Markets Jump on Hopes of a New E.U. Trade Deal

Summary

WSJ What’s News: Markets Jump on Hopes of a New E.U. Trade Deal
Release Date: July 24, 2025
Host: The Wall Street Journal

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1. Trade Optimism Sparks Global Market Rally

Global markets experienced a significant surge fueled by optimism surrounding a potential new trade deal between the United States and the European Union. Japan's Topix index reached a new record high, while European stocks climbed on indications that the U.S. and EU are nearing an agreement.

Azhar Sukri highlights the collaboration efforts:
"Trade optimism is fuelling a global market rally, with Japan's Topix hitting a new record high this morning and European stocks surging on signs that the U.S. and European Union are nearing a trade deal."
[00:39]

2. Potential U.S.-EU Trade Deal Under Scrutiny

The focus of this optimistic surge is a possible 15% tariff agreement that could apply to most EU exports to the U.S., including a critical provision for automobiles—a key sticking point previously hampered by President Trump's threat of 30% tariffs.

Kim McCrail, The Wall Street Journal's trade expert, provides insight:
"We heard yesterday, is increasingly the view that trade officials on both sides in the EU and the US seem to be converging on this idea that maybe an outline deal could have 15% tariffs for most EU exports to the US and interestingly for Europe that could potentially include cars, which has been a key sticking point for them."
[01:41]

While there is growing optimism, McCrail cautions that final approval from President Trump is still pending:
"The caution I would issue here, and I think it's important to keep in mind that that doesn't necessarily mean a deal will be done until it actually has President Trump's approval."
[02:29]

3. Comparison with Previous Trade Agreements

The potential U.S.-EU deal mirrors the recent agreement with Japan, suggesting a broader shift toward lowering tariffs from the initially proposed higher rates. This alignment reinforces hope for a more collaborative global trade environment.

McCrail compares the negotiations:
"What's being discussed right now for Europe has a lot of similarities to what we saw announced in terms of the deal with Japan. So the 15% that's the same level for a baseline tariff for most goods."
[02:43]

4. European Preparations for Potential Trade Fallout

Despite the optimism, Europe is also preparing for alternative scenarios. European member states are poised to vote on new tariff packages covering over $100 billion worth of U.S. imports, which would be activated if a deal fails and President Trump proceeds with the threatened tariffs.

McCrail elaborates:
"They're also simultaneously preparing potential countermeasures. So tariffs that they could put on the US if there's no deal and if Trump were to go ahead with the 30% tariff that was threatened."
[03:39]

5. Columbia University Settlement and Federal Funding Restored

In domestic news, Columbia University has agreed to pay over $200 million to the federal government to settle allegations of violating anti-discrimination laws. In return, the Trump administration will reinstate most of the research grants previously withdrawn in March, allowing the university future access to federal funding.

Azhar Sukri reports:
"The New York City school will also be able to access federal funding in the future."
[04:47]

6. Tensions Between the Trump Administration and the Federal Reserve

President Trump is set to visit the Federal Reserve, intensifying existing tensions. The administration has been critical of the Fed's multi-billion dollar renovation program and Chair Jerome Powell's policies, including pressure to cut interest rates and threats to terminate Powell’s tenure prematurely.

Sukri notes:
"The Trump administration will restore nearly all the research grants it had pulled from Columbia back in March."
[04:47]

7. Automotive Industry Struggles Amid Rising Tariffs

Hyundai Motor reported a 22% drop in profits year-over-year, attributing the decline to higher U.S. tariffs. Investors are closely monitoring upcoming meetings between U.S. and Korean trade officials for potential relief measures.

Additionally, Tesla faced a significant sales downturn, marking its biggest decline in a decade. Despite the financial setbacks, Elon Musk remains optimistic about future revenue streams.

8. Tesla’s Gloomy Financials and Future Prospects

Elon Musk addressed concerns during Tesla's earnings call:
"We have done what we said we will do doesn't mean we're always on time, but we get it done."
[00:30]

Further discussing Tesla's challenges, Musk admitted potential rough quarters ahead:
"Yeah, we probably could have a few rough quarters."
[07:49]

Stephen Wilmot, WSJ Autos Reporter, analyzes the situation:
"The big takeaway from this report is that the gap between the promise that Elon Musk is making to investors around Autonomy and the reality of Tesla's numbers and finances is getting more extreme."
[08:20]

Wilmot emphasizes the shift in Tesla's business model towards autonomy and robo-taxis, despite current financial strains and declining vehicle deliveries.

9. Microsoft’s Innovative Approach to Reducing Carbon Footprint

Yousef Khan, Journal Reporter, discusses Microsoft's investment in eco-friendly technologies that transform bio-waste into carbon credits. This initiative aligns with Microsoft's broader strategy to minimize its carbon footprint amidst expanding AI data centers and increasing energy demands.

Khan explains:
"Microsoft is very big on this. They are by far the biggest buyer in the market. So we're learning about these technologies, you know, in real time."
[12:04]

Microsoft's approach exemplifies the company's commitment to sustainability by turning waste into valuable carbon-reducing assets.

