Chips, Juice and Airplanes - Exemptions Confuse as Tariffs Kick In

Summary

WSJ What’s News: "Chips, Juice and Airplanes - Exemptions Confuse as Tariffs Kick In"

Release Date: August 7, 2025
Host: Azhar Sukri
Podcast: WSJ What’s News by The Wall Street Journal

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Introduction

In the August 7th episode of WSJ What’s News, host Azhar Sukri delves into the complexities of the ongoing U.S.-China trade war, focusing on recent tariff implementations and their broad-reaching impacts. The episode, titled "Chips, Juice and Airplanes - Exemptions Confuse as Tariffs Kick In," explores how new tariffs are affecting various industries, the confusion arising from exemptions, and the consequential strain on global trade relationships.

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Trump’s Tariff Announcement and Exemptions

The episode opens with significant news that President Donald Trump has imposed a 100% tariff on semiconductor chips but has granted exemptions to major tech firms like Apple. This move has led to a surge in tech stocks, as highlighted by Azhar Sukri at [00:33].

Key Highlights:

• Apple’s Investment Pledge: Apple CEO Tim Cook announced an additional $100 billion investment in the U.S., supplementing the company’s previous $500 billion commitment in February. At [01:44], President Trump states, “...the company is also unveiling its ambitious new American manufacturing program, which will bring factories and assembly lines across our country all roaring to life.”

• Market Reaction: According to Journal finance editor Alex Frangos at [02:17], the markets have reacted positively, indicating investor confidence despite the overarching tariff threats. Frangos observes, “The investors seem to be welcoming the bonhomie between the big tech companies and Trump.”

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Market and Tech Industry Reaction

The exemptions have created a complex landscape as reciprocal tariffs begin affecting U.S. trading partners. Alex Frangos discusses the initial market stability, noting that while tariffs are high, the negotiated exemptions provide a “Swiss cheese of exemptions and carve outs” that obscure the full impact of the tariffs ([03:10]).

Notable Quote:

“There’s this feeling that at the top level, Trump is throwing out these tariffs, but underneath it, he’s making life palatable for everyone.” – Alex Frangos [02:17]

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Impact on Global Automakers

The trade war's repercussions extend beyond the tech sector into the automotive industry. The episode cites a Journal tally revealing nearly $12 billion in losses for global automakers this earnings season. Toyota alone reported a $3.1 billion reduction in operating profit for the second quarter ([03:56]).

Insights from Stephen Wilmot: Stephen Wilmot explains the automotive sector's predicament, stating at [04:27], “These are companies with high fixed costs, very inflexible production works,” highlighting the industry's limited ability to maneuver swiftly in response to tariffs. He further elaborates on the trend toward regional production hubs as a long-term strategy cemented by the current tariffs.

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Effects on Developing Countries: The Case of Indonesia

A significant portion of the episode examines the adverse effects of U.S. tariffs on developing nations, with a focus on Indonesia. Senior reporter John Emont discusses how a 19% tariff on Indonesian exports threatens jobs and economic stability in regions reliant on labor-intensive products like shoes, clothing, and textiles ([05:51]).

Key Points:

• Trade Dependency: Indonesia ranks as the U.S.’s second-largest trading partner after China, heavily depending on exporting labor-intensive goods to the American market ([06:25]).

• Economic Strain: Reduced U.S. demand due to tariffs may lead to decreased employment opportunities in Indonesia’s manufacturing sectors.

Notable Quote:

“The United States actually buys a lot of the labor intensive products... whereas China tends to buy more commodities that tend to be less labor intensive.” – Ryan Reynolds [06:25]

Note: The transcript attributes this statement to Ryan Reynolds, likely an error, as Ryan Reynolds is associated with Mint Mobile advertisements in this episode.

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Economic Rationale Behind U.S. Tariffs

The discussion shifts to exploring the United States' motivations for imposing high tariffs on some of the world’s poorest countries. The analysis suggests that President Trump’s focus on trade deficits drives the targeting of nations that cannot significantly boost their imports of U.S. goods, thereby exacerbating trade surpluses ([08:10]).

