reports a 5.9% decline in existing home sales for March compared to the previous month— the steepest drop since November 2022— far exceeding economists' expectations of a 3.1% decrease ([06:03]).

Friedman attributes this decline to several factors:

• Affordability Issues: High home prices and elevated mortgage rates between 6.5% and 7% have deterred potential buyers.
• Economic Uncertainty: Concerns about a possible recession, ongoing trade tensions, and job security have led consumers to postpone significant financial commitments.
• Inventory and Supply Dynamics: While an increase in housing inventory could have spurred sales, the expected uplift hasn’t materialized due to the aforementioned affordability constraints.

She adds, “Buyers are paying close attention to mortgage rates... and we're not yet seeing a big change in rates that might lead to a pickup in activity” ([07:32]).

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3. Labor Market Shift: Florida’s Push for Teenage Workers

Governor DeSantis’ Proposal [08:42 – 10:02]:
Post-break, Alex Osolo transitions to labor market issues, focusing on Florida’s latest initiative to address labor shortages by increasing the employment of teenage workers. Reporter Tali Arbel explains that Governor Ron DeSantis has proposed legislation to reduce restrictions on the hours minors can work, particularly in resorts and other key industries affected by the crackdown on illegal immigration and reliance on foreign workers ([08:42]).

Key aspects of the proposal include:

• Age and Hour Adjustments: Lowering the minimum working age for certain jobs and permitting minors to work more hours on school nights.
• Economic Justification: The move aims to fill vacancies in sectors like hospitality without increasing labor costs significantly for businesses.

Criticism and Opposition:
Critics argue that this policy could negatively impact teens’ academic performance and mental health, asserting that existing labor laws sufficiently protect young workers. Additionally, opponents contend that the primary motivation behind the proposal is to enable businesses to reduce labor expenses, rather than addressing genuine labor shortages.

Tali Arbel summarizes the debate, stating, “They say that lifting these protections could be bad for [teens], could be bad for their academic performance, for their mental health” ([09:41]).

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4. Business Sector Developments

PepsiCo’s Earnings Forecast:
PepsiCo announced its expectation of flat earnings for the year, revising previous forecasts that anticipated growth. The company faces challenges due to a 10% tariff on concentrate imports from Ireland, essential for its US beverage production. While rival Coca-Cola is not burdened by this specific tariff, both companies remain vulnerable to a proposed 25% tariff on aluminum imports used for canning. PepsiCo plans to mitigate the supply chain costs impact but has not disclosed specific strategies.

Intel’s Restructuring Efforts:
Intel revealed plans to streamline its operations by cutting management positions, aiming to enhance focus on engineering and developing new products. Although the company did not specify the number of jobs affected or the expected financial impact, this move follows their reporting of wider losses and decreased sales in the first quarter.

Alphabet’s Robust Performance:
In contrast, Alphabet, the parent company of Google, reported strong first-quarter results. Profit exceeded $34 billion, and revenue climbed by 12% to approximately $90 billion, outperforming analyst expectations. The surge was driven by significant growth in Alphabet’s advertising services and cloud divisions. Revenue from Google services, including advertising, increased by 10%, while the cloud unit, encompassing artificial intelligence initiatives, saw a remarkable 28% rise.

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Conclusion

The episode of WSJ What’s News provides a detailed examination of the escalating US-China trade tensions, the resultant market fluctuations, and the broader economic implications. It highlights the strategic maneuvers of both nations amidst tariffs and trade negotiations, underscores the fragility of the US housing market amidst financial constraints, and explores labor policy changes aimed at mitigating workforce shortages. Additionally, it offers a snapshot of the corporate landscape, showcasing both struggles and successes within major US corporations.

For listeners seeking to understand the multifaceted economic and political developments shaping global and domestic markets, this episode serves as a comprehensive resource, blending expert analysis with up-to-date reporting to illuminate the forces at play.

Transcript

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[Alex Osolo]

US home sales fell last month, boding Ill for the crucial spring selling season. Plus China dismisses suggestions it's in negotiations about tariffs with the U.S. trump has.

[Jason Douglas]

Blinked, and the way this will be interpreted in Beijing is that China has a much greater tolerance for pain than the US Does.