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Conclusion

The episode of WSJ What’s News delves into significant global trade negotiations, highlighting the potential U.S.-EU trade deal's impact on markets. It also covers critical domestic issues, including Columbia University's settlement and the Trump administration's strained relationship with the Federal Reserve. In the automotive sector, Tesla faces financial challenges despite Musk's optimistic outlook, while Microsoft pioneers innovative solutions to combat its carbon footprint. These discussions collectively underscore the dynamic interplay between global politics, corporate strategies, and market movements shaping today's economic landscape.

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

Transcript

[Narrator]

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[Azhar Sukri]

Global markets are surging and so is hope for peace in the trade war. Plus, Tesla shares drop as its sales suffer their biggest fall in a decade. But Elon Musk remains upbeat.

[Elon Musk]

We have done what we said we will going to do doesn't mean we're always on time, but we get it done. Adam Mazers are sitting there with egg.

[Azhar Sukri]

On their face and how your poop could help power Microsoft to its AI driven future. It's Thursday, July 24th. 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. Trade optimism is fuelling a global market rally, with Japan's topics hitting a new record high this morning and European stocks surging on signs that the U.S. and European Union are nearing a trade deal. President Trump's push to introduce a new standard for global trade is coming into sharper focus with officials on either side of the Atlantic converging on a possible 15% tariff deal. The Journal's Kim McRail has has been following EU trade negotiations closely and told our Kate Bullivant that it comes on the heels of a similar agreement with Japan earlier this week.

[Kim McCrail]

We heard yesterday, is increasingly the view that trade officials on both sides in the EU and the US Seem to be converging on this idea that maybe an outline deal could have 15% tariffs for most EU exports to the US and interestingly for Europe that could potentially include cars, which has been a key sticking point for them. So that looks a lot better than the 30% level that Trump had threatened just quite recently. The caution I would issue here, and I think it's important to keep in mind that that doesn't necessarily mean a deal will be done until it actually has President Trump's approval. And the Europeans actually thought they were close to a deal before just a couple of weeks ago. And their hopes for the deal that they had been negotiating before ended up being dashed when Trump issued a letter threatening those 30% tariffs.

[Kate Bullivant]

So some optimism, but by no means completely over the line yet. How does this potential deal compare to other deals struck so far? And what does this tell us about the new trade standard set by President Trump?

[Kim McCrail]

Yeah, so what's being discussed right now for Europe has a lot of similarities to what we saw announced in terms of the deal with Japan. So the 15% that's the same level for a baseline tariff for most goods. And the inclusion of cars at that level would be the same as what was agreed for Japan. This is interesting because actually there was some sense that not too long ago perhaps the US would not be moving from its 25% tariffs on automotives because of the administration's desire to try to reshore more manufacturing. So the fact that Japan was able to get a 15% level, I think does fuel quite a bit of optimism that there is a possibility for something below 25%. You know, whether or not Europe is able to get something like that as well, we'll see.

[Kate Bullivant]

So with all these different factors still being up in the air, if this deal doesn't go ahead, what can we expect the response from Europe to be?

[Kim McCrail]

Yeah, that's a great question. And I think it's good context, actually, in thinking about where we stand in terms of the talks between Europe and the US Right now. Because even as we're hearing quite a bit of optimism on the European side about where talks may be headed, they're also simultaneously preparing potential countermeasures. So tariffs that they could put on the US if there's no deal and if Trump were to go ahead with the 30% tariff that was threatened. So there will actually be a vote today from member states, European member states, who are combining two different packages that were put forward on tariffs on on US goods. It covers more than US$100 billion worth of American imports to Europe. So they'll probably approve that today, but it won't take effect before. So they're kind of holding that out as something that they could use to push back if a deal isn't reached. And if Trump were to raise tariffs after August 1st.

[Kate Bullivant]

That was the Journal's Kim McCrail. Kim, thanks so much.

[Kim McCrail]

Thanks so much for having me.

[Azhar Sukri]

Columbia University has agreed to pay more than $200 million to the federal government over allegations the school violated anti discrimination laws. In return, the Trump administration will restore nearly all the research grants it had pulled from Columbia back in March. The New York City school will also be able to access federal funding in the future. The Trump administration's battle with Columbia was the first of a series of broadsides against research universities that depend on federal funds to operate. The White House says President Trump will visit the Federal Reserve today, a surprise move that could add more pressure on Fed Chair Jerome Powell. Trump has been a harsh critic of a multi billion dollar renovation program for the Fed's Washington, D.C. headquarters. And as we've reported, Trump has repeatedly pushed Powell to aggressively cut interest rates, criticized his performance and threatened to end his tenure early. And in a slew of earnings out this morning, Hyundai motor reported a 22% drop in profits from a year earlier amid higher US tariffs. The carmaker's investors will be keenly watching Friday's meeting between US And Korean trade officials in Washington, hoping for a trade reprieve. Meanwhile, diverging fortunes for two key tech suppliers. STMicro, which supplies chips to Apple and Tesla, has added to months of disappointing sales as orders for chips in electric vehicles lag behind the surging demand for AI chips. The AI boom has benefited Nvidia supplier SK Hynix, though, which notched a record second quarter and plans to ramp up spending on high performance chips. Coming up, we've got more on big tech and dig into Tesla's surprisingly gloomy results with Elon Musk's first earnings call since leaving the Trump administration. That story and more after the break.

