President Trump Threatens New Tariffs on the EU and Smartphones

Summary

WSJ What’s News: President Trump Threatens New Tariffs on the EU and Smartphones

Release Date: May 23, 2025
Host: The Wall Street Journal
Episode Overview: In this episode of WSJ What’s News, host Alex Osola delves into President Trump's latest moves in the global trade war, including his threats to impose hefty tariffs on European Union imports and smartphones. The episode also explores the repercussions of these threats on the stock market, Apple's legal battles in Texas, Nvidia's strategic deals amidst geopolitical tensions, fluctuations in the U.S. bond market, and a significant legal decision affecting Harvard University's international student enrollment.

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1. President Trump's Escalation in the Trade War

New Tariffs on the European Union

At [00:28], Alex Osola introduces President Trump's latest stance in the ongoing trade conflict, highlighting his threat to impose a 50% tariff on imported goods from the European Union. Additionally, Trump hinted at applying similar duties on smartphones manufactured overseas, including brands like Apple and Samsung.

Alex Osola [00:28]: "President Trump threatened 50% tariffs on the European Union as well as new duties on iPhones made overseas."

Discussion with Trade Expert Gavin Baid

In an insightful conversation at [01:43], Gavin Baid, a trade correspondent for the Wall Street Journal, elaborates on the implications of Trump's remarks.

Gavin Baid [01:43]: "The European diplomats really felt like they were making progress in these trade talks. But Trump is dissatisfied with the pace and wants to push harder."

Baid explains that the EU was optimistic about advancing trade negotiations, but Trump's declaration has disrupted these efforts. He notes the multifaceted frustrations from the U.S. side, including ongoing disputes over non-tariff barriers and legal actions against companies like Google.

Gavin Baid [02:40]: "There is a lot of ongoing frustrations from the US Side."

Potential EU Response

When queried about the EU's reaction, Baid anticipates a concerted effort from the European side to reaffirm their commitment to reaching a deal, despite the recent setbacks.

Gavin Baid [02:42]: "There's going to be a redoubling of an effort to get to a deal here."

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2. Impact on the Global Technology Sector

Tariffs on Smartphones and Apple

Trump's threats extended to the smartphone industry, particularly targeting Apple. At [03:08], Osola discusses how these tariffs could affect both consumers and manufacturers.

Gavin Baid [03:24]: "A 25% tariff is going to be felt by consumers of phones in the United States. It’s all about the industrial ecosystem."

Baid highlights the challenges Apple would face in maintaining its pricing structure if such tariffs were implemented, given that the U.S. lacks the industrial capacity to fully absorb or offset these costs.

Market Reactions

The immediate market response was negative, with U.S. stocks declining as a result of Trump's aggressive trade posture.

Alex Osola [04:01]: "President Trump's threats against the EU and Apple sent U.S. stocks lower, with the iPhone maker stock ending the day down 3%."

Major indices reflected the unease, with the Dow Jones Industrial Average dropping by 0.6%, the S&P 500 declining 0.7%, and the Nasdaq falling 1%.

Apple's Legal and Legislative Challenges

Beyond tariffs, Apple is embroiled in a legal battle against Texas legislation aimed at enforcing age verification for device users. Tim Cook has actively engaged with Texas Governor Greg Abbott to advocate for amending or vetoing the bill.

Alex Osola [04:22]: "Apple is fighting Texas legislation that would require the iPhone maker to verify the ages of device users."

An Apple spokesperson emphasized the company's commitment to online safety while expressing concerns over potential infringements on user privacy.

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3. Nvidia's Strategic Position Amid Trade Tensions

As the episode progresses, attention shifts to Nvidia and its maneuvers in the AI chip market, a sector heavily influenced by U.S.-China trade relations.

Global Deals and Geopolitical Challenges

Nvidia has been actively securing deals with countries like Saudi Arabia and India to supply AI chips for infrastructure projects. However, these deals come with significant political complexities.

Dan Gallagher [05:34]: "These AI chips are front and center in the trade war with China. It's going to be a much more complicated business than Nvidia just getting the country to sign on the dotted line and make some sales."

Gallagher, a columnist for WSJ's Tech News Briefing, explains that Nvidia's ability to sell chips is increasingly contingent on geopolitical factors, including whether recipient countries might later divert these chips to China. This intertwining of technology and politics makes the market environment particularly volatile.

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4. Bond Market Turmoil and Economic Implications

Weak Auction Performance and Yield Increases

At [07:00], the focus shifts to the bond market, where a weak auction for 20-year bonds has heightened concerns about the U.S. government's fiscal trajectory. The 30-year treasury bond yield reached its highest point since 2023, signaling investor apprehension.

