China, EU Signal Desire to Cool Trade Fight

Summary

WSJ What’s News: Summary of "China, EU Signal Desire to Cool Trade Fight" Episode Released on May 2, 2025

Introduction

In the May 2, 2025 episode of WSJ What’s News, hosted by Luke Vargas, listeners are presented with a comprehensive overview of significant global economic and political developments. The episode delves into the White House's fiscal 2026 budget proposal, President Trump's contentious moves against public media, evolving trade negotiations between the U.S., EU, and China, the resilience of Big Tech amid tariff uncertainties, and emerging trends in betting markets surrounding the upcoming papal conclave.

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I. White House Fiscal 2026 Budget Proposal

Luke Vargas begins the episode by discussing the imminent release of the White House's fiscal 2026 budget. The administration proposes over $160 billion in non-defense discretionary spending, marking a substantial 22.6% reduction from the projected fiscal 2025 budget. Key areas targeted for cuts include federal environmental programs, renewable energy initiatives, education, and foreign aid. However, essential programs such as Medicare, Medicaid, and Social Security remain protected. Additionally, the budget seeks increased funding for defense, border security, air and rail safety, veterans, and law enforcement.

Notable Quote:

"Lawmakers will likely spend months debating which elements of the plan should become law." – Luke Vargas [01:12]

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II. President Trump's Executive Order Against Public Media

In a controversial move, President Trump has signed an executive order terminating federal funding for public media outlets, including PBS and NPR. He criticized these entities for not providing a "fair, accurate or unbiased portrayal of current events to taxpaying citizens."

Notable Quote:

"Neither entity presents a fair, accurate or unbiased portrayal of current events to taxpaying citizens." – President Trump [01:12]

This action is part of a broader pattern of Trump's confrontations with the media, which includes a defamation lawsuit against Disney's ABC News and ongoing litigation with Paramount Global's CBS.

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III. Trade Negotiations: EU and China's Moves to De-escalate

A significant portion of the episode focuses on the evolving trade dynamics between the U.S., European Union, and China. The EU has expressed a willingness to mitigate the ongoing trade tensions by proposing to purchase $56 billion worth of U.S. goods. This includes American liquefied natural gas and agricultural products like soybeans. Joshua Kirby, covering the European economy, explains that the EU aims to address the trade deficit perceived by President Trump.

Notable Quote:

"The bloc could offer to buy $56 billion worth of U.S. goods... agricultural products like soybeans." – Joshua Kirby [03:21]

Meanwhile, China has signaled its openness to resume trade talks with the U.S., contingent upon Washington’s commitment to reducing tariffs and making substantial concessions, such as enhancing access to Chinese markets.

Notable Quote:

"China has said it's considering starting talks with the US to halt the trade war, but only if Washington shows sincerity through concrete measures like canceling tariffs." – Luke Vargas [03:45]

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IV. Impact on Big Tech: Apple's Response to Tariffs

Apple emerges as a focal point in the discussion on Big Tech's vulnerability amid trade uncertainties. Despite outperforming analyst expectations in its quarterly sales, Apple’s stock dipped post-announcement due to concerns over tariff exposures. CEO Tim Cook disclosed an anticipated $900 million increase in costs from tariffs in the upcoming June quarter and outlined plans to diversify the supply chain by shifting iPhone shipments to India and Vietnam.

In an in-depth interview, Richard Kramer, founder of Arete Research, assesses the long-term implications of these tariff-induced supply chain adjustments.

Notable Quotes:

"Apple is showing that it has anticipated this issue by the comments it made about the India share of US smartphone sales." – Richard Kramer [05:37]

"Replicating that deep supply chain that you have in China is not something you can do in a matter of months. It’s a multi-years project." – Richard Kramer [06:25]

Kramer emphasizes that while Big Tech companies possess the financial resilience to navigate such disruptions, the broader S&P 500 may face challenges in matching their stability and resourcefulness.

Notable Quote:

"Big tech stayed the course with its investments and came out with increased market share and market power." – Richard Kramer [08:37]

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V. Oil Majors and U.S. Jobs Data

The episode also touches on the financial strategies of major oil companies. Shell announced a $3.5 billion share buyback following better-than-expected first-quarter earnings, marking its 14th consecutive quarter of returning cash to shareholders. Investors are keenly awaiting earnings reports from U.S. oil giants Chevron and ExxonMobil for further industry insights.