Insights from Ryan Reynolds: Reynolds posits that the tariffs are strategically aimed at reducing trade imbalances, albeit at the cost of straining relationships with nations like Lesotho and India ([08:25]).

Notable Quote:

“Sometimes it definitely feels a little bit confounding, like why would we be punishing Lesotho? Other times it may be makes a little bit more sense...” – Ryan Reynolds [08:25]

Again, the attribution to Ryan Reynolds seems misplaced within the context of trade analysis.

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Additional Business News Briefs

While the core focus remains on the trade war, the episode also touches upon other significant business developments:

• United Airlines Outage: A major system-wide technology issue caused United Airlines to cancel over 60 flights and delay more than 1,000 departures. The problem centered around the Unimatic system, crucial for flight data management ([10:22]).

• Microsoft’s AI Recruitment Drive: Microsoft has hired Mustafa Suleiman, a founder of Google’s DeepMind, to spearhead its AI division. This strategic move mirrors Meta Platforms’ tactics, aiming to bolster Microsoft’s competitive edge in the AI sector by attracting top talent through higher pay and a startup-like environment ([10:22]).

• Italy’s New Suspension Bridge: Italy is proceeding with plans to construct the world’s longest suspension bridge, linking Sicily to the mainland. The two-mile bridge, projected to cost $15.6 billion, symbolizes a century-old ambition to unify the nation and stimulate economic development in historically impoverished regions ([12:16]).

Notable Quote:

“This is a project that has been talked about literally since the 19th century...” – Margarita Stancati [12:16]

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Conclusion

The episode concludes by highlighting the intricate balance the U.S. is attempting to maintain between enforcing trade tariffs and providing exemptions to key industries and companies. As Azhar Sukri summarizes, the trade war remains a dynamic and evolving situation with significant implications for global markets, industries, and economies.

Closing Note:

"That’s it for what’s news for this Thursday morning." – Azhar Sukri [13:08]

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Produced by: Kate Bullivant and Daniel Bark
Supervising Producer: Sandra Kilhoff

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This comprehensive analysis provides listeners with an in-depth understanding of the current state of international trade, the strategic maneuvers of major corporations, and the broader economic consequences of protectionist policies. For those seeking to grasp the nuances of today's global market dynamics, this episode offers valuable insights and expert commentary.

Transcript

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[Azhar Sukri]

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[Azhar Sukri]

Tech stocks gain after President Trump exempts firms including Apple from 100% levies on chips. But confusion reigns as reciprocal tariffs kick in for US Trading partners around the world. And we look at just how many billions of dollars the trade war is costing everything from automakers to the poorest countries.

[Ryan Reynolds]

The US Is the number two trading partner after China. China doesn't really need Indonesian shoes. They do buy some, but they make a ton of own shoes, right?

[Azhar Sukri]

It's Thursday, August 7th. I'm Azhar Sucri for the Wall Street Journal. Here is the AM Edition of what's news, the top headlines and business stories moving your world today. Tech stocks are gaining after President Trump last night announced 100% tariffs on chips and to the relief of companies like Apple, exemptions for tech firms that invest in the U.S. apple CEO Tim Cook yesterday promised to invest an additional $100 billion in the country. That's on top of the $500 billion pledge Apple made in February. Here's the president.

[Donald Trump]

As you know, Apple's been an investor in other countries a little bit. I won't say which ones, but a couple. And they're coming. They're coming home. $600 billion. It's the biggest there is. The company is also unveiling its ambitious new American manufacturing program, which will bring factories and assembly lines across our country all roaring to life. Areas that were not doing so well are doing very well.

[Azhar Sukri]

Journal finance editor Alex Frangos says markets, and not least tech companies are taking the announcements in stride.

[Alex Frangos]

There's a lot left to play for, but the investors seem to be welcoming the bonhomie between the big tech companies and Trump. There's this feeling that at the top level, Trump is throwing out these tariffs, but underneath it, he's making life palatable for everyone. And so, you know, you see markets not freaking out. Apple shares were up early this morning after this news. So it seems right now people are kind of digesting the whole thing.