[Alex Osolo]

And Florida's solution to a labor shortage? Teenage workers It's Thursday, April 24th. I'm Alex Osolo 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. President Trump's apparent softening on tariffs against China in recent days has buoyed markets and raised hopes for a de escalation between the world's two largest economies. For Chinese leaders, it only strengthens their resolve that Trump will eventually cave if they wait him out. President Trump said today his team was actively talking to Beijing about trade. Beijing played down hopes for an imminent rapprochement, saying it hasn't held negotiations with the US Quote, let alone reach an agreement, and described reports of US China talks as fake news. WSJ Asia economic reporter Jason Douglas Part.

[Jason Douglas]

Of Beijing's strategy is certainly to suggest to Trump that they're not rattled by what he's doing at all. They seem very keen not to take the first step in ratcheting down tensions either. It seems clear that they think that strategy is working now that Trump is the one to signal that he is prepared to de escalate and reduce tensions. The real risk here is that the trade war spills over into arenas that are removed from tariffs. It is just tariffs that get affected. But the U.S. for instance, has talked about delisting Chinese stocks. Could it stop investors putting money into China? Could it put further restrictions on investment flows? Trump says that he wants China to give him a call. It doesn't seem like China will do that until they see some real movement on tariffs.

[Alex Osolo]

To read Jason's full story, check out the link in the show. Notes. Since starting his second term in January, President Trump has toppled federal agencies, consolidated executive power, challenged global alliances and reconfigured America's economic relationships around the globe. His moves have been met with protests, court challenges, dipping poll numbers and political opposition. But faced with market turmoil, the president seems ready to soften his stances on the economy and trade. For more, I'm joined by White house reporter Meredith McGraw. Meredith, is Wall street the only force that has reliably pushed the president to back down?

[Meredith McGraw]

There's definitely been a pattern here where the president announces some sweeping economic policy and it's met with actual turmoil in the markets as investors try to figure out in real time what the president and his advisors have planned. The White House has said this is all part of a negotiation tactic by the president and his advisors after they put the 90 day pause on the tariffs. With the exception of China, they said that's because so many countries were coming to the table and trying to make a deal. And Caroline Levitt, the White House press secretary, has urged people to have patience. And yet at the same time, we know that the president watches the markets very carefully and we know that he's aware of how economists and even CEOs who have come to the White House have told him that these tariffs are having serious implications or could have serious implications on supply chains. And we've already seen how they've impacted things like consumer confidence.

[Alex Osolo]

Trump wants to drive market gains, but he also wants to reshore American manufacturing through these steep tariffs. Can he do both?

[Meredith McGraw]

The president and the White House basically say they can walk and chew gum at the same time with this, that they're going to be enacting this serious realignment of global trade and at the same time boosting manufacturing and investments here in the US and they point to a lot of the investments that have been already announced by companies that are reshoring different projects or building additional projects in the US But a lot of these projects can take decades. These deals can take years to make and take a lot of complex negotiations. So there are still a lot of outstanding question marks about whether it's possible to do both at the same time.

[Alex Osolo]

That was White house reporter Meredith McGraw. Thank you, Meredith.

[Meredith McGraw]

Thanks, Alex.

[Alex Osolo]

U.S. stocks rallied again today despite few concrete developments on the trade war front. Investors expect volatility is here to stay, but for now they're clinging to optimism. Major indexes rose. The Nasdaq led the gains, adding about 2 1/4% for the day. The S&P 500 gained roughly 2% and the Dow notched up about 1.2%. The National association of Realtors said today that U.S. existing home sales fell 5.9% in March from the prior month. That's the biggest monthly decline since November 2022 and was much worse than the 3.1% drop that economists expected. Meanwhile, mortgage rates have stayed high. According to Freddie Mac, mortgage rates have held between 6.5 and 7% for most of 2025, though today the 30 year fixed rate mortgage averaged 6.81%, down slightly from 6.83% last week. Nicole Friedman, who covers the housing market for the Journal, joins me now. Nicole, what's behind this drop in home sales?

