Markets Shrug Off Trump’s Latest Tariff Threats

Summary

WSJ What’s News: Detailed Summary of "Markets Shrug Off Trump’s Latest Tariff Threats"

Release Date: November 26, 2024
Host: Tracy Hunt
Guest: Greg Ip, Chief Economic Commentator, The Wall Street Journal

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1. Introduction

In the November 26, 2024 episode of WSJ What’s News, host Tracy Hunt delves into the latest economic and market developments, primarily focusing on President-elect Donald Trump's recent threats to impose substantial tariffs on imports from Mexico and Canada. The episode also explores the implications of these threats on global markets, corporate strategies regarding diversity initiatives, and significant developments in the pharmaceutical sector.

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2. Trump's Tariff Threats and Market Reactions

The episode opens with a discussion on President-elect Trump's announcement to levy 25% tariffs on imports from Mexico and Canada, signaling a protectionist stance that has sent ripples through global markets.

Market Impact:

• Currency Fluctuations: The Canadian dollar and Mexican peso experienced declines against the U.S. dollar following the tariff threats.
• Automaker Shares: Global automaker stocks dipped as traders evaluated potential disruptions to supply chains.
• Stock Market Performance: Despite initial jitters, major indices like the S&P 500 and the Dow Jones Industrial Average reached new highs, while the NASDAQ saw a modest gain of 0.6%.

Greg Ip’s Insights: Greg Ip analyzes the situation, emphasizing that Trump remains the dominant force influencing economic policy, even amidst efforts by traditional financial leaders to stabilize markets.

Greg Ip (00:25): “What President-elect Donald Trump's threats of tariffs against Mexico and Canada say about how he'll approach the economy.”

Greg Ip (02:36): “What it tells you, I believe, is that notwithstanding the effort to reassure Wall Street and the establishment with people like Scott Besson at Treasury, it is still Trump calling the shots.”

Ip highlights that despite the nomination of Scott Besant, a hedge fund manager with market-friendly credentials, to the Treasury Secretary position, Trump's protectionist inclinations prevail. He notes Trump's dissatisfaction with the USMCA, particularly regarding the influx of cheaper Mexican goods and issues like illicit fentanyl and illegal immigration.

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3. Implications for the USMCA and Potential Trade War

The imposition of tariffs directly contravenes the United States-Mexico-Canada Agreement (USMCA), the successor to NAFTA, which facilitates tariff-free movement of goods among the three nations.

Key Points:

• Violation of USMCA: A 25% tariff on imports from Mexico and Canada blatantly breaches the agreement, raising concerns about economic retaliation and a potential trade war.

Reasons Behind Trump's Stance:

• Economic Concerns: Trump aims to reduce the influx of cheaper Mexican products, which he argues jeopardizes American jobs.
• Security Issues: He attributes a rise in illicit fentanyl and illegal immigration to Mexico’s insufficient control measures, seeking leverage through the USMCA renegotiations.

Greg Ip’s Perspective: Ip suggests that Trump is using the USMCA renegotiation as a strategic point to address multiple grievances, potentially pushing for concessions beyond just trade tariffs.

Greg Ip (03:26): “Trump is basically seizing upon the renegotiation of that treaty as a leverage point to achieve a lot of different things with Trump's tariff threats.”

Ip also raises questions about the negotiation tactics, noting that Trump’s sudden announcement of high tariffs contrasts with expectations that such moves would wait until his presidency and commence with lower rates. He speculates that immediate actions might be intended as negotiating ploys, though past behaviors indicate Trump has followed through on tariff implementations, notably against China.

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4. Corporate Shifts: Walmart’s Rollback of DEI Initiatives

Shifting focus from trade policies to corporate social responsibility, the episode highlights Walmart's decision to scale back its Diversity, Equity, and Inclusion (DEI) programs amidst mounting pressure from conservative activists.

Walmart’s Changes:

• Termination of DEI Programs: Walmart is winding down its Center for Racial Equity and programs supporting majority-owned suppliers from underrepresented groups.
• Reasoning: The rollback is largely attributed to backlash from conservative factions and the strategic timing ahead of the Black Friday shopping season.

Influence of Activists: Robby Starbuck, a prominent anti-DEI activist, claims responsibility for pressuring Walmart and other large corporations to abandon their DEI commitments.

