Market Turmoil Deepens as Trump Stands By Tariffs

Summary

WSJ What’s News: Market Turmoil Deepens as Trump Stands By Tariffs

Release Date: April 7, 2025
Host: Luke Vargas
Produced by: The Wall Street Journal

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1. Introduction: Escalating Global Market Turmoil

In this episode of WSJ What’s News, host Luke Vargas delves into the escalating global market turmoil triggered by President Trump's steadfast stance on imposing aggressive tariffs. The episode, released on April 7, 2025, provides a comprehensive analysis of the economic repercussions, expert opinions, and geopolitical tensions arising from the latest trade policies.

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2. The Global Market Sell-Off

The episode opens with a stark portrayal of a severe global market sell-off. President Trump’s decision to double down on tariffs has sent shockwaves through international financial markets, exacerbating fears of a deepening trade war between the United States and China.

Luke Vargas sets the stage:

"Global markets sell off as President Trump doubles down on his tariffs" ([00:26]).

Peter Landers, Asia Finance Editor, elaborates on the gravity of the situation:

"European shares are tumbling after Asian stock markets plunged this morning" ([00:36]).

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3. Impact on Asian and European Markets

The repercussions of the tariffs were immediately felt across Asia and Europe. Asian stock markets experienced significant declines, with Japanese trading face the brunt.

• Japanese Markets: The Nikkei index saw an almost 10% drop in futures, prompting a temporary trading halt. The index ultimately closed down nearly 8%.

  Peter Landers noted:

  "The two worst hit markets were Hong Kong and Taiwan" ([01:39]).

• Hong Kong and Taiwan:

  • Hong Kong’s Hang Seng index plummeted over 13%, marking its worst day since the Asian financial crisis of 1997.
  • Taiwan’s stock market declined by 9.7%, nearing the market's one-day maximum drop limit.

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4. U.S. Market Concerns and Potential Bear Market

Back in the United States, Wall Street is bracing for challenging times as the S&P 500 futures indicate a potential plunge into bear market territory.

Katie Barnato, Markets Editor, highlights the growing economic fears:

"Wall street is starting to speak out as the true economic effect of tariffs comes into focus" ([02:03]).

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5. Wall Street's Dire Predictions

Prominent voices from Wall Street have begun voicing their concerns regarding the tariffs' long-term economic impacts.

• Kevin Hassett, White House National Economic Council Director, cites Goldman Sachs’ alarming forecast:

  "Goldman Sachs has raised the US's recession probability over the next 12 months to 45%. That's up from 35%" ([02:21]).

• Jamie Dimon, CEO of JP Morgan, expresses reservations:

  "Whether or not it would cause a recession is in question, but it will slow down growth" ([02:21]).

• Bill Ackman, billionaire investor, warns of an economic “nuclear winter”:

  "If the US goes ahead with all these tariffs, that could cause a self-induced economic nuclear winter" ([02:21]).

  He further emphasizes:

  "We are in the process of destroying confidence in our country as a trading partner, as a place to business, as a market to invest capital" ([02:21]).

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6. President Trump’s Unwavering Tariff Stance

Despite mounting warnings from financial experts, President Trump remains resolute in his tariff policies.

Luke Vargas reports on Trump’s activities:

"President Trump remains undeterred in his tariff stance, spending a long weekend at three of his Florida golf courses and firing off social media posts urging Americans to stay the course while promising a market reprieve" ([03:26]).

Trump’s administration defends the tariffs, with Hassett countering claims that consumers will bear increased costs:

"More than 50 countries have reached out to start negotiations" ([03:26]).

Robert F. Kennedy Jr., Health Secretary, adds a critical perspective:

"If US Consumers are bearing the costs, there's no reason for the countries to be angry. So the fact is the countries are angry and retaliating" ([04:02]).

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7. China’s Retaliatory Measures and Economic Impact

China swiftly retaliated to the U.S. tariffs, implementing sweeping measures that could further strain global economic relations.

Luke Vargas introduces China's response:

"China has come out in front as the only country to respond to U.S. tariffs immediately, announcing Friday it would put blanket tariffs of 34% on all U.S. goods" ([05:28]).

Hannah Miao, economist covering the Chinese economy in Singapore, provides deeper insights:

"The trade fight is really hitting China at a critical part of its economy. So exports last year actually accounted for nearly a third of China's GDP growth" ([06:03]).

