Podcast Summary: WSJ What’s News – "China Hits U.S. Goods With 125% Tariff"

Release Date: April 11, 2025
Host: Luke Vargas, The Wall Street Journal

1. Introduction

In this episode of WSJ What’s News, host Luke Vargas delves into the escalating trade tensions between China and the United States, the impending nuclear talks between the U.S. and Iran, a significant Supreme Court ruling on immigration, and insights from Ed Smith of Rathbone's Investment Management on the current economic landscape. The episode provides a comprehensive overview of events shaping global markets and investor sentiment.

2. China Raises Tariffs on U.S. Goods

Key Developments:

• Tariff Increase: China announced an increase in its retaliatory tariffs on U.S. goods to 125%, effective the following day. This move matches the latest tariffs imposed by the White House and signifies Beijing's stance that American imports remain non-viable under current tariff levels.

• Xi Jinping's Statement: In a meeting with Spain's Prime Minister in Beijing, Chinese leader Xi Jinping stated, "there'd be no winners in a tariff war, but I am not afraid of the fight to come" (00:58).

• U.S. Negotiations: The Trump administration has launched a high-speed initiative to negotiate ad hoc deals with over 70 countries to circumvent higher tariffs. However, insiders suggest that many offers are preliminary and lack detailed economic proposals.

Market Impact:

• Global Markets: Asian markets, including Japan and South Korea, closed the day in the red, while European indices declined in morning trading. U.S. futures indicated a lower opening, and gold prices surged to an all-time high.

• Upcoming Earnings: Major U.S. financial institutions such as JPMorgan Chase, Wells Fargo, and Morgan Stanley are set to report their first-quarter earnings, a crucial indicator amidst the trade tensions.

3. U.S.-Iran Nuclear Talks

Scheduled Meetings:

• Location & Participants: The U.S. and Iran are set to engage in high-stakes nuclear negotiations in Oman. Steve Witkoff, Trump's special envoy for Middle East issues, will meet with Iran's Foreign Minister.

Insights from Benoit Fouqan (03:18):

• Iran's Position: Iran aims to return to the 2015 nuclear pact, seeking to curb its uranium enrichment program in exchange for sanction relief.

• U.S. Objectives: The U.S. seeks a broader agreement, including the dismantling of Iran's ballistic missile program, with initial statements pushing for even the civilian aspects of Iran's nuclear program to be addressed.

• Strategic Dynamics: Fouqan describes the negotiations as a "chess game" with an open-ended outcome, highlighting the complexity and uncertainty surrounding the discussions.

Geopolitical Context:

• Axis Peace: The episode mentions the formation of an axis comprising China, Russia, Iran, and North Korea ("Krink"), united in opposing Western sanctions, increasing the urgency for Iran to reach a deal.

Further Comments from Fouqan (04:05):

• Economic Pressures: Iran's economic strategies rely on limited engagements with China and Russia, but these do not replace the robust economic relations fostered by the U.S. dollar and American banking systems. The U.S. currency has depreciated by 40% since Trump's election, pushing Iran to seek partial alternatives like the "Greeks alliance," which Fouqan refers to as a "band-aid" for long-term issues.

4. Supreme Court Ruling on Migrant Deportation

Case Overview:

• The Supreme Court mandated the Trump administration to seek the return of Kilmar Abrego Garcia, a migrant mistakenly deported to a Salvadorian prison in March. The Court rejected the government's argument that it had no obligation to retrieve Garcia from a foreign custody facility.

Administration's Stance:

• The Trump administration contended that their only mistake was sending Garcia to El Salvador instead of a third country and maintained that federal courts lack authority to compel officials to retrieve individuals once they are in a foreign government's custody.

5. Interview with Ed Smith: Investment Outlook Amid Trade Tensions

Economic Uncertainty and Policy Risk (06:10): Ed Smith, co-Chief Investment Officer at Rathbone's Investment Management, discusses the persistent policy risk affecting global markets. He highlights the tight correlation between the S&P 500 levels and the Trade Policy Uncertainty Index, which remains elevated despite a recent reprieve announced by the White House.

Impact of New Tariffs (07:27): Smith assesses the disruption caused by the new 10% universal tariffs and 100+% tariffs on China, noting that the effective tariff rate now falls between 16% and 21%, potentially increasing the Federal Reserve's inflation target by approximately 1%.

Recession Risks (08:29): Smith confirms that recession risks remain significant, with Rathbone's forecasting a 40% probability of a recession. He emphasizes that even with possible fiscal stimulus, the base case points to meaningful economic slowdown and sub-1% growth in the U.S. for the year.

Consumer and Business Confidence (09:22): While traditional consumer sentiment indices have lost their predictive power for actual consumption, business confidence indicators remain crucial. Smith notes that business investment is likely to slow, as boardrooms express uncertainty and desire for greater clarity amid ongoing trade tensions.

Investment Strategies and Market Outlook (10:46): Despite the current market downturn, Smith advises against ruling out U.S. equities, citing the market's historical resilience. He points out that over 80% of rolling three-year periods show positive equity market returns, with the median bounce-back following a correction being 15% within 12 months. However, he stresses the importance of maintaining a disciplined investment framework to avoid emotional decision-making amidst heightened volatility.

Final Thoughts (11:34): Smith underscores that investor emotions are high, with potential for poor decision-making. He advocates for a rational, cool-headed approach to investing, especially in an environment where volatility is likely to remain elevated.

6. Conclusion

Luke Vargas wraps up the episode by summarizing the key takeaways: escalating U.S.-China trade tensions with significant tariff increases, critical upcoming U.S.-Iran nuclear negotiations, a pivotal Supreme Court decision on migrant deportation, and expert insights on navigating the uncertain economic landscape from Ed Smith. The episode emphasizes the interconnectedness of global trade policies, geopolitical dynamics, and market behaviors, providing listeners with a comprehensive understanding of factors influencing today's financial and political environment.

Notable Quotes:

• Xi Jinping on Tariff War: “There'd be no winners in a tariff war, but I am not afraid of the fight to come.” (00:58)

• Benoit Fouqan on Nuclear Talks: “We're basically on a chess game and the end game is quite open ended.” (03:18)

• Ed Smith on Tariffs' Impact: “It's a little difficult to exactly figure out what the effective tariff rate is... between 16 and 21% and that's going to hurt the Fed's targeted measure of inflation by round about 1%.” (07:47)

• Ed Smith on Recession Odds: “Our base case... the next couple of quarters are going to be hard in particular as business investment probably goes on hiatus.” (08:40)

• Ed Smith on Investment Approach: “It's really important to have a framework that means that you don't make emotive decisions. You only make sort of rational, cool headed ones.” (11:55)

This detailed summary encapsulates the essential discussions and insights from the episode, providing a clear and informative overview for those who haven’t listened to the podcast.