Adoptive Mom (09:25): “Basically, we've hit a point where it's really been years of companies backtracking on a lot of their DEI LGBTQ corporate activities under pressure from conservative activists.”

Adoptive Mom (10:03): “He's pretty strategic about it. I talked to him and he said he waited to target Walmart, knowing it was a big fish, until he had some experience with these other companies.”

Market and Social Implications: Sarah Nassauer from The Wall Street Journal comments that Walmart's decision sets a significant precedent, given its stature as the largest U.S. retailer and private employer. This move may embolden other companies to reconsider their DEI strategies in response to similar pressures.

Adoptive Mom (10:42): “It definitely sets a precedent because it's Walmart. Walmart is the largest retailer in the country by revenue and the country's largest private employer.”

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5. Pharmaceutical Developments: Amgen’s Obesity Drug

The episode also covers the mixed reactions to Amgen’s obesity drug candidate, Maritide, which showed promise in clinical trials but fell short of investor expectations.

Clinical Trial Results:

• Efficacy: Patients using Maritide experienced a 20% reduction in body weight compared to those on placebos.
• Investor Reaction: While the results are positive, analysts anticipated greater efficacy, questioning the drug's potential to challenge market leaders like Eli Lilly and Novo Nordisk.
• Patient Tolerability: Approximately 11% of participants discontinued the drug due to adverse effects, raising concerns about its long-term viability.

Policy Implications: The Biden administration proposes that Medicare and Medicaid cover these high-cost drugs, priced over $1,000 monthly. This proposal, however, faces scrutiny from Trump-appointed officials who hold divergent views on obesity treatment.

Diverse Perspectives:

• Robert F. Kennedy Jr.: Skeptical about pharmaceutical interventions for obesity, advocating for healthier eating habits instead.

  Peter Loftus (08:03): “He has expressed skepticism about these drugs, essentially saying that a better way to deal with obesity is just eating healthier.”

• Dr. Mehmet Oz: Supports recognizing obesity as a legitimate medical condition that may require pharmaceutical treatment beyond diet and exercise.

  Peter Loftus (08:03): “Dr. Mehmet Oz has said that obesity is a real condition, it shouldn't be stigmatized, it's not easily dealt with by diet and exercise alone.”

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6. Conclusion

The episode of WSJ What’s News provides a comprehensive overview of the current economic and corporate landscapes influenced by political decisions and social movements. From Trump's aggressive tariff threats potentially igniting a trade war to major corporations like Walmart retracting DEI initiatives under activist pressure, the discussions underscore a period of significant change and uncertainty. Additionally, developments in the pharmaceutical industry highlight the complex interplay between medical advancements, market expectations, and policy decisions.

Produced by Anthony Bansi with supervising producer Matthew Walls, this episode offers valuable insights for listeners seeking to understand the multifaceted factors shaping today's business and economic environment.

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For more updates, tune in to the next episode of WSJ What’s News.

Transcript

[Adoptive Mom]

Courage. I learned it from my adoptive mom. Hold my hand.

[Tracy Hunt]

You hold my hand. Learn about adopting a teen from foster [e-mail] you can't imagine the reward brought to you by Adopt Us Kids, the U.S. department of Health and Human Services and the Ad Council. What President elect Donald Trump's threats of tariffs against Mexico and Canada say about how he'll approach the economy.

[Greg Ip]

What it tells you, I believe, is that notwithstanding the effort to reassure Wall street and the establishment with people like Scott Besson at Treasury, it is still Trump calling the shots.

[Tracy Hunt]