She further explains the cascading effects:

"Trump's tariffs also hit many Southeast Asian countries with pretty high levies... with an overall global slowdown, which many economists are expecting, if tariffs go this high around the world, could really hurt demand in general for Chinese goods around the world" ([06:03]).

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8. Shifts in China’s Economic Strategy

In response to the increasing tariffs and global economic pressure, China is pivoting towards boosting domestic consumption to offset declining exports.

Hannah Miao discusses China’s strategic shift:

"China did identify boosting domestic consumption as its top policy priority for the year" ([08:23]).

Measures being taken include:

• Increasing money supply and implementing looser monetary policies to encourage spending.
• Introducing subsidies for childcare, raising wages, and expanding pensions to boost household spending.
• Expanding the goods trade subsidy program to stimulate retail sales of appliances and consumer goods.

Peter Landers queries the extent of stimulus measures:

"What we're not hearing here, Hannah, is talk of significantly bolder stimulus action... a bazooka stimulus" ([09:46]).

Hannah Miao acknowledges the anticipation for more substantial measures:

"A lot of investors have been waiting for that... China is willing to lower interest rates and also to increase deficit spending in an effort to boost household consumption, business consumption" ([09:56]).

She concludes that while efforts are underway, the effectiveness of these measures in compensating for reduced exports remains uncertain:

"We're still awaiting more details on what exactly that will look like... waiting to see if this kind of pickup in consumer spending would be enough to make up for any hits to exports as a result of tariffs" ([09:56]).

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9. Additional Headlines: Measles Outbreak and Geopolitical Tensions

While the primary focus remains on economic turmoil, the episode briefly touches on other significant news:

• Measles Outbreak in Texas:
  A second child died from measles in Texas amid a broader outbreak affecting hundreds. Health Secretary Robert F. Kennedy Jr. underscores the importance of vaccination:

  "The MMR vaccine is the most effective way to prevent the spread of measles" ([11:05]).

• Geopolitical Tensions in Panama:
  Defense Secretary Pete Hegseth is set to attend a regional security conference in Panama following President Trump's accusations of Chinese interference in the Panama Canal. This has led to significant business moves, including a Hong Kong-based conglomerate selling its stake in ports near the canal to a consortium including BlackRock.

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10. Conclusion: Uncertain Economic Future Amidst Trade Wars

As the episode concludes, the interplay between President Trump’s tariff policies and global economic stability remains precarious. With China’s aggressive retaliatory measures and shifting economic strategies, the world faces an uncertain financial future. The insights from Wall Street experts and economic analysts paint a picture of mounting recession risks and the potential for prolonged economic strain if the trade tensions persist.

Luke Vargas wraps up:

"That's it for what's news for this Monday morning" ([11:10]).

The episode underscores the critical need for negotiation and strategic economic policies to navigate the tumultuous waters of global trade wars.

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Key Quotes Summary

• Peter Landers: "The two worst hit markets were Hong Kong and Taiwan." ([01:39])
• Kevin Hassett: "Goldman Sachs has raised the US's recession probability over the next 12 months to 45%. That's up from 35%." ([02:21])
• Bill Ackman: "We are in the process of destroying confidence in our country as a trading partner, as a place to business, as a market to invest capital." ([02:21])
• Robert F. Kennedy Jr.: "If US Consumers are bearing the costs, there's no reason for the countries to be angry." ([04:02])
• Hannah Miao: "The trade fight is really hitting China at a critical part of its economy." ([06:03])
• Hannah Miao: "China did identify boosting domestic consumption as its top policy priority for the year." ([08:23])

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This comprehensive summary encapsulates the critical discussions and insights from the WSJ What’s News episode, providing listeners with a thorough understanding of the current economic climate and the far-reaching impacts of President Trump's tariff policies.

Transcript

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[Luke Vargas]

Global markets sell off as President Trump doubles down on his tariffs I don't.

[Hannah Miao]

Want anything to go down, but sometimes.

[Peter Landers]

You have to take medicine to fix something.

[Luke Vargas]

Plus, Beijing's tariff countermeasures raise the specter of an intensifying trade war with Washington. And Wall street speaks out, warning of an economic nuclear winter as recession risks mount. It's Monday, April 7th. 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. Turmoil in global markets has snowballed into one of the worst routes in recent memory after President Trump said he'll stay the course with aggressive, economically disruptive tariffs. European shares are tumbling after Asian stock markets plunged this morning. The sell off became particularly apparent when Japan's exchange operator briefly halted trading in response to an almost 10% drop in Nikkei futures. The index closed trading off nearly 8%, though as our Asia finance editor Peter Landers told me, that wasn't the worst of it.