[Azhar Sukri]

The levies on chips come ahead of sweeping new tariffs that went into force today. That includes a 50% levy on imports from India and Brazil, near 20% tariffs on Southeast Asian countries and a 15% rate on most industrialised economies like Japan and the EU. But as Alex explains, carve outs and exemptions like the one Apple received are causing confusion.

[Alex Frangos]

The dust has definitively not settled. There was going to be a big tariff on copper and Chile, one of the world's biggest copper producers, said, hey, maybe just do that on copper products, not raw copper. He slapped very high tariffs on Brazil. Brazil makes a lot of orange juice that Americans drink, makes a lot of airplanes that Americans fly in, and convinced that those should be exempted as well. The EU is in talks to, to try to carve out spirits so your Negronis can not be extra taxed and things like that. So there's this baseline or kind of ceiling of tariffs around the world, but underneath it is kind of a Swiss cheese of exemptions and carve outs. And the signal seems to be there will continue to be more and more of those sorts of things negotiated.

[Azhar Sukri]

And it's not just chip makers that are feeling the brunt. A journal tally of this earnings season reveals that the trade war has inflicted, inflicted almost $12 billion in losses on global automakers. Just this morning, Toyota said tariffs reduced its operating profit in the second quarter by $3.1 billion, the largest bill reported by a carmaker to date. And as autos reporter Stephen Wilmot explains, this may just be the beginning of a painful reshaping of the industry.

[Stephen Wilmot]

So they have to pay these tariffs in the short run because they have limited room for manoeuvre. These are companies with high fixed costs, very inflexible production works, but they can do a few things at the margins. They can increase production a bit, add an extra shift here and there, where they can in the us, dial down a bit of production in Mexico and Canada, in Japan, but they're tweaking a bit at the edges. They try and localize more parts. In the very long term, it doesn't really change the strategy of the auto industry, which has increasingly been about local for local production. So producing in North America, for the North American market, producing in Asia, for the Asian market. Toyota has been kind of the flag bearer of this policy and confirmed today that the tariffs sort of would essentially cement the logic of that strategy. So we're seeing the once global auto industry fragmenting into regional hubs, and tariffs are Part of that trend.

[Azhar Sukri]

Now, with the US Effectively ending the era of free trade on practically all its trading partners, people in poorer parts of the world reliant on on exports to the west are feeling the pressure. Journal senior reporter John Emont has been speaking to exporters in Indonesia. John, you've been looking at the tariff impact on the developing world. Tell us what you've learned.

[Ryan Reynolds]

So Indonesia is one of these countries where a lot of people join the middle class after working in factories that, you know, made Barbies for Mattel, made shoes for Nike. And crucially, the United States buys a lot of goods that are very labor intensive from Indonesia, like shoes, like clothing, like textile, even like canned pineapple. And so the concern is that 19% tariffs mean that demand is going to go down, meaning the United States will buy fewer products, meaning there won't be the need for the same amount of workers.

[Azhar Sukri]

Just how big of a trading partner is the US For Indonesia?

[Ryan Reynolds]

The US Is the number two trading partner after China. But crucially, the United States actually buys a lot of the labor intensive products. So that's why the United States is so important for a country like Indonesia. China doesn't really need Indonesian shoes. They do buy some, but they make a ton of their own shoes. Right. It's America which doesn't really manufacture athletic footwear or really sew its own clothes. So the United States just buys a lot of that really labor intensive stuff, whereas China tends to buy more commodities that tend to be less labor intensive. So in terms of the impact on just ordinary Indonesian workers, the United States is very important.

[Azhar Sukri]

And the fact that the US Consumer can't be replaced by Chinese consumers. I mean, just this morning, data showed Chinese exports to countries around the world, excluding the US Are continuing to rise. So China is very much a seller, not a buyer. Where does that leave a manufacturing hub like Indonesia?