And the results from a closely watched obesity drug study are in. And investors don't like what they see. Plus why Walmart is rolling back its DEI efforts. It's Tuesday, November 26th. I'm Tracy Hunt for the Wall Street Journal. This is the PM edition of what's the top headlines and business stories that move the world today. But before we get to those stories, Israel has approved a ceasefire with Hezbollah that would end more than a year of fighting in Lebanon. In a televised address, Israeli Prime Minister Benjamin Netanyahu said ending the fight would give the country's military time to rest and rearm so it could focus on the threat from Iran and isolate Hamas. Lebanese officials say the agreement is expected to go into effect on Wednesday. The announcement came after a day of heavy bombardment of Beirut while Israeli ground forces advanced deeper into Leb, Lebanese territory. President elect Donald Trump's threat to impose 25% tariffs on imports from Mexico and Canada on his first day in office caused the Canadian dollar and the Mexican peso to move lower against the US Dollar today. Meanwhile, shares of global automakers declined as traders considered what impact tariffs might have on supply chains. Investors, though, are largely taking a wait and see approach to Trump's trade policy, betting that he won't come close to following through on all his threat. The S&P 500 and the Dow notched fresh records, and The NASDAQ gained 0.6%. Trump's promise of tariffs came just days after he nominated hedge fund manager Scott Besant to Be treasury secretary. Besant has a reputation as a deficit hawk, but he's a late convert to tariffs. Here to explain all this is Greg ip, the Wall Street Journal's chief economic commentator. So, Greg, what does this say about Trump's overall approach to the economy?

[Greg Ip]

When Trump nominated Scott Besant to be the treasury secretary, people said, oh, that's good. Besant's a hedge fund manager. He's very smart about markets. He has good ideas about bringing the deficit down. And at Least to date. What he said about tariffs is that he thinks that they're only a negotiating ploy. So you actually saw the markets rallied somewhat on Monday. But then Trump comes along with this announcement out of the blue that he's going to hit Mexico and Canada and then also China with tariffs. That's forced to rethink. What it tells you, I believe, is that notwithstanding the effort to reassure the Wall street and the establishment with people like Scott Besson at Treasury, it is still Trump calling the shots. And Trump loves tariffs, and he is a protectionist at heart.

[Tracy Hunt]

This announcement suggests that Trump is eager to reopen the 2018 United States, Mexico, Canada Agreement or the USMCA. Wouldn't these tariffs violate the USMCA?

[Greg Ip]

You're absolutely right. The USMCA was a successor agreement to the North American Free Trade Agreement, or nafta. And under both of those agree, products move from Canada to the United States and Mexico and back tariff free. So imposing these 25% tariffs would be a clear violation of that agreement. But it appears from the way that Trump's been talking for the last year that even though he negotiated that agreement, he's not very happy with it. He doesn't like that a lot of cheaper Mexican products are coming in in greater volumes. He has talked, for example, about hitting Mexican car imports with very high tariffs in order to stem that inflow, which he thinks is bad for American jobs. And he believes that Mexico is simply not doing enough to halt the flow of illicit fentanyl in the United States. And he would like to see Mexico do more to stem the flow of illegal immigrants across the US Southern border. Now, it's an open question whether fentanyl or illegal immigration can really be part of the usmca. But I think what Trump is basically doing is seizing upon the renegotiation of that treaty as a leverage point to achieve a lot of different things are Trump's tariff threats.

[Tracy Hunt]

Assign that a trade war with American rivals and allies much more likely.

[Greg Ip]

Now, a lot of folks were expecting that he would wait until he was actually president and then would enter a series of negotiations and he would start low with tariffs, not high. But that's not what we're getting. He's not even the president yet, and he's starting with a very high bid on tariffs. But the thing we don't know is whether these are still a negotiating tactic. It seems not hard to believe that between now and when he takes office, Canada and Mexico will undertake certain actions that will please Trump and allow him to claim victory and set aside these threats. It wouldn't be the first time that Trump has dangled the threat of terror only to essentially set them aside, saying he had gotten what he wanted. But there were many tariff threats in the past that he actually did carry through on, most notably on China.

[Tracy Hunt]

How much leeway will Trump's economic appointees have in setting policies or curbing Trump's impulses on tariffs?

[Greg Ip]

What we saw this week is that ultimately Trump is the policy decider here. Now, on balance, a mixture of voices inside the policy room is probably still going to moderate the overall thrust of policy. Bessen has a reputation for being concerned about the deficit, so he'll probably team up with Elon Musk to look for spending cuts to bring the deficit down. But Trump's also laid out a bunch of tax cuts that he wants. It may be difficult for Besant and other people in his team to achieve the kind of deficit reduction that they want. The other thing to keep in mind is that Trump hasn't finished filling out his economic team yet. We don't yet know who we'll have as the director of his National Economic Council or as his trade ambassador. And if he chooses more protectionist individuals or people with more outside the mainstream economic ideas for those positions, that would once again force everybody to, I think, reconsider and recalibrate exactly just how populist a president they have now.