[Nicole Friedman]

What this is basically showing is that the spring housing market, which is the most important time of year for home sales, is off to a weak start. That's a combination of buyers being hesitant right now that affordability is still poor, home prices are high, mortgage rates are high. And then just this broader economic uncertainty. Consumer confidence is low because people are looking at the economy right now wondering, are we going to enter a recession? What's going to happen with tariffs? What's going to happen with my job? And so they're hesitant to jump in and make a big purchase.

[Alex Osolo]

There were hopes that this spring would offer signs of a turnaround for the industry. There's more inventory. Does that turnaround seem likely now?

[Nicole Friedman]

So there is more inventory, which is good news for buyers because the supply of homes for sale has been really, really low for a couple of years. And economists and real estate agents have been saying if we had more supp, we would have more purchases, that the buyers are out there. They just can't find a home that fits their needs. But now we are starting to get more supply and the sales aren't going up as expected. And what we're seeing is that buyers are paying close attention to mortgage rates. So the rate was pretty unchanged this week. It ticked down just slightly, but it's still just hovering in this 6.5% to 7% range that it's been in for months now. And so we're not yet seeing a big change in rates that might lead to a pickup in activity.

[Alex Osolo]

That was WSJ reporter Nicole Friedman. Thanks, Nicole.

[Nicole Friedman]

Thank you for having me.

[Alex Osolo]

Coming up, why Florida's governor wants more teen workers. That's after the break.

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[Alex Osolo]

A number of US states are looking to get the most out of teenage workers. The latest Florida. The office of Governor Ron DeSantis has drafted and pitched bill language for the current legislative session that would cut restrictions on the hours that minors can work. The proposals have the support of small business groups and opposition from unions and advocates for the poor. For more on the move, I'm joined by reporter Tali Arbel. Tali, why is Florida looking to lean more on teenage workers?

[Tali Arbel]

The governor, Ron DeSantis, he specifically has talked about Florida wanting to use teen workers at resorts and other employers. In 2023, Florida started cracking down on illegal immigration more and on foreign workers. And so in March, he was one who made a connection to the foreign worker situation, saying they need these resorts and other businesses need workers and we should use teens for that. This proposal in Florida and proposals in other states lower the age that teens can do certain things like let them do certain jobs that were deemed hazardous for them before or saying that they can work more hours on a school night. Florida's law now says that when 16 and 17 year olds are in school, they can't work more than 30 hours during the week and this would get rid of that.

[Alex Osolo]

And critics, what do they say? Why are they opposed to it?

[Tali Arbel]

They say that teens can already work, that this isn't necessary and that lifting these protections could be bad for them, could be bad for their academic performance, for their mental health. Also, some people say that the reason that these laws are being changed or being sought to be changed is that businesses would like to be able to lower their labor costs.

[Alex Osolo]

That was WSJ reporter Talia. Thank you, Tali.

[Tali Arbel]

Thanks, guys.

[Alex Osolo]

In business news, PepsiCo said today that it expects flat earnings this year, reversing earlier forecasts of growth. The company relies on concentrate from Ireland to make its US drinks, which is now subject to a 10% tariff. Rival Coca Cola doesn't have this problem, but both companies could be hurt by a 25% tariff on aluminum imports, which they use for cans. Pepsi executives said they plan to take action to mitigate the impact of tariffs on the company's supply chain costs, but declined to provide details on their plan. Intel said today that it will streamline its business by cutting management positions, a move the chipmaker said will allow it to increase focus on engineering new products. The company didn't say how many jobs it would cut or detail the charges it expects to incur as a result of the restructuring. Intel's streamlining plan came as the company logged a wider loss and lower sales in the first quarter, and Alphabet posted higher profit and revenue in the first quarter, driven by growth in its advertising services and cloud divisions. Google's parent company posted a profit of more than $34 billion for the first quarter, while revenue rose 12% to about $90 billion. Both profit and revenue beat analyst expectations. Revenue increased 10% across Google services, which includes advertising, and 28% in its cloud unit, which includes its artificial intelligence business. And that's what's news for this Thursday afternoon. Today's show is produced by Pierre Biennime and Anthony Bansi with supervising producer Michael Kosmides. I'm Alex Osola for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.

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