[Katie Barnato]

The two worst hit markets were Hong Kong and Taiwan. The Hang Seng index in Hong Kong, which includes a lot of mainland Chinese stocks, was down more than 13%, and it had its worst day since the Asian financial crisis in 1997. Taiwan's stock market was down 9.7%, which is pretty close to the maximum because shares can't go down more than 10% in one day on that market.

[Luke Vargas]

Meanwhile, things are looking equally bleak back in the US with futures suggesting the S&P 500 is on course to enter bear market territory. And as Journal markets editor Katie Barnato explains, Wall street is starting to speak out as the true economic effect of tariffs comes into focus.

[Kevin Hassett]

Goldman Sachs has raised the US's recession probability over the next 12 months to 45%. That's up from 35%. We've also had a range of big name investors and big names on Wall street talking over the weekend. JP Morgan's chief executive, that's Jamie Dimon, in his annual letter to shareholders, he has raised concerns about President Trump's new tariffs. He specifically says whether or not it would cause a recession is in question, but it will slow down growth. Bill Ackman, the billionaire investor called specifically for a 90 day pause in the tariff to allow for more negotiations with other countries. He has said that if the US Goes ahead with all these tariffs, that could cause a self induced economic nuclear winter. He specifies in a social media post, we are in the process of destroying confidence in our country as a trading partner, as a place to business, as a market to invest capital.

[Luke Vargas]

Yet President Trump remains undeterred in his tariff stance, spending a long weekend at three of his Florida golf courses and firing off social media posts urging Americans to stay the course while promising a market reprieve. His administration is also defending the minimum 10% tariffs that have been imposed on countries around the world, with White House National Economic Council Director Kevin Hassett saying that more than 50 countries have reached out to start negotiations. Speaking to ABC News this Week with George Stephanopoulos, Hassett rejected the idea that American consumers will face higher prices.

[Robert F. Kennedy Jr.]

But if US Consumers are bearing the costs, there's no reason for the countries to be angry. So the fact is the countries are angry and retaliating. And by the way, coming to the table, I got a report from the USTR last night that more than 50 countries have reached out to the President to begin a negotiation, but they're doing that because they understand that they bear a lot of the tariff.

[Luke Vargas]

Israeli Prime Minister Benjamin Netanyahu is set to be the first world leader to hold in person talks with Trump about the tariffs when he visits the White House today. Meanwhile, EU trade ministers are also meeting meeting today to discuss the bloc's response to U.S. tariffs. Well, one country that's already responding is China. Coming up, we'll look at Beijing's sweeping retaliatory tariffs and get to the rest of the day's headlines. After the break.

[Daniel Bach]

It's tax season. So what's new this year that could save you money?

[Kevin Hassett]

The IRS says that taxpayers spend 13.

[Robert F. Kennedy Jr.]

Hours and $290 preparing and paying just for the tax prep.

[Kevin Hassett]

So it's worth looking into different options.

[Daniel Bach]

On the youe Money Briefing podcast from the Wall Street Journal, we're breaking down the latest tax rules, how to keep your tax data safe, and ways to file for free. Catch our Series tax season 2025, what's new and everything else you need to know leading up to tax day. On your Money briefing.

[Luke Vargas]

China has come out in front as the only country to respond to U.S. tariffs immediately, announcing Friday it would put blanket tariffs of 34% on all U.S. goods. The bevy of retaliatory measures from Beijing includes restrictions on exports of rare earth minerals, controls on several American companies, and a probe into US chemicals. Manufacturer DuPont. Journal reporter Hannah Miao covers the Chinese economy for us. Hannah, a pretty bold response from Beijing. What is the Chinese thinking around these tariffs?

[Hannah Miao]

So the trade fight is really hitting China at a critical part of its economy. So exports last year actually accounted for nearly a third of China's GDP growth, which was the highest proportion since the late 1990s. So China's economy definitely is focused on exports as a driver of economic growth. And with the US Being a major market, any continued trade barriers are really putting pressure on that part of the economy. At the same time, Trump's Liberation Day tariffs also hit many Southeast Asian countries with pretty high levies as well. And part of the strategy for many Chinese manufacturers in the last several years has been to expand their operations to places like Vietnam, places like Cambodia, Indonesia. And those countries are also now facing high tariffs. And plus an overall global slowdown, which many economists are expecting, if tariffs go this high around the world, could really hurt demand in general for Chinese goods around the world. So it's really pressuring this part of the economy, I guess.

