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- [00:04]
Azhar Sukri
President Trump raises tariffs on virtually every trading partner, including 35% on Canada.
- [00:11]
Alex Frangos
About 85% of the goods that Canada exports in the US are covered by that accord. So 35% on 15% of trade, it's still a much better deal than any of the other partners got right now. Canada is trying to preserve that USMCA exemption. What they're trying to do is limit damage to key sectors.
- [00:30]
Azhar Sukri
But in a sign of relief, levies won't begin until August 7th. We look at what this all means for countries, consumers and the markets. It's Friday, August 1st. I'm Azhar Sukri for the Wall Street Journal. Here is the AM Edition of what's news, the top headlines and business stories moving your world. Today, President Trump has signed an executive order that significantly raises tariffs on virtually every US trading partner. With the new regime taking effect on August 7, the big surprise was that.
- [01:09]
Vipel Monga
He gave another week for this to be implemented. That leaves a window open for further negotiation. So the levels we see here, you know, might not be the final levels. And even after August 7, there might be further negotiations down the line. The big, big thing which happened earlier in the day on Thursday was Mexico, a reprieve to negotiate its levels. So clearly there's still a lot to play for.
- [01:33]
Azhar Sukri
That's Journal finance editor Alex Fringos. According to the order, a 15% levy will apply to major economies like the European Union and Japan, as well as countries where the US has a small trade deficit. Nations where the US runs a trade surplus will face 10% tariffs. Alex explains the logic behind that.
- [01:55]
Vipel Monga
The reason you'd put 10% on countries with trade surpluses, you're not picking on them in particular, it's more that you want to create a baseline around the world and say, look, this is the cost of doing business with the U.S. there's a lot of concern in the White House that the countries with the biggest surpluses with the U.S. in other words, where the U.S. has a trade deficit like China, are going to reroute their goods to these other countries, many of whom currently are in deficit with the US So this is a bit of a deterrent. The other side of the coin is that Trump sees this as a revenue generator. A tariff is essentially a tax. We've seen a big increase in tariff revenue so far this year because of the increased tariffs. So if you throw 10% on everybody, you know, you bring in money.
- [02:34]
Azhar Sukri
Other countries face an even higher rate, though. Trump has pledged to hike tariffs to 50% on Brazil, Asian economies, Thailand, Cambodia, and Vietnam all face an almost 20% levy. And on Thursday, the President raised the rate on Canada to 35% for goods that do not comply with the U. S. Mexico Canada agreement. Vipel Monga is our reporter in Ottawa.
- [03:00]
Alex Frangos
After granting Mexico a 90 day extension, Trump criticized Canada for not doing enough to stop fentanyl from coming in over the northern border and also for retaliating against his tariffs. Trump criticized Canada for its agricultural tariffs and for not spending enough money on the military. He said a deal was still possible, but he had not spoken with Mark Carney yet.
- [03:24]
Azhar Sukri
Prime Minister Mark Carney has said his government remains committed to preserving the existing trade deal while pointing out that the majority of Canadian goods still remain tariff free. But Wiepel says that tariffs could damage key sectors of the Canadian economy, including lumber, steel, aluminum and automobiles.
- [03:45]
Alex Frangos
The 35% tariffs would only apply to the percentage of goods that flow across the border that are not covered by the USMCA accord. About 85% of of the goods that Canada exports to the US are covered by that accord. So 35% on 15% of trade, it's still a much better deal than any of the other partners got right now. Canada is trying to preserve that USMCA exemption. What they're trying to do is limit damage to key sectors, steel and aluminum for one, and the other one is autos. It's a real tough pickle for Canada because they really fear that this is the beginning of the end of the auto sector in Canada.
- [04:24]
Azhar Sukri
And for the countries that have struck a deal, the future isn't as clear cut either. As Alex Frangos explains, the countries that.
- [04:31]
Vipel Monga
Have struck so called deals like Japan, Korea, United Kingdom, European Union, Vietnam, the list goes on and on. These deals are very hazy. There's not a lot written down on paper generally. In the past trade deals were these monumental negotiating efforts that took years and years and ran hundreds and hundreds of pages long. So these are really outlines, frameworks at best and they're still a lot of negotiating on the nitty gritty. And frankly the nitty gritty really matters, really matters to investors and matters to companies. Are you exempt? Are you going to get some sort of quota? Could have huge ramifications. So the headline number might be very high, but the actual impact might be very low.
- [05:12]
Azhar Sukri
The outlier in all of this is of course China, which is working to extend a trade truce with the US past its August 12 deadline. This morning, data showed the country's manufacturing tumbled into contraction territory as tariffs continue to roil the world's second largest economy. So, as Alex alluded to earlier, the US has already been collecting revenues from the tariffs implemented in April. Those levies boosted the federal coffers by nearly $91 billion in the first half of the year. That's more than double the amount in the same period last year. I spoke to data reporter intypacheco, who's been tracking just how some of those tariffs have been impacting consumers.