Simultaneously, upcoming U.S. jobs and unemployment data are highlighted as critical indicators of the economy's health post-trade tensions. Economic reporter Chaodang notes potential headwinds such as reduced hiring due to tariff impacts, a decline in immigration affecting labor availability in key industries, and ongoing federal government layoffs.

Notable Quote:

"Some businesses could have put a brake on hiring at the same time... fewer firms are now waiting to see what happens next before making big changes." – Chaodang [12:00]

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VI. Betting Markets on the Papal Conclave

In an intriguing cultural note, the podcast explores the burgeoning interest in prediction markets related to the upcoming papal conclave. Platforms like Polymarket and Kalshi have seen over $16 million in trading, reminiscent of historical betting practices dating back to 16th-century Rome. Alexander Osipovich from The Wall Street Journal provides insights into the modern parallels and potential risks, such as the influence of media perceptions over insider information due to the conclave's secretive nature.

Notable Quotes:

"In 16th century Rome... Bookies and brokers were accused of manipulating the markets." – Alexander Osipovich [13:27]

"The lack of polling, public debates or campaigning makes it more likely that media attention and public perceptions affect odds." – Alexander Osipovich [14:04]

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Conclusion

The May 2 episode of WSJ What’s News offers a thorough examination of pressing economic and political issues shaping the global landscape. From significant budgetary shifts and escalating trade negotiations to the strategic maneuvers of Big Tech and cultural phenomena like papal conclave betting, the podcast provides listeners with nuanced insights and expert analyses. As these stories unfold, the episode underscores the intricate interplay between policy decisions, market responses, and broader societal trends.

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Notable Contributors:

• Luke Vargas: Host, The Wall Street Journal
• Joshua Kirby: European Economy Correspondent
• Richard Kramer: Founder, Arete Research
• Chaodang: U.S. Economics Reporter
• Alexander Osipovich: Reporter, The Wall Street Journal

Produced by Cate Bullivant and supervised by Sandra Kilhoff.

Transcript

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[Luke Vargas]

President Trump proposes big cuts to health, research, climate and education programs plus the EU and China signal their desire to wind down the trade fight with Washington and to end a busy week for earnings, we'll look at whether Big Tech can remain an island amid prevailing uncertainty.

[Richard Kramer]

There is certainly an element for the entire market of whistling past the graveyard right at the same time, if we go back to look at what happened during the COVID pandemic era, Big Tech stayed the course with its investments and came out with increased market share and market power and indeed market cap It's Friday, May 2nd.

[Luke Vargas]

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. The White House is set to release its fiscal 2026 budget today. A wish list of presidential priorities we exclusively report proposes more than $160 billion in non defense discretionary spending, according to administration officials. That'd represent a 22.6% reduction from projected fiscal 2025 spending, with the budget blueprint envisioning far reaching cuts to federal environmental, renewable energy, education and foreign aid programs. Immune from the proposed cuts are Medicare, Medicaid and Social Security, while the plan seeks spending increases for defense, border security, air and rail safety, veterans and law enforcement. Lawmakers will likely spend months debating which elements of the plan should become law. Meanwhile, President Trump has signed an executive order cutting off federal funding of public media, including PBS and npr, saying that neither entity presents a fair, accurate or unbiased portrayal of current events to taxpaying citizens. His efforts to shut down funding for public broadcasting are the latest of several battles with the media, including a defamation suit against Disney's ABC News last December and the suing of Paramount Global's cbs, which is currently in mediation with Trump. Officials at PBS and NPR didn't immediately respond to requests for comment. Turning to trade now, we are seeing signs that two of the world's biggest economies are looking to resolve the trade war with the US in an interview with the Financial Times, the EU's top trade negotiator, Maros Shevcovic, said the the bloc could offer to buy $56 billion worth of U.S. goods. Joshua Kirby covers the European economy for us and says the proposal includes buying American liquefied natural gas as well as agricultural products like soybeans.

