DeepSeek’s Breakthrough Pushes AI Up on Trump’s To-Do List

Summary

Podcast Summary: WSJ What’s News – "DeepSeek’s Breakthrough Pushes AI Up on Trump’s To-Do List"

Release Date: January 28, 2025
Host: Alex Osola
Produced by: The Wall Street Journal

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1. DeepSeek’s AI Breakthrough and Its Impact on U.S. Policy

The episode opens with Alex Osola introducing a significant development in the tech world: the release of a sophisticated and cost-effective artificial intelligence model by the Chinese company DeepSeek. This advancement has not only stirred the global tech community but has also compelled the Trump administration to prioritize the AI race against China.

Amrit Ramkumar, Wall Street Journal’s tech policy reporter, delves into the ramifications of DeepSeek’s innovation. He emphasizes the dual concerns of economic competitiveness and national security:

“[The stakes] are staggering from an economic and national security perspective. Already, many national security officials in the US are very worried about AI and the risks posed by China and other countries racing ahead.”
(02:22)

Ramkumar highlights the urgency felt within the administration to address the rapid advancements in AI technology by foreign competitors, particularly China.

2. Trump’s AI Action Plan and Policy Shifts

The conversation shifts to the Trump administration’s recent executive order on AI, which annulled one of Biden’s directives requiring companies to notify the government upon developing powerful AI models. This move underscores Trump’s intent to redefine the U.S. approach to AI governance.

Ramkumar discusses the uncertainty surrounding the new AI action plan:

“Nobody really knows. So that's probably the most pressing question among companies, investors, lobbyists, as it relates to the AI race between the US and China.”
(01:51)

He points out that while President Trump has revoked previous regulations, there is significant anticipation about what his administration will implement in place. Ramkumar speculates on the potential rebranding of existing structures like the AI Safety Institute and the necessity for clear federal leadership to establish new standards and regulations.

“They really need to make clear sort of what the direction of travel is and what the rules of the road are.”
(03:13)

3. Market Reactions and Consumer Confidence

Following DeepSeek’s impactful announcement, Tech stocks experienced a rebound after a sharp decline the previous day. Notable companies like Nvidia and Oracle saw gains; however, these were insufficient to fully recover from earlier losses. The U.S. stock indexes closed higher, with the Nasdaq up by approximately 2%, the Dow Jones rising 0.3%, and the S&P 500 gaining just under 1%.

Despite the stock market's resilience, consumer confidence in the U.S. declined for the second consecutive month. The Index of Consumer Sentiment fell by more than economists had predicted, signaling diminished optimism regarding current and future economic conditions as the Trump administration enters its second term. Notably, consumers under 55 years old experienced a significant drop in sentiment, whereas those above 55 saw a slight increase.

“Consumers under 55 years old led the fall in sentiment, while those above 55 registered a small uptick in confidence.”
(08:50)

4. General Motors’ Restructuring in China and Potential U.S. Tariffs

A substantial portion of the episode is dedicated to General Motors (GM) and its recent financial downturn. GM reported nearly $3 billion in losses for the fourth quarter, attributing this to a strategic restructuring of its operations in China. The company is scaling back its robo-taxi ambitions and closing factories to align with the competitive landscape dominated by local Chinese automakers.

Mike Kalias, WSJ’s deputy bureau chief for autos, provides insights into GM’s situation:

“Chinese automakers have got a big cost advantage. They've pivoted to electric vehicles more quickly. They're delivering the kind of digital tech features that Chinese buyers really want.”
(07:17)

Kalias explains that while GM’s core operations remain profitable, especially in the U.S. market driven by higher-end models and larger vehicles, the losses in China stem from necessary measures to stay competitive.

The discussion then turns to the looming threat of 25% tariffs on imports from Mexico and Canada, which could have profound implications for GM and the broader automotive industry. Approximately one-third of GM’s U.S. sales originate from these neighboring countries. Such tariffs would significantly increase costs, potentially leading to higher vehicle prices and disrupting the meticulously established North American supply chain.

