OECD Slashes U.S. Growth Forecast

Summary

WSJ What’s News: Detailed Summary of “OECD Slashes U.S. Growth Forecast” Episode

Release Date: June 3, 2025

In this episode of WSJ What’s News, hosted by Luke Vargas from The Wall Street Journal, listeners are presented with an in-depth analysis of the latest economic forecasts, geopolitical tensions, and significant policy shifts affecting global markets. The episode delves into the OECD's revised growth projections for the U.S., the evolving dynamics of U.S.-China trade negotiations, South Korea's pivotal presidential election, FEMA's controversial hurricane response plan, and emerging legal challenges in the tech and music industries.

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1. OECD Slashes U.S. Growth Forecast

The episode opens with a critical examination of the Organization for Economic Cooperation and Development (OECD)'s latest economic forecasts. The OECD has significantly downgraded its growth projections for the United States, citing ongoing tariff-related turmoil and broader global economic uncertainties.

• Luke Vargas introduces the topic, highlighting that "Global growth is set to slow this year and next as US Tariffs introduce widespread economic uncertainty and risk, leading to higher for longer inflation" (01:09).

• Matthias Corman, OECD Secretary General, elaborates on the factors contributing to this forecast: "The main headwinds are lower export growth as a result of retaliatory measures from some trading partners, the impact of high policy uncertainty and a marked slowdown in net immigration" (02:00).

• The OECD projects U.S. economic growth to dip to 1.6% in 2025, a stark decline from the previous year's 3.3% and March's projection of 2.2% (01:09).

• The forecast also anticipates U.S. inflation nearing 4% this year, a trend expected to persist globally, potentially keeping interest rates elevated and increasing borrowing costs, thereby dampening economic activity.

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2. US-China Trade Tensions and Negotiations

A significant portion of the episode is dedicated to exploring the strained relationship between the United States and China, particularly focusing on recent developments in trade negotiations.

• Ling Ling Wei, Chief China Correspondent for The Wall Street Journal, provides insights into China's strategic shift in trade negotiations. She notes, "What really jumped out at me is how Xi Jinping wants a different kind of negotiation than the one in the first Trump term" (03:58).

• The current Chinese chief negotiator, He Lifang, represents a departure from previous negotiators. Unlike his predecessor, He lacks proficiency in English and has limited experience engaging with American officials, signaling a more hardline stance. Wei explains, "He Lif doesn't speak English and he doesn't have as much of experience dealing with Americans as some of his predecessors did" (04:52).

• He Lifang is staunchly defending China's industrial policies, refusing to acknowledge overcapacity issues. He argues, "the fact that we're selling so much cheap stuff to the rest of the world should be viewed as a positive by comparison" (04:52).

• The episode highlights China's strategic use of export controls as leverage in negotiations. Wei details, "The Chinese really have already used export controls as a very potent tool to hit back at the US and will continue to use that as leverage in future negotiations" (06:19).

• Emphasizing China's push for self-reliance, Wei states, "Xi Jinping has significantly beefed up the country's self-reliance. They believe they're in a better position to drive a harder bargain" (07:25).

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3. China's Manufacturing Sector: Signs of Strain

The podcast also addresses concerns within China's manufacturing sector, drawing on data from the China Caixin Manufacturing Purchasing Managers Index (PMI).

• Rebecca Fung reports that the PMI fell to 48.3 in May, indicating a contraction in manufacturing activities, as readings below 50 denote shrinking activity (02:42).

• Additionally, a sub-index tracking factory production declined for the first time in 19 months, suggesting that "Chinese manufacturing activities has not fully recovered despite the US And China trade truce" (02:42).

• Despite these challenges, business optimism saw an uptick in the previous month, with companies hopeful for a resolution to the ongoing trade conflict (03:12).

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4. South Korea's Pivotal Presidential Election

Shifting focus to East Asia, the episode covers South Korea's recent presidential election, a critical event given the country's strategic importance.