[Joshua Kirby]

Certain things the EU has definitely drawn a red line under when it comes to food standards and things like that, but they seem pretty willing to go ahead and agree to buy more American goods in a way that would, I think, redress the key point at the heart of the trade dispute from the perspective of President Trump, which is that the EU surplus that it runs in its goods trade is unfair from their perspective, and this would be a way of reducing that deficit.

[Luke Vargas]

At the same time, China has said it's considering starting talks with the US to halt the trade war, but only if Washington shows sincerity through concrete measures like canceling tariffs. Trump has said that's a non starter without significant concessions from Beijing, such as increased access to Chinese markets, even as he's also said that levies on Chinese goods are unlikely to remain anywhere near the current 100. China's commerce ministry said it had noted repeated US signaling on the possibility of adjustments to those tariffs, but didn't give a timeline for possible trade talks with Washington. Shares of Apple are down off hours While the company beat analyst expectations on quarterly sales yesterday, investors appear more focused on its tariff exposure. CEO Tim Cook predicted 900 million doll in added costs from tariffs in the June quarter, but admitted that things could get much worse from there and said the company plans to ship most US bound iPhones from India and Vietnam by this summer as it urgently tries to de risk its supply chain. While Apple's mixed results cap a busy few days of tech earnings after strong results from Meta and Microsoft earlier in the week had helped to ease fears about the impact of tariffs. Well, here to assess the state of play one month since President Trump's Liberation Day tariff announcement, I'm joined by Richard Kramer, founder of global technology research firm Arete Research. Richard in some ways that Rose Garden tariff announcement by President Trump on April 2nd can kind of feel like a lifetime ago. US equities have certainly clawed back a lot of ground since then. And yet can one look at a company like Apple and not be reminded in many ways of the overhang of this trade war?

[Richard Kramer]

It's certainly top of mind for investors, and I think the debate has shifted from the direct impact of tariffs. If you said a month ago that it would be a 1% hit on Apple's total sales for the June quarter, you would have said no problem. I'm delighted with that. But what it is now shifted the debate towards is the fears of a either mild or catastrophic US recession. So it's a recognition that the world has these interconnected supply chains and Apple is showing that it has anticipated this issue by the comments it made about the India share of US smartphone sales.

[Luke Vargas]

Okay, what is that pivot going to look like? It maybe makes Apple more resilient in time, but I can't imagine that is cheap either.

[Richard Kramer]

You know, again, just like these words disruption and pivot, I think they sound great, but when you're running a $400 billion business, you know it is the proverbial supertanker and you don't just sort of do a U turn right. So there will be a long term concerted effort to build up additional supply coming out of markets like India and build the tertiary supply chain around the assembly factories. And then behind that same thing has happened in for Macs and iPads and AirPods and so forth in Vietnam and other locations. But again, replicating that deep supply chain that you have in China is not something you can do in a matter of months. In reaction to a tariff announcement. It's a multi years project.

[Luke Vargas]

How did they then get to the targets he's setting for this summer? That a majority of phones sold in the US will be coming from or shipped from there. I guess that's the operative word.

[Richard Kramer]

A little history here. If you go back even a decade or more. Nokia had one of the largest mobile phone manufacturing plants in the world in India. They had a huge market share in the India market. Obviously Nokia is really no more in the smartphone space. That plant was taken over by Foxconn, the leading ODM production partner for Apple. They have built up that capacity for Apple in India, principally initially to serve the Indian domestic market and to avoid import duties there. And they now can produce the full range of Apple iPhones that sell into the US market. Now, Cook didn't talk about which phones were going into the US market, it is again the majority, which means it may be a low quarter and they get just over half of the phones. And clearly when they ramp towards the all important Christmas selling season where volumes are 40 or 50% higher than they are in the other quarter. That may be a tougher ask, but unsurprisingly he did not want to be drawn on what the tariff situation is going to be in July, much less what's going to happen in September. And December, and these things seem to have a habit of changing almost by the day.

[Luke Vargas]

And finally, Richard, with Apple kind of rounding out what had been a bumper week for tech earnings that have generally boosted market sentiment, do you get the sense that the tariff hit just isn't too apparent now, but that might come later?