“There would be big ramifications for the entire industry if this 25% tariff on Mexico and Canada goes through.”
(09:01)

In response, GM is exploring strategies to mitigate the impact, including increasing domestic production and expediting inventory transfers from Mexico and Canada. Mary Barra, GM’s CEO, has communicated these contingency plans to investors, while the company actively engages with the administration and Congress to navigate the potential policy changes.

“We're looking at a number of things we could do... they're definitely scrambling and monitoring.”
(09:38)

5. Prescription Drug Price Increases

The episode also touches upon the healthcare sector, noting that over 800 prescription drugs saw price hikes at the beginning of the year. These increases were relatively modest, with a median rise of 4%, slightly below last year's 4.5% increase. This strategic pricing may help drugmakers avoid backlash from President Trump, who has been critical of rising healthcare costs, while balancing profitability and market demands.

6. U.S. Government's Efforts to Tax Online Sellers

In a move to bolster tax revenues, the U.S. Government is lowering the income thresholds for online sellers required to report their earnings. This change affects a broader spectrum of individuals, including those earning between $5,000 to $20,000 annually from platforms like Etsy or providing services on sites such as Justanswer. The IRS has intensified its scrutiny, recently authorizing investigations into individuals who may have underreported income, exemplified by the ongoing case with Justanswer users.

Ashleya Ebling, WSJ’s personal finance reporter, explains:

“It's not just people who sell stuff like tickets and clothes online. It's also people making stuff and selling it on Etsy. It's people taking online payments for their services.”
(11:46)

The IRS aims to ensure compliance and increase tax revenues by identifying and auditing more online income earners, particularly those who fall below previous reporting thresholds.

Conclusion

The episode of WSJ What’s News provides a comprehensive overview of pivotal developments in technology, automotive industry dynamics, healthcare pricing, and tax policy. DeepSeek’s AI advancements have not only shifted the strategic focus of the Trump administration but have also influenced market sentiments and international trade considerations. Concurrently, major corporations like General Motors are navigating both domestic and international challenges amid potential policy shifts and competitive pressures. The discussion underscores the intricate interplay between technological innovation, government policy, and economic performance shaping the current landscape.

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For more insights and detailed analysis, listeners are encouraged to tune into the full episode of WSJ What’s News.

Transcript

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[Alex Osola]

The Rise of Chinese company Deepseek is pushing the Trump administration to focus more urgently on AI.

[Amrit Ramkumar]

The stakes here are staggering from an economic and national security perspective. Already, many national security officials in the US Are very worried about AI and the risks posed by China and other countries racing ahead.

[Alex Osola]

Plus, General Motors prepares for possible US Tariffs on Mexico and Canada, and the makers of prescription drugs modestly raise prices in the U.S. it's Tuesday, January 28th. I'm Alex Osila 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. The release of a sophisticated and cheaply trained artificial intelligence model from Chinese company Deep Seq has rocked the tech world. It has also refocused President Trump on the AI race and created urgency for his administration to figure out what to do about AI. Here to tell us more about what the administration is thinking is Amrit Ramkumar, who covers tech policy for the Wall Street Journal. Amrit, I want to start with export restrictions on semiconductors. The Biden Administration limited which chips could be exported to China, though despite that, we have Deep Seq tilting the global tech race. So what's the Trump administration planning to do here?

[Amrit Ramkumar]

Nobody really knows. So that's probably the most pressing question among companies, investors, lobbyists, as it relates to things, the AI race between the US And China. So people are waiting on pins and needles for some clarity on that. We'll see where Trump lands on this because companies like Nvidia and others have warned that harsh export controls could really hurt revenue or hurt the growth of the industry in other ways and hurt these companies. So it's a very tricky balancing act that the administration will have to do. And of course they will not want to look weak on China. So you kind of have to put the Deep Seq news in the context of everything else that's going on, like discussions about tariffs on Chinese imports, a deal to buy TikTok or take over majority control of TikTok. So there are a lot of different balls in the air, but Definitely the chip export control thing is at the top of the list. And it's something people expect Commerce Secretary Howard Lutnick to be asked about at a Senate hearing. And people will be really following for any clues and indicators the administration gives in the coming weeks.