Insights from Greg Ip on Bond Market Dynamics

Greg Ip, the Wall Street Journal's chief economics commentator, provides an in-depth analysis of the bond market's recent volatility.

Greg Ip [08:03]: "Investors are becoming specifically quite nervous or uneasy about owning U.S. treasury bonds and are asking for higher returns associated with the risk."

Ip attributes the rise in long-term bond yields to the U.S.'s substantial budget deficits, which are projected to exceed 7% of GDP under the upcoming budget package spearheaded by President Trump and Congressional Republicans. This fiscal strain necessitates increased bond issuance, compelling investors to demand higher returns.

Inflation Concerns and the Federal Reserve's Role

Ip also connects the bond market's instability to broader inflationary pressures and the Federal Reserve's monetary policies.

Greg Ip [09:30]: "The overall environment you have out there is one where inflation used to be very benign... now it's no longer benign."

The interplay between rising inflation and large budget deficits exacerbates the difficulty in borrowing long-term, contributing to investor unease and higher yields.

The Dollar's Reserve Currency Status Under Scrutiny

A pertinent question arises regarding the potential erosion of the U.S. dollar's dominance as the world's reserve currency.

Greg Ip [10:14]: "There's really not an alternative [to the dollar]. But that doesn't mean people aren't going to look for alternatives."

Ip notes subtle signs of shifting investor confidence, such as the dollar weakening despite rising bond yields, indicating a gradual but ongoing search for alternatives like gold and Bitcoin. While the dollar's status remains robust for the foreseeable future, these developments suggest a slow but steady diversification in global reserve holdings.

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5. Legal Battle: Harvard vs. Trump Administration

In the concluding segment at [11:15], the episode covers a significant legal victory for Harvard University. A federal judge has temporarily blocked the Trump administration's attempt to revoke Harvard's authorization to enroll international students. This temporary restraining order allows Harvard to continue accepting foreign students while the legal proceedings unfold.

Alex Osola [11:15]: "A federal judge has temporarily blocked the government's bid to prevent Harvard University from enrolling international students."

The White House has objected to this ruling, maintaining its stance against the administration's policy. The outcome of this legal battle could have profound implications for U.S. higher education and international student demographics.

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Conclusion

This episode of WSJ What’s News provides a comprehensive overview of the current geopolitical and economic tensions influenced by President Trump's aggressive trade policies, the subsequent market reactions, and the broader implications for major corporations like Apple and Nvidia. Additionally, it sheds light on the complexities of the U.S. bond market amid rising deficits and inflation concerns, as well as significant legal actions affecting higher education institutions. For listeners seeking to understand the intricate web of global trade, economic indicators, and legal developments, this episode delivers valuable insights backed by expert analysis and real-time data.

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Notable Quotes:

• Gavin Baid [02:42]: "There's going to be a redoubling of an effort to get to a deal here."

• Gavin Baid [03:24]: "A 25% tariff is going to be felt by consumers of phones in the United States."

• Dan Gallagher [05:34]: "These AI chips are front and center in the trade war with China."

• Greg Ip [08:03]: "Investors are becoming specifically quite nervous or uneasy about owning U.S. treasury bonds."

• Greg Ip [10:14]: "They will look for alternatives. They seem to be buying a lot of gold. They're buying a lot of Bitcoin."

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Timestamps Reference:

• [00:28] – Introduction of Trump’s tariff threats
• [01:43] – Conversation with Gavin Baid on EU tariffs
• [02:40] – Discussion on US frustrations
• [03:08] – Shift to Apple and smartphone tariffs
• [04:01] – Market impact of tariff threats
• [05:34] – Nvidia's deals and geopolitical challenges
• [07:00] – Introduction to bond market concerns
• [08:03] – Greg Ip on bond yields and deficits
• [09:30] – Inflation’s role in bond market
• [10:14] – The dollar's reserve currency status
• [11:15] – Harvard’s legal victory

Transcript

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February 2024 through January 2025. President Trump threatens 50% tariffs on the European Union.

[Gavin Baid]

You're seeing a number of things build up here. It's hard to know which one is the straw that broke the camel's back. But there's a lot of ongoing frustrations from the US Side.