[Peter Landers]

Trying to find new markets, presumably is going to be on the list, though the world has grown a bit wary of perceived Chinese dumping of its goods at a cheap price and harming local industry, for example.

[Hannah Miao]

Yeah, in my conversations with Chinese manufacturers in the last few days, a few have brought up saying we are going to try to look for customers outside of the US Some had mentioned, you know, the Middle East, Latin America, of course, Southeast Asia is a huge trading partner. But as you mentioned, we are seeing efforts from countries around the world to put up trade barriers to Chinese goods. There is a concern that a flood of cheap goods from China could hurt domestic industries in their countries. And of course, it's hard to find a replacement for the US Market. I mean, it's such a huge component of final demand in world trade, so it's really hard to replace. So we saw in the last several days, some Wall street research houses come out and say, we think these increased tariffs as a result of all of these factors impacting China's export sector could lead to around 1 to 2 percentage points of decline in China's GDP growth.

[Peter Landers]

Rate for this year, shifting over to encouraging domestic demand. We've had many segments on the show through the years about things Beijing is thinking about to try and incentivize Chinese consumption of its own products. What are we hearing there?

[Hannah Miao]

Yeah, so there have been calls for quite some time from outside economists and government advisors to shift China's economy more toward a consumption driven economy such as the US's economy. And China has long prioritized using manufacturing and investments and infrastructure, that kind of thing, as a driver of growth. But this year we saw that China did identify boosting domestic consumption as its top policy priority for the year. There are efforts to increase money supply, make policy looser and encourage spending, as well as efforts to implement policies such as subsidies for childcare and raising wages, expanding pensions, all of which would factor into expanding spending from households. There's also been a goods trade in subsidy program that has been underway and China is expanding that program this year, which already we have seen a correlating pickup in retail sales of appliances and consumer goods.

[Peter Landers]

Though what we're not hearing here, Hannah, is talk of significantly bolder stimulus action. If I'm hearing this correctly, what we've described here on the podcast before as a bazooka stimulus.

[Hannah Miao]

Yeah, a lot of investors have been waiting for that. It still remains to be seen, although we have seen this year more efforts to step up deficit spending in order to bolster the economy. We saw earlier this year, China's leaders set a fiscal deficit to GDP ratio target of about 4%, which is higher than last year's 3% target. And in recent commentary in places like People's Daily, which is the Communist Party's flagship newspaper, there has been commentary suggesting that China is willing to lower interest rates and also to increase deficit spending in an effort to boost household consumption, business consumption. So it certainly seems like the momentum is shifting more towards stimulus. We're still awaiting more details on what exactly that will look like. And perhaps more importantly, we're waiting to see if this kind of pickup in consumer spending would be enough to make up for any hits to exports as a result of tariffs.

[Peter Landers]

Reporter Hannah Miao covers the Chinese economy for us out of Singapore.

[Luke Vargas]

Hannah, thank you so much for the update.

[Hannah Miao]

Thanks for having me.

[Luke Vargas]

Back in the US a second child diagnosed with measles has died in Texas amid an outbreak that's sickened hundreds of people and spread to nearby states. The Texas Department of State Health Services said the school age child was not vaccinated and didn't have any known underlying health conditions. Health Secretary Robert F. Kennedy Jr. Traveled to Gaines county on Sunday, the center of the outbreak, where he was seen outside the funeral for the child. He did not attend a nearby news conference held by the US Centers for Disease Control and Prevention about the outbreak, but in a post on X said that the MMR vaccine is the most effective way to prevent the spread of measles. Health officials say two doses of the measles, mumps and rubella vaccine is 97% effective in preventing the disease. And the Pentagon says that Defense Secretary Pete Hegseth will travel to Panama this week to attend a regional security conference. The visit follows President Trump's allegations of Chinese interference at the Panama Canal and threats to take back control of the vital shipping lane. Panama's government has denied Trump's claim that China exerts influence over the canal. Following Trump's threats, a Hong Kong based conglomerate agreed to sell its controlling stake in a subsidiary that operates ports near the canal to a consortium including BlackRock. And that's it for what's news for this Monday morning. Today's show was produced by Daniel Bach and Kate Bullivant with supervising producer Sandra Kilhoff. And I'm Luke Vargas for the Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.