• Tim Martin, Korea Bureau Chief, discusses the implications of the election outcome: "The stakes are very high for South Korea, one of America's biggest trading partners and allies" (09:16).

• The ruling conservatives appear poised for defeat, with voters expressing dissatisfaction following the recent imposition of martial law late last year.

• The new president's approach will be crucial in shaping South Korea's trade relations with the U.S., especially regarding ongoing negotiations with the Trump administration and addressing security concerns related to China and North Korea.

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5. FEMA Scraps New Hurricane Response Plan

Back in the United States, the Federal Emergency Management Agency (FEMA) has made a controversial decision to discard its newly developed hurricane response plan just days into the hurricane season.

• Luke Vargas reports, "Agency workers were left stunned after new FEMA leader David Richardson suggested he recently learned there was an annual hurricane season" (10:10).

• This move comes amid significant workforce reductions and the elimination of key programs, raising questions about the agency's preparedness. A FEMA representative dismissed concerns, asserting that there is no uncertainty regarding the agency's hurricane response strategy.

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6. Meta Challenges European Commission Over DMA Enforcement

The tech industry is another focal point, with Meta (Facebook) taking legal action against the European Commission's crackdown under the Digital Markets Act (DMA).

• Luke Vargas outlines the issue: "Meta platforms are taking on the European Commission today, challenging the bloc's crackdown on the company's social networking business" (10:10).

• Meta argues that features like Messenger and Marketplace should not be classified as "core platform services" subject to DMA's stringent regulations. Other tech giants, including Apple and ByteDance's TikTok, are also contesting the DMA, which mandates easier access for rivals on their platforms or face hefty fines.

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7. Music Industry Sets Precedent for AI-Generated Remixes

Concluding the episode, Vargas touches upon groundbreaking developments in the music industry concerning artificial intelligence.

• Three major music labels—Universal, Warner, and Sony—are in negotiations with AI startups Suno and Udo to establish new standards for AI-generated remixes.

• The labels seek compensation models where artists and labels are paid when their music is used to train generative AI models. This involves developing "fingerprinting and attribution technology similar to YouTube's Content ID" to monitor and monetize AI-driven musical creations.

• Agreements may also involve the labels taking equity stakes in the AI startups, signaling a significant shift in how intellectual property and creative works are managed in the age of artificial intelligence.

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Conclusion

This episode of WSJ What’s News provides a comprehensive overview of pressing economic and geopolitical issues affecting global markets. From the OECD's sobering economic forecasts to the intricate maneuvers in U.S.-China trade negotiations, the podcast offers valuable insights for listeners seeking to understand the complex forces shaping today's world. Additionally, the discussions on FEMA's policy shifts, South Korea's political landscape, and emerging challenges in the tech and music industries underscore the multifaceted nature of contemporary global affairs.

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Notable Quotes:

• Matthias Corman: "The main headwinds are lower export growth as a result of retaliatory measures from some trading partners, the impact of high policy uncertainty and a marked slowdown in net immigration." (02:00)

• Ling Ling Wei: "He Lif doesn't speak English and he doesn't have as much of experience dealing with Americans as some of his predecessors did." (04:52)

• Ling Ling Wei: "The Chinese really have already used export controls as a very potent tool to hit back at the US and will continue to use that as leverage in future negotiations." (06:19)

• Ling Ling Wei: "Xi Jinping has significantly beefed up the country's self-reliance. They believe they're in a better position to drive a harder bargain." (07:25)

• Tim Martin: "The stakes are very high for South Korea, one of America's biggest trading partners and allies." (09:16)

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

Transcript

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[Luke Vargas]

FEMA scraps its new hurricane plan as storm season kicks off plus the OECD forecasts the US and global economies will lose steam as tariff related turmoil drags on, and we'll look at China's trade negotiating team for clues about the likely hardball talks to come.

[Ling Ling Wei]

They believe they're in a better position to drive a harder bargain. If the US Wants China to buy more stuff from the United States, the Chinese would argue, okay, you need to sell us stuff we really want, such as semiconductors.