[Alex Osola]

Let's shift gears a little bit to the Trump AI action plan. Last week, the president signed an executive order about AI which revoked one of Biden's executives executive orders that ask companies to tell the government when they're developing powerful models. And it directed his team to create an AI action plan. So where does Deep Seek's model fit into this?

[Amrit Ramkumar]

Deep Seek's model and their breakthrough really just creates more urgency for Trump's team to make concrete what is in the action plan. Like you said, Trump revoked that order, but the key is what he's going to replace it with. And that's what people don't really know. Biden and his team also created something called the AI Safety Institute within the Commerce Department. And that's an organization that works with companies to develop testing standards and really make sure that these models are safe. So they've been working with companies like OpenAI and Anthropic and other big companies. So big companies have been very in favor of the Safety Institute. So we'll see where Trump lands on that. There's some speculation he could rebrand the Safety Institute and call it something else. But they really need to make clear sort of what the direction of travel is and what the rules of the road are. And a lot of people will be upset if the action plan is just no regulation and take a hands off approach because they do want to see some federal government leadership in this area.

[Alex Osola]

Yeah. What are the stakes here? Exactly. Like if Chinese models end up being the ones that are sort of more commonly used or more popular versus US.

[Amrit Ramkumar]

Models, the stakes here are staggering from an economic and national security perspective. Already many national security officials in the US Are very worried about AI and the risks posed by China and other countries racing ahead. And you have to think about the models that other countries will use. And if they're able to access Chinese models that are much cheaper and more accessible, then that's probably where the route they're going to go. And that creates a lot of potential issues geopolitically for the US and other countries.

[Alex Osola]

That was WSJ reporter Amrith Ramkumar. Thanks so much, Amrith.

[Amrit Ramkumar]

Thanks for having me.

[Alex Osola]

Tech stocks rebounded after yesterday's Deep Seek inspired rout. Some stocks that had swooned Monday, including Nvidia and Oracle posted solid gains today, though not enough to make up for yesterday's losses. U.S. stock indexes were up today. The Nasdaq added about 2%, the Dow rose 0.3%, and the S&P 500 gained just shy of 1%. Confidence among U.S. consumers fell for the second straight month. That reflects a retreat in optimism for both current and future conditions at the start of President Trump's second term and expectations that inflation will rise again. The Index of Consumer Sentiment, which is published by the research group the Conference Board, fell more than economists expected, but remained above the threshold that usually signals a recession ahead. The data showed that consumers under 55 years old led the fall in sentiment, While those above 55 registered a small uptick in confidence. Still, consumers remained bullish about the stock market, though slightly less than at the end of last year. Coming up, what tariffs against Mexico and Canada could mean for General Motors. That's after the break.

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[Alex Osola]

General Motors posted nearly $3 billion in losses for the fourth quarter. The cause? A restructuring of the company's China operations to abandon its robo taxi ambitions. The losses marred what was otherwise a relatively strong year for the company. Here to tell us more about what this means for GM's future is Mike Calias, the deputy bureau chief for autos for the Wall Street Journal. Mike, I want to start by digging into the reasons behind those losses in China. The company is taking some steps to restructure their operations. Does that seem like it's working?

[Mike Kalias]

Well, I'd say yes and no. So what the company said today is they've spent all this money, 4 billion plus dollars, that close some factories, probably vehicle lines, rework things with its joint venture partner over there. And all of these steps are being taken to mitigate some of the losses that we're seeing because GM and quite frankly, a lot of other major automakers in China have had a really tough time competing with the Chinese players. So this is GM trying to sort of right size its business there because it's basically acknowledging it's never going to be a major top player in that market anymore. The Chinese automakers have got a big cost advantage. They've pivoted to electric vehicles more quickly. They're delivering the kind of digital tech features that Chinese buyers really want. And so it's not game over for the, for the big foreign automakers, but they've already shrank in size despite this.