[Richard Kramer]

Yeah, I mean, there is certainly an element for the entire market of whistling past the graveyard right. At the same time, if we go back to look at what happened during the COVID pandemic era, big tech stayed the course with its investments. It kept spending on R and D and Capex and came out with increased market share and market power and indeed market cap. And that's why everybody around the world knows about the Mag 7 now. So I think these companies have a unique ability, especially given the 3 to $400 billion of net cash balance they're sitting on of duration in their business models. The Apple iPhone replacement cycle is four years. Gosh knows how long the average Microsoft software installation is. We've all been using these Google and Meta services for a decade or more now, and they passed the toothbrush test of using them twice a day or more. So these companies are very willing to invest through down cycles to come out better on the other end. And I think now the question that will be asked across the Entire S&P 500 is how many companies have that stability and duration in their business model and have the sheer resources of big tech. And you know, that's why Mark Zuckerberg can say, well, our Capex isn't going to be 60 to 65 billion because it might cost a little more. We'll spend up to 72 and no one bats an eyelash because they know Meta can generate that much in free cash flow in a given year.

[Luke Vargas]

Richard Kramer is the founder of global technology research firm Arete Research. Richard, thank you so much for being with us on what's news.

[Richard Kramer]

Thank you so much for having me.

[Luke Vargas]

Coming up, the rest of the day's news, including what to look for in today's jobs data and betters. Join the pious as excitement grows ahead of next week's papal conclave. Those stories and more after the break.

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[Luke Vargas]

Oil majors are wrapping up a busy week for earnings, with Shell this morning announcing a $3.5 billion share buyback after posting higher than expected earnings for the first quarter. It marks the 14th consecutive quarter in which the British energy giant is returning cash to shareholders and comes as low oil and trade tensions have rattled other oil companies, and we will get further clues on the health of the industry when US oil majors Chevron and ExxonMobil release their earnings before the market open. That said, investors today will first and foremost be watching the U.S. jobs and unemployment numbers out at 8:30am Eastern. U.S. economics reporter Chaodang says it'll be the first hard data since Trump's Liberation Day tariff announcements and follows a week of economic headlines that have been skewed by companies trying to mitigate the Tarif impact and front load imports.

[Chaodang]

Some businesses could have put a brake on hiring at the same time. Few tariffs have been passed to customers yet many firms are waiting to see what happens next before they make big changes, including to prices and to hiring. Another factor that could weigh on job gains is the sharp decline in immigration stemming from Trump's border policies. Industries like construction and healthcare rely on foreign labor, so less immigration could leave some job positions unfilled. Lastly, economists will be watching for the impact of the Trump administration's federal government layoffs. These federal cuts have begun to weigh on monthly job gains, and that is expected to continue for the April data.

[Luke Vargas]

And finally, as Catholic cardinals prepare to convene at the Vatican next week to choose a new pope, bettors are signaling their enthusiasm to get in on the action. So far, $16 million and counting has been traded on leading prediction markets where users can buy and sell contracts that pay off if their holders accurately predict who becomes the next pontiff. The Journal's Alexander Osipovich told me that while platforms like Polymarket and Kalshi are hoping that the secretive PayPal selection becomes their next hit product, the story of betting on conclaves actually goes way back.

[Alexander Osipovich]

In 16th century Rome, there was quite a thriving culture of placing wagers on the results of papal conclaves, and this led to a very thriving rumor mill where information would leak out of the conclave and things got kind of out of hand. Bookies and brokers were accused of manipulating the markets. There were also allegations of insider trading by people close to the cardinals who knew what was going on. Eventually, the papacy cracked down on this. And in 1591, Pope Gregory XIV issued a papal bull that banned wagering on papal elections on penalty of excommunication.

[Luke Vargas]

Well, if that doesn't dissuade you, Alexander reports that the papal prediction market may be risky for other reasons, with the lack of polling, public debates or campaigning making it more likely that media attention and public perceptions affect odds as opposed to insider information. And that's it for what's news for this Friday morning. Today's show was produced by Cate Bullivant. Our supervising producer is Sandra Kilhoff. And I'm Luke Vargas for the Wall Street Journal. We will be back tonight with a new show. Otherwise, have a great weekend. Thanks for listening.