[Luke Vargas]

It's Tuesday, June 3rd. 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 Global growth is set to slow this year and next as US Tariffs introduce widespread economic uncertainty and risk, leading to higher for longer inflation. That's according to the Organization for Economic Cooperation and Development, or OECD, which projected the US could be among the worst hit economies with 2025 growth of just 1.6%, a sharp deceleration from a 3.3% forecast last year and a March projection of 2.2. OECD Secretary General Matthias Corman.

[Matthias Corman]

The main headwinds are lower export growth as a result of retaliatory measures from some trading partners, the impact of high policy uncertainty and a marked slowdown in net immigration.

[Luke Vargas]

According to the OECD forecast, US inflation could reach close to 4% this year, part of a global trend that Cormann said could keep interest rates elevated, leading to higher borrowing costs and dragging economic activity. Meanwhile, fresh manufacturing data out of China is showing the steepest drop off in new orders in over two and a half years. The Journal's Rebecca Fung has more.

[Rebecca Fung]

The China Caixin Manufacturing Purchasing Managers Index, which is a private gauge of activity, it fell to 48.3 in May and basically a reading below 50 means that manufacturing activities has contracted and then a sub index tracking factory production fell for the first time in 19 months. So it's fair to say Chinese manufacturing activities has not fully recovered despite the US And China trade truce, and that domestic demand in China continued to be.

[Luke Vargas]

Pretty weak despite those weak readings, business optimism improved last month compared to a low in April, with companies hopeful that the US China trade conflict could subside in the near future. Well, for that to happen, the two sides will need to negotiate, especially after Treasury Secretary Scott Bessant signaled last week that talks had effective effectively stalled. The Journal's chief China correspondent, Ling Ling Wei has been looking into the trade team assembled by Xi Jinping for negotiations and she joins me now to discuss what we can learn by studying it. Ling Ling, this is an angle on trade negotiations that we don't often dwell on, the who of talks as opposed to the what's and the whens. I'm curious what's jumping out to you about what we're seeing from China here.

[Ling Ling Wei]

Right. What really jumped out at me is how Xi Jinping wants a different kind of negotiation than the one in the first Trump term. Back then, Xi Jinping's chief trade negotiator was someone who was trained by Harvard, was known as a very pro market pragmatist who really understood U.S. concerns. And fast forward to today. Xi Jinping himself really wants to play hardball with the United States. And then his chief negotiator is someone who thinks just like him, who believes in state planning, believes in central government control and has a clear mandate of not catering to the US you mentioned.

[Luke Vargas]

The chief negotiator in all of this. Let's talk a bit more about him. This is He Lifang. What should we know about him?

[Ling Ling Wei]

Unlike previous Chinese officials in task with dealing with foreign governments and especially American officials, he Lif doesn't speak English and he doesn't have as much of experience dealing with Americans as some of his predecessors did. He's quite different from a lot of so called barbarian handlers in China who were English speaking, more exposed to Western way of thinking and sometimes considered maybe even a little bit too sympathetic to Western concerns. He really has been staunchly defending China's industrial policy and refused to admit that China has an overcapacity problem. He told American officials that the fact that we're selling so much cheap stuff to the rest of the world should be viewed as a positive by comparison. His predecessor, the previous trade negotiator for Xi Jinping Liu, he really acknowledged the problems with China's industrial policy and how that policy has led to waste and inefficiencies in China.

[Luke Vargas]

Yeah, I'm glad you brought up his lack of interest it seems in reining in production. What other kinds of moves from Beijing might we be likely to see as these talks play out, where do they see their leverage?

[Ling Ling Wei]

As being one big powerful new weapon? The Chinese have realized that they have is export controls. That might sound really counterintuitive because export controls have traditionally been a big tool by the United states. Right. The U.S. has significantly tightened export controls on sale of technology high tech products to China. And the Chinese have learned the American way. But their export controls are aimed at rare earths and critical minerals US companies need to use to produce semiconductors, EVs or even fighter jets. So the Chinese really have already used export controls as a very potent tool to hit back at the US and will continue to use that as leverage in future negotiations.