[Alex Osola]

We're reporting that this was a pretty decent year for gm. What were some of the bright spots?

[Mike Kalias]

That big loss in China was really an accounting balance sheet thing, right? Had to take these charges. But if you just look at the underlying operations of the company, it had its most profitable year ever from just an operating income standpoint that's driven mostly by the US market. So GM is really taking advantage of considerably higher prices that car buyers have been paying really since the pandemic. Like American car buyers are really paying up for higher end models and features and bigger cars in some cases. And gm, you know, that's kind of the sweet spot of the company looking ahead.

[Alex Osola]

One of the biggest potential issues on the horizon for GM is tariffs. If President Trump goes through with these tariffs against Canada and Mexico, how exposed is the company and what are they doing about it?

[Mike Kalias]

Just big picture. There would be big ramifications for the entire industry if this 25% tariff on Mexico and Canada goes through. The industry has spent 30 years kind of setting up its supply chain and its factory network to be able to move trade and goods freely between those countries. So GM as an example, one of the most exposed players, about a third of its what it sells in the US Its vehicles comes from either Mexico or Canada. And so that would raise costs for GM and companies like it by a lot. And it would probably lead to higher prices is what analysts expect.

[Alex Osola]

And how are they preparing for that?

[Mike Kalias]

GM CEO Mary Barra talked about this a bit when she addressed investors on their conference call today. She said, we're looking at a number of things we could do. We're looking to see if we were faced with paying levies on stuff coming in from Canada and Mexico, we could potentially make more trucks in the U.S. i know that they've been expediting some shipments of inventory that has been sitting over in Canada and Mexico to get that across the border before any tariffs take place. So they're definitely scrambling and monitoring. And I know that they're also talking to the administration and talking to Congress about the impact this would have. You know, when you talk to people in the industry, one of the things you hear is we ultimately don't think this is going to go into effect or go into effect for a long period of time just because it would be so damaging to an industry that President Trump's on record as saying he wants to see thriving.

[Alex Osola]

That was Mike Kalias, WSJ's deputy bureau chief for autos. Thanks, Mike.

[Mike Kalias]

Thanks for having me on.

[Alex Osola]

Drugmakers raised the list prices of more than 800 prescription drugs in the US at the start of this year. Many of them kept the increases relatively modest, with prices rising a median of 4% lower than the 4.5% rise last year. That could help companies avoid criticism from President Trump as they seek his administration's support. The impact for patients will depend on their health plan, which usually pays most of the cost of a prescription. To defuse tensions over the Panama Canal, Panama's government is preparing a charm offensive. Top Panamanian diplomats are meeting today with counterparts from the US State Department in anticipation of Secretary of State Marco Rubio's stopover in the country on Saturday. The State Department didn't immediately return a request for comment. And finally, if you've been making a bit of money selling things online, the US Government wants its cut. Granted, this isn't completely new, but now the threshold for how much you've made is lower. Which as WSJ personal finance reporter Ashleya Ebling told our your Money Briefing podcast means millions more taxpayers should expect to receive a form to report that income on their taxes.

[Mint Mobile Representative]

Mainly, it's people making between $5,000 to $20,000 who this will be new for. And it's not just people who sell stuff like tickets and clothes online. It's also people making stuff and selling it on Etsy. It's people taking online payments for their services. And really big thing the IRS has just launched an investigation into taxpayers who earn money as experts on the online platform Justanswer, and they allegedly failed to accurately report their income. It was in the past, from 2017 through 2020, and a judge in December just authorized the IRS to issue summons requiring Justanswer to provide the names of these people. So the point is, you know, you might be found out.

[Alex Osola]

You can hear more about this story in today's episode of youf Money Briefing. And if you're wondering what else is new for the 2025 tax season in the US Ashleya breaks down key changes to consider before you file in a two part series with your Money Briefing. The first episode drops Sunday, February 2nd. And that's what's news for this Tuesday afternoon. Today's show is produced by Pierre Bienname and Anthony Banci, 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.