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[Azhar Sukri]

Tesla shares have slipped off hours after Elon Musk said he expects a few more bumpy quarters after the EV maker announced another steep decline in sales. Tesla's net income dropped 16% in the second quarter. Still, Musk encouraged investors to focus their attention on future revenue streams as he promised to expand Tesla's robo taxi service to half the country by the end.

[Elon Musk]

Of the year across all of it at the relatively early stages of autonomy. On the other hand, autonomy is most advanced and most available from a regulatory standpoint in the U.S. so I mean, does that mean, like, we could have a few rough quarters? Yeah, we probably could have a few rough quarters.

[Azhar Sukri]

Journal Autos reporter Stephen Wilmot joins me now. Stephen, let's start with the numbers here. They seem bad. The stock has reacted in turn. What's your take?

[Narrator]

The big takeaway from this report is that the gap between the promise that Elon Musk is making to investors around Autonomy and the reality of Tesla's numbers and finances is getting more extreme the numbers were pretty bad, certainly relative to a year ago. Free cash flow has basically evaporated. So the company is investing all of the money it's making, leaving very little for shareholders, whereas a few years ago it was really churning out huge amounts of free cash flow. And that's because vehicle deliveries have declined, of course. And Elon Musk is admitting that particularly fourth quarter of this year, first quarter of next year, second quarter of next year could be really bad because not only is the operating environment already difficult, but it's about to lose incentives in the U.S. the $7,500 tax credit, which is disappearing as a result of President Trump's spending bill. Not just that, but also income that Tesla has got historically, and it's been a really large part of its cash flows historically from regulatory credits. That is also under threat because of the changes that President Trump has made to the regulations around vehicle emissions. But yeah, as you rightly pointed out, he's doing everything he can to shift the focus to a totally different business, which is Autonomy, and saying that from the very, very small launch that they had in Austin, Texas in June, they're going to expand exponentially so that it starts being more meaningful part of Tesla's business next year. I guess the extent to which investors believe him is reflected in the slightly weak share price reaction. The hype around Autonomy wasn't quite able to overcome the sense that the next few quarters are not going to be great.

[Azhar Sukri]

It seems like there is a fairly radical shift in the business model overall. How are investors reacting to how that's going to.

[Narrator]

Well, on the one hand, Tesla hasn't participated in the massive AI rally that we've seen elsewhere to the same extent. But on the other hand, it has outperformed automakers quite significantly, and it's still valued totally disproportionately to GM and Ford and any other automaker, despite the fact that it's no longer in any way benefiting from EV growth in Europe, for example, and in China, it's being displaced, essentially. It's losing market share to rivals, to BYD in China and to Volkswagen in Europe. But it's still valued like a tech stock, essentially.

[Azhar Sukri]

So it seems almost as if it's a stock with a bit of an identity crisis.

[Narrator]

Absolutely. This quarter really demonstrates how big the gap is between its history and its future, as Elon Musk would like to portray it. But he needs to keep Tesla's valuation anywhere near it is he needs to keep this hope, this flame alive. And he's amazingly effective at keeping this flame alive. Despite having little in the way of concrete evidence for the extraordinary robo taxi future that he likes to talk about, there was very little in terms of concrete details that would back up this future.

[Azhar Sukri]

Stephen Wilmot, Wall Street Journal autos reporter, thank you so much.

[Narrator]

My pleasure.

[Azhar Sukri]

Now, sticking with the Mag 7 and Microsoft is betting that your poop can reduce the company's huge carbon footprint. The tech giant is investing in American Start vaulted deep that takes bio waste such as sewage and paper mulch and sends it thousands of feet underground. Journal reporter Yousef Khan says the process generates carbon credits for Microsoft by capturing the carbon that would have been released as the waste decomposes.

[Yousef Khan]

So Microsoft is betting on a variety of technologies to try and bring down its carbon footprint while also reducing its emissions by going to clean power and things like that. Like any big tech company, you know, they're really expanding with things like AI data centers, and that really drives up your carbon footprint as the energy costs go up. And so like any tech company, or really like any company at the moment, first you have to try and reduce your emissions, and then after that, the question is what you do with your residual emissions. That's where things like carbon removals, climate scientists say, can come in. Microsoft is very big on this. They are by far the biggest buyer in the market. So we're learning about these technologies, you know, in real time. These have only been developed in the last few years. We're still learning about the science, how much carbon they actually trap. So we're very much in the early stages. And, you know, Microsoft has taken a very early bet on these things.

[Azhar Sukri]

I guess the phrase one person's trash is another person's treasure takes on a whole new meaning. And that's it for what's news for this Thursday morning. Today's show was produced by Daniel Bark and Kate Bullivant. Our supervising producer is Sandra Kilhoff. I'm Azhar Sucri for the Wall Street Journal. We'll be back tonight with a new show. Until then, thanks for listening.