[Alex Osola]

Plus what's behind the recent turmoil around US Bonds. And a federal judge halts the government's move to prevent Harvard from enrolling international students. Alex It's Friday, May 23rd. I'm Alex Osola for the Wall Street Journal. This is the PM edition of what's News, the top headlines and business stories that move the world today. President Trump fired new salvos in the global trade war today. He threatened a 50% tariff on imported goods from the European Union as well as new duties on iPhones made overseas. In comments at the Oval Office this afternoon, the the president said he's not looking for a tariff deal with the eu. I'm not looking for a deal. I mean, we've set the deal, it's at 50%. But again, there is no tariff if they build their plant here. I'm joined now by Gavin Baid, who covers trade for the Journal. Gavin, where are the president's comments about the EU coming from? Are they out of the blue here?

[Gavin Baid]

Well, certainly for the eu, they feel out of the blue for them. The European diplomats really felt like they were making progress in these trade talks. Certainly they did not go to lunch on Friday expecting to see this sort of online missive from the president. But when you ask the administration, the frustrations are kind of multifold here. We've heard Trump talk often about tariffs and non trade barriers, about European Union lawsuits against companies like Google, something he brought up in the Oval Office today again. And then I think there are some unstated frustrations as well, especially when it comes to how they want the EU to approach China. And then you just see that this is a little bit of art of the deal stuff, right? Like Trump is dissatisfied with the pace of these negotiations. He and his team certainly don't like to be lectured by EU officials like we saw this week at the G7. And so I think you're seeing a number of things build up here. There's a lot of ongoing frustrations from the US Side.

[Alex Osola]

Has the EU responded to any of this?

[Gavin Baid]

Not publicly yet, but I think there's going to be a redoubling of an effort to get to a deal here. Treasury Secretary Scott Besant said on Fox this morning. We want to light a fire under the eu. The president is dissatisfied with the pace here and so far from blowing up the negotiations, I think the two sides are still going to come back to the table and maybe this just is the push they need to get some of the more intractable issues solved here.

[Alex Osola]

Let's shift now to talk a bit about Apple. So Trump was threatening a tariff of at least 25% on iPhones made overseas. During his comments in the Oval Office this afternoon, he said that could be expanded to other phone makers like Samsung. But what is going on here with Apple and Trump?

[Gavin Baid]

Tim Cook is probably one of Trump's closest corporate contacts. However, a 25% tariff is going to be felt by consumers of phones in the United States. We're just not going to see another economy or Apple eat that entire tariff. It's going to be significant, but I don't think they can do soup to nuts entire iPhone in the United States for anywhere near the price point. But it's all about the industrial ecosystem. We simply don't have that here yet. So there's going to be significant challenges to building anywhere near the amount of iPhones that are demanded by US Consumers in this country.

[Alex Osola]

That was WSJ reporter Gavin Baid. Thank you, Gavin. Thanks, Alex. President Trump's threats against the EU and Apple sent U.S. stocks lower, with the iPhone maker stock ending the day down 3%. Major indexes closed lower today. The Dow dipped about 0.6%, the S&P 500 dropped roughly 0.7%, and the Nasdaq fell 1%. We're exclusively reporting that Apple has recently stepped up efforts to fight Texas legislation that would require the iPhone maker to verify the ages of device users. Apple CEO Tim Cook called Texas Governor Greg Abbott last week to ask for changes to the legislation or failing that, for a veto. That's according to people familiar with the call. Abbott has yet to say whether he will sign the bill, though it passed the Texas legislature with veto proof majorities. An Apple spokesman said that the company wants to strengthen online safety for children, but that the Texas bill threatens user privacy. Ahead of Nvidia's earnings next week, the chipmaker and its competitors have been striking deals with sovereign nations. For example, Saudi Arabia recently agreed to buy large amounts of Nvidia's AI chips for local infrastructure projects, and Nvidia has described India as a major customer. But though it can be very lucrative to cut deals like these, they can also be polarizing. WSJ Heard on the street columnist Dan Gallagher told our Tech News Briefing podcast about the challenges that these kinds of deals can present.

[Dan Gallagher]

I don't think there's a business right now that's more politicized than chips and especially AI chips. These AI chips are front and center in the trade war with China. Between the US And China, the Trump administration and the Biden administration before that really wanted to make sure China did not get its hands on the latest AI chips to give more competitive with the US and so that governs everything Nvidia can do in terms of how it can sell its chips into other countries. And it's been a back and forth. The Trump administration did recently kill a rule that the Biden administration had set up where it was going to be a lot harder for Nvidia to sell chips into other countries, even like friendly ones to the US there's going to be all these different rules. Those were scrapped. But the signs now are that Nvidia's ability to sell into other countries might hinge on bigger picture stuff. Are these countries striking trade deals with us? Is there concern that chips sold to one country could eventually find their way to China? So it's just going to be a much more complicated business than Nvidia. Just getting the country to sign on the dotted line and make some sales. There's going to be a lot of politics involved.