[Ryan Reynolds]

One option would be, for example, to react by trying to limit Chinese exports to Indonesia. So one way of protecting your own factories that might have fewer options abroad is to give them more opportunities to sell domestically, which means limiting the flow of Chinese imports. And that's something that has been discussed repeatedly without much action. So one thing that the Indonesians have discussed is sort of accepting this 19% baseline tariff, but maybe getting carve outs for certain products that are very labor intensive, things like palm oil, other commodities that employ a lot of farmers. And the Indonesian's point is, why does the United States want to put a tariff of 19% on Indonesian palm oil? It's not like you can grow palm oil in basically almost anywhere in America. So the Indonesians are still negotiating with the United States, and I think they're hoping that if they play nice and try to be understanding that they can maybe win some important concessions.

[Azhar Sukri]

So looking at it from the US's point of view, what do we think the economic logic is of hitting the world's poorest countries with tariffs? Is there one? Or is it more about setting a standard for everyone and just letting the chips fall where they will?

[Ryan Reynolds]

I think that Trump is very focused on trade deficits and so inevitably countries that are quite poor can't buy a lot of U.S. products. And so they tend to have trade surpluses with the us. Right. So I think that's one reason why they're getting targeted the most. Sometimes it definitely feels a little bit confounding, like why would we be punishing Lesotho? Other times it may be makes a little bit more sense, you know, if you adopt sort of a Trumpian frame of mind. Like for example, if you take India, right, which is a still a rather poor country. But Trump has been clear that he doesn't want Apple supply chain just to move from China to India. He wants it to move from China to the United States. So conceivably, one way to make them more likely would be to raise hefty tariffs on India, even though India is a poor country. So I think it sort of depends when you look around the world. Certainly there are some examples, I would say Lesotho being a prominent one, where it is a bit confounding. There are other times where if you look at the world the way the president does, countries like India, Vietnam, it makes more sense.

[Azhar Sukri]

Senior reporter John Emont, thank you very much indeed for your time.

[Ryan Reynolds]

Thank you so much.

[Azhar Sukri]

Coming up, after centuries of debate, Italy is finally moving ahead with plans for a bridge to link the mainland with Sicily. That story and more after the break.

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[Azhar Sukri]

United Airlines flights started taking off again late yesterday, a few hours after a system wide technology issue prompted the carrier to halt departures. According to flight tracking site FlightAware, United canceled more than 60 flights and had more than 1,000 delays. At issue was a key system called Unimatic that stores flight data and feeds it to other systems. People familiar with the matter say work has been underway to replace the aging system. United didn't say what caused the outage, but that it wasn't related to cybersecurity concerns. Microsoft has hired one of the founders of Google's DeepMind to help it catch up in the AI race and in his new role as head of Microsoft AI, people familiar with the matter say Mustafa Suleiman is raiding his former shop for talent and is mirroring a tactic of Meta Platform CEO Mark Zuckerberg to do so. Suleyman has been personally calling recruits, offering heftier pay and pitching them on the idea that the AI division of Microsoft is a more startup like workplace than DeepMind. According to our reporting, Microsoft has poached at least two dozen executives and other employees from Google in the last several months, with most having worked at DeepMind. Mind Google said that its attrition rates are below industry average and that it has hired a number of employees from Microsoft. And in a feat of engineering, Italy has announced it will build the world's longest suspension bridge linking Sicily to mainland Italy. The two mile bridge over the Strait of Messina will cost an estimated $15.6 billion and is slated for completion in the early 2000-30s. Our Rome correspondent Margarita Stancati says the planning go back quite a while.

[Margarita Stancati]

This is a project that has been talked about literally since the 19th century as a way of linking Sicily to the mainland, both promoting national unity and to bring jobs and economic development to this part of Italy that has been historically impoverished. And the government is now presenting the bridge as a security asset that allows it to cast the project as a military expenditure that is part of its spending commitments to NATO. And once completed, it will include six traffic lanes, two railway tracks, and it's supposed to have a lifespan of around 200 years. It will have two huge steel towers on each side on the mainland. The steel towers, just to put that in perspective, will be much, much taller than the golden gatebridge towers and roughly as tall as the roof of the Empire State Building.

[Azhar Sukri]

And that's it for what's news for this Thursday morning. Today's show was produced by Kate Bullivant and Daniel Bark. Our supervising producer is Sandra Kilhoff. I'm Azhar Sukri for the Wall Street Journal. We'll be back tonight with a new show. Until then, thanks for listening.