- [06:01]
Inti Pacheco
Well, so the tariffs are usually paid by the importer. So that might be a retail company selling products to consumers. And up until now, a lot of these companies have been, like, absorbing those costs or working with partners to absorb those costs, like suppliers. But some companies have started increasing prices in recent months. You might see a $5 or $10 increase in a pair of shoes or a pair of jeans or maybe on some wooden furniture. But the companies have said that they've started doing it and that they will keep doing it to mitigate those costs. But a lot of them are saying that they're being very surgical about it, targeting very specific products and not like their entire line of items or products that they sell.
- [06:53]
Azhar Sukri
So, Inti, which categories of imports have seen the biggest increases in duties?
- [06:58]
Inti Pacheco
So we were looking at government data, looking at all the imports that come into the US from every other country, and the import that was paying the highest duties is, of course, vehicles, which consumers might be looking to buy. Those were paying during the same time period last year they paid half a billion dollars. And right now, Import have paid $2.3 billion to get those cars into the.
- [07:25]
Azhar Sukri
US and other categories like furniture and clothing have also gotten more expensive.
- [07:31]
Inti Pacheco
Yes, in furniture, the levies went up from 135 million to almost 306 million from January until May. And then also for clothing, we had specifically women's denim jeans. Last year, from January until May, they paid $77 million, and right now they paid 117 million.
- [07:58]
Azhar Sukri
And what have businesses said about all of this?
- [08:01]
Inti Pacheco
Yeah, so one of the biggest examples is Ikea, the flat pack furniture company that we all know and love. Some of us. They have been forced, they said, to increase prices because a lot of what they import comes from Asian countries. And so their costs have gone up and they've started passing on some of that to consumers. And they have said that they will keep analyzing the rising costs and maybe we'll have to do more rounds of price increases.
- [08:36]
Azhar Sukri
That's Journal data reporter Inty Pacheco. Thanks, Inti.
- [08:40]
Inti Pacheco
Thank you.
- [08:41]
Azhar Sukri
Coming up, the U.S. s envoy to the Middle East, Steve Witkoff, is set to visit Gaza today as the Trump administration seeks out a new aid plan. Plus why millions of student loan borrowers are bracing for higher monthly payments. That and more after the break. US Middle east envoy Steve Witkoff is set to visit Gaza today to develop a new aid distribution plan, accompanied by US Ambassador to Israel Mike Huckabee. White House Press Secretary Caroline Levitt said it's part of the Trump administration's push to alleviate the deepening humanitarian crisis in the Gaza Strip.
- [09:25]
Steve Witkoff
Special envoy Witkoff and Ambassador Huckabee will be traveling into Gaza to inspect the current distribution sites and secure a plan to deliver more food and meet with local Gazans to hear firsthand about this dire situation on the ground. The special envoy and the ambassador will brief the president immediately after their visit to approve a final plan for food and aid distribution into the region.
- [09:49]
Azhar Sukri
The visit follows Wyckoff's meeting yesterday with Israeli Prime Minister Benjamin Netanyahu in Jerusalem, where, according to an Israeli official, Israel is now considering negotiating a single comprehensive deal to end the war in the Gaza Strip. However, veteran negotiators say Witkoff still faces significant hurdles to clinch a deal. In El Salvador, ruling party legislators have pushed through constitutional changes that eliminate term limits on President Nayib Bukit. The legislation was introduced and voted on without debate at committee level yesterday. It allows Bukele, who has served as president since 2019, to further consolidate power in the impoverished Central American country. Millions of student loan borrowers are bracing for significantly higher monthly payments as the Trump administration winds down one of the federal government's most affordable repayment options. Starting today, interest will start accruing for nearly 8 million people enrolled in the Saving on a valuable Education plan or save. The Education Department said it's making the change to comply with a federal injunction that blocked the plan, which was introduced under the Biden administration. The loans remain in forbearance while courts decide SAVE's future, meaning borrowers still aren't required to make monthly payments. And we are exclusively reporting that Ray Dalio, the founder of hedge fund giant Bridgewater Associates, has sold his remaining stake in the firm he founded. In a letter to clients this week, Bridgewater said the billionaire has also stepped off its board. Hedge fund reporter Caitlin McCabe says the move marks the end of a tumultuous transition at the top of one of the biggest names in the hedge fund industry.
- [11:40]
Caitlin McCabe
So this is significant because Bridgewater and Ray Dalio are two really big names on Wall Street. Bridgewater is one of the biggest hedge funds in the world, and as a result, that's made Ray Dalio one of the most prominent hedge fund managers out there. So I think just by the very nature of that, people are interested in this news and in this firm. You know, I think it's worth noting that over the years Dalio has taken steps back from Bridgewater. So in 2011, Dalio said Succession Bridgewater would be a 10 year process. And in the years since, it's been pretty protracted and messy, in part because Dalio at some points during that process remained very actively involved with the firm. Bridgewater tried various numbers and combinations of CEOs over the years. One of them later sued and then settled with the firm. So this news definitely in a way caps this transition.
- [12:36]
Azhar Sukri
And that's it for what's news for this Friday morning. Today's show was produced by Kate Bullivant and Daniel Bar. Our supervising producer is Sandra Koff. I'm Azhar Sucri for the Wall Street Journal. We'll be back tonight with a new show. Until then, have a great weekend and thanks for listening.