[Luke Vargas]

And as you report, if they are going to, let's say, dangle more purchases of American goods in the course of talks, they're going to do it in exchange for getting something very much in their core interests.

[Ling Ling Wei]

Right? Exactly. Xi Jinping has significantly beefed up the country's self reliance. They believe they're in a better position to drive a harder bargain. If the US Wants China to buy more stuff from the United States, the Chinese would argue, okay, you need to sell less stuff we really want to buy, such as semiconductors and other high end technology products.

[Luke Vargas]

Ling Ling Wei is the Wall Street Journal's chief China correspondent. Ling Ling, thank you so much as.

[Ling Ling Wei]

Always, thank you for having me.

[Luke Vargas]

Coming up, South Koreans choose a new president as the country contends with U.S. trade talks and tensions with Beijing. And record labels try to set the rules of the road for how artists are paid when AI remixes their music. We have got those stories and more after the.

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[Luke Vargas]

South Koreans have been voting to select their next president today following months of political uncertainty after the country's short lived imposition of martial law late last year. Opinion polls show voters are set to punish the ruling conservatives. And as our Korea bureau chief Tim Martin explains, the winner of the snap election will determine how Seoul approaches key foreign policy issues.

[Tim Martin]

The stakes are very high for South Korea, one of America's biggest trading partners and allies. Home to America's largest overseas military base and corporate giants like Samsung, Hyundai and lg. Now, martial law was declared six months ago, but that's really hurt Seoul at a time like this. There are trade talks unfolding with the Trump administration, big moves on key industries for South Korea, from cars to semiconductors to aluminum and steel. Having a permanent leader, an elected leader, enables South Korea to have a president who can meet Trump directly and make South Korea's case to get reprieve from the new levies. In addition to trade, South Korea also has major security issues to deal with from how the US Contends with China and the rising nuclear threat from North Korea.

[Luke Vargas]

Back in the U.S. federal emergency management Agency officials are scrapping its new hurricane response plan just two days into the annual hurricane season. Instead, the agency is returning to last year's guidance, leaving some confused about how that would be possible given sharp workforce cuts and the elimination of key programs. Agency workers were left stunned after new FEMA leader David Richardson suggested he recently learned there was an annual hurricane season, which lasts from June 1st through the end of November. A FEMA representative called it an attempt to falsely frame a joke as policy and said there is no uncertainty about how the agency will handle hurricane season. Lawyers from Meta platforms are taking on the European Commission today, challenging the bloc's crackdown on the company's social networking business. At issue are Facebook's messenger and Marketplace features, which Meta argues shouldn't be classified as so called core platform services that must obey the block's antitrust rulebook. The Digital Markets Act, Apple's iOS operating system and Safari browser and Alphabet's Google search engine have also come under the scope of the law, which forces companies to make it easier for rivals to operate on their platforms or face fines of up to 10% of their annual sales. Meta is one of three tech companies suing the commission over DMA enforcement, with Apple and ByteDance owned TikTok filing legal challenges of their own. And three major players in the music industry are in talks with a pair of startups that could set a new precedent for how songs can be used and how artists are paid for remixes generated by AI. Universal, Warner and Sony want to be compensated by startups Suno and Udo if music by artists on their label, like Sony's Miley Cyrus is used to train generative AI models and produce new music. People familiar with the talks say the companies want the startups to develop fingerprinting and attribution technology similar to YouTube's Content ID, to track when and how a song is used to help determine how much artists and labels should be paid. Each company is negotiating with the startups individually, and the talks are said to be at different stages of progression, though we learned the agreements could involve the labels taking stakes in the AI companies. And that's it for what's news for this Tuesday morning. Today's show was produced by Daniel Bach and Kate Bullivant. Our supervising producer is Sandra Kilhoff. And I'm Luke Vargas for the Wall Street Journal. We will be back tonight with the new show. Until then, thanks for list.