[Tracy Hunt]

Greg IP is the Wall Street Journal's chief economic commentator. Thank you so much, Greg.

[Greg Ip]

Thanks for having me.

[Tracy Hunt]

Coming up, Walmart does a 180 on its DEI initiatives. That and more after the break. A highly anticipated obesity drug candidate from biotech Amgen helped patients shed a significant amount of weight in a mid state study, but fell short of the loftier expectations of some investors. Amgen today said that subjects taking its drug candidate Maritide lost 20% of their body weight compared with those who received placebos. But WSJ pharma reporter Peter Loftus said analysts had expected more for a drug that some thought could break the duopoly held by Eli Lilly and Novo Nordisk.

[Peter Loftus]

A lot of investors were expecting or hoping that the magnitude of the weight loss could have been much bigger and therefore it could be a more viable competitor. The other issues that some people had with it were whether the drug is tolerable for patients. Something like 11% of the people dropped out of the study or stopped taking the drug because they were having a tough time tolerating it.

[Tracy Hunt]

And as we told you this morning, the Biden administration is proposing a plan for Medicare and Medicaid to pay for these new drugs. With price tags of more than $1,000 a month, the plan could add up to tens of billions of dollars, and it would have to be finalized by the Trump administration. But Trump's nominee to run the Department of Health and Human Services, Robert F. Kennedy Jr. And his pick to run Medicare, Dr. Mehmet Oz, have differing opinions on the popular drugs. Here's Peter again, Robert Kennedy.

[Peter Loftus]

He has expressed skepticism about these drugs, essentially saying that a better way to deal with obesity is just eating healthier. Whereas Mehmet Oz has said that obesity is a real condition, it shouldn't be stigmatized, it's not easily dealt with by diet and exercise alone, and that these could be a real option for people. So it remains to be seen how this is going to play out.

[Tracy Hunt]

In the wake of George Floyd's killing in 2020, many U.S. companies vowed to support diversity, equity and inclusion, or DEI efforts. Chief among them was Walmart, whose CEO Doug McMillan, spoke publicly about these issues. Walmart now says it's ending some of its diversity programs. It'll wind down the center for Racial Equity, a nonprofit it funded with $100 million for five years in and programs that assist suppliers that are majority owned by women, minorities, veterans or members of the LGBTQ community. The moves make Walmart the latest big company to shift gears under pressure from a conservative activist. Following in the steps of Harley Davidson and tractor maker Deere, Sarah Nassauer writes about large retailers for the Wall Street Journal. Sarah, why are all these companies rolling back their DEI programs now?

[Adoptive Mom]

Basically, we've hit a point where it's really been years of companies backtracking on a lot of their DEI LGBTQ corporate activities under pressure from conservative activists. And now in the wake of the Trump election, you see renewed vigor around some of these efforts and companies afraid of backlash from customers and their workers who are against some of these policies.

[Tracy Hunt]

One of these anti DEI activists, Robby Starbuck, he is taking credit for Walmart ending some of its diversity efforts. Do you know what other companies he plans to target?

[Adoptive Mom]

He's talked about in his videos about targeting other companies. He's name checked several. We do know that he has had success with other smaller than Walmart companies, tractor supply manufacturing firms like Ford and Deere, getting them to publicly sort of disavow some of the things that they have done in the past. And he's pretty strategic about it. I talked to him and he said he waited to target Walmart, knowing it was a big fish, until he had some experience with these other companies. And also ahead of the Black Friday shopping season. You know, this is a really important time for retailers, and he thought they would be more perceptive to a campaign like his.

[Tracy Hunt]

Now, does this set a precedent for other big companies?

[Adoptive Mom]

It definitely sets a precedent because it's Walmart. Walmart is the largest retailer in the country by revenue and the country's largest private employer. So they have a bit of an outsized role when it comes to setting the tone on labor practices or even political movements. So I do think that this marks a real inflection point for how companies are handling this issue.

[Tracy Hunt]

That was our reporter, Sarah Nossauer, and that's what's news for this Tuesday afternoon. Today's show was produced by Anthony Bansi with supervising producer Matthew Walls. I'm Tracy Hunt for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.