[Alex Osola]

For more on this, listen to Tech News Briefing next week. Coming up, what the recent upheaval with Bonds says about long term bet on the US Government. That's after the break.

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[Alex Osola]

A weak auction for 20 year bonds on Wednesday exacerbated worries about rising deficits in Washington and drove sharp declines for stocks and bonds. The 30 year treasury bond yield reached its highest level since 2023, though it's come down a bit since. For more on what the recent bond turmoil means for the broader market, I'm joined by WSJ's chief economics commentator, Greg Ip. So Greg, it doesn't seem like this upheaval with bonds is a sign of widespread panic per se, but what does it mean?

[Greg Ip]

It's very important to look at the individual behavior inside the bond market to kind of understand the message that's going on when bond yields go up. That's essentially a very long term interest rate and it's telling you what the market thinks the cost of long term borrowing should be. Usually movements in bond yields are driven by what they think the Federal Reserve is going to do with short term interest rates. But if that was what was going on right now, we should see the biggest movement in two year bond yields. Those are the most sensitive to what people think the Fed will do, but they've barely moved. Instead, we've seen 10 year yields go up and we've seen 30 year yields go up a lot. So what's going on right now seems to be that investors are becoming specifically quite nervous or uneasy about owning U.S. treasury bonds and are asking for higher returns associated with the risk. The most obvious reason they're nervous is because the US Is already running very large budget deficits on the order of 6% of GDP. Republicans in Congress and President Trump are about to pass a budget package which will not only maintain those deficits, but probably see them rise to over 7% of GDP as far as the eye can see. That basically means that we are going to be selling a lot of bonds to people and we need them to buy those bonds and they're asking for a higher return in order to do that.

[Alex Osola]

Where does inflation fit in with this? You did talk about the Fed, but are there concerns about inflation baked into this?

[Greg Ip]

So the overall environment you have out there is one where inflation used to be very benign, that kept interest rates low and it was an easy time for governments to borrow. Now because the inflation environment is no longer benign and central banks are on the case, that alone makes it a more difficult time for people to borrow money for very long term, including our government. So you mix the inflation picture with the deficit picture and you have a bunch of reasons why people might be more nervous than they used to be about lending money for very long term to the U.S. treasury.

[Alex Osola]

Right now, the dollar is the preferred currency for central banks around the world to hold. Is there a threat here to the dollar's reserve currency status?

[Greg Ip]

So, first of all, the most important reason why the dollar is probably going to stay the world's reserve currency for a while is that there's really not an alternative. But that doesn't mean people aren't going to look for alternatives to the dollar. They will look for alternatives. They seem to be buying a lot of gold. They're buying a lot of Bitcoin. And I don't think a reserve currency status is the sort of thing a country loses overnight, but it happens bit by bit. And you do see some evidence that that's happening now. The fact that the dollar fell instead of going up as bond yields went up is very unusual. And it does suggest that investors as a whole are trying to reduce their holdings of US Dollar assets. So what I'm trying to say is that, no, the reserve currency status ain't going away tomorrow or next year. But you can see that bit by bit is probably going to be something that the US can't take for granted the way it used to.

[Alex Osola]

That was WSJ chief economics commentator Greg ip. Thank you, Greg.

[Greg Ip]

All right. Thanks very much for having me.

[Alex Osola]

And finally, a federal judge has temporarily blocked the government's bid to prevent Harvard University from enrolling international students. The judge granted the university a temporary restraining order, giving it a reprieve from the Trump administration's revocation of its ability to enroll foreign students. The ruling doesn't permanently resolve the matter, but allows Harvard to continue enrolling foreign students for now. A White House spokesperson objected to the judges blocking the government's revocation. Earlier today, Harvard sued the Trump administration over its move to block international student enrollment. And that's what's news for this week. Tomorrow you can look out for our weekly markets wrap up. What's news in markets? We'll take the rest of the weekend off for Memorial Day in the US and we'll be back to our normal schedule Tuesday morning. Today's show was produced by Pierre Biennime with supervising producer Michael Kosmides. Michael Lavalle wrote our theme music. Aisha El Musleam is our development producer. Scott Salloway and Chris Inslee are our deputy editors. And Falana Patterson is the Wall Street Journal's head of news audio. I'm Alex Osola. Thanks for listening, Sam.