Stocks Surge as U.S. and China Slash Tariffs

Summary

WSJ What’s News Summary: Stocks Surge as U.S. and China Slash Tariffs Release Date: May 12, 2025
Host: The Wall Street Journal

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Introduction

On Monday, May 12th, WSJ What’s News delved into significant developments impacting global markets and geopolitical landscapes. The episode primarily focused on the historic tariff reductions between the United States and China, the resulting surge in stock markets, and other critical international and domestic news. Below is a comprehensive summary of the episode's key discussions, insights, and conclusions.

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U.S. and China Slash Tariffs: A Game-Changer for Global Trade

Overview of Tariff Reductions

The cornerstone of this episode was the unprecedented agreement between the U.S. and China to significantly lower tariffs, effectively ending an extended trade embargo between the two economic giants. Luke Vargas introduced the topic:

"The US and China have sent stocks and the dollar surging this morning after both sides cut tariffs by 115%, ending an effective embargo on trade."
— Luke Vargas [00:39]

Details from U.S. Officials

Jason Douglas, a Wall Street Journal reporter, and Treasury Secretary Scott Besant provided in-depth analysis of the tariff adjustments:

"They've reduced tariffs by 115%, so they're down now to about 10% at a baseline... Tariffs on most Chinese imports are about 30%, which is a lot better than 145%."
— Scott Besant [02:30]

Besant explained that while the reciprocal tariffs were significantly cut, certain specific tariffs, such as those related to fentanyl, remain in place:

"The US still has these additional tariffs that aren't related to those reciprocal ones on China. That includes the tariffs related to fentanyl."
— Scott Besant [02:30]

Fentanyl's Role in Negotiations

Fentanyl emerged as a pivotal issue that facilitated the tariff negotiations:

"We understand it does seem to be something that helped prize negotiations open... One of the attendees at the trade talks spoke at length about what China was doing on fentanyl."
— Scott Besant [02:42]

90-Day Tariff Pause for Further Negotiations

A critical component of the agreement is a 90-day pause on tariffs, intended to foster more comprehensive trade discussions:

"The 90-day pause is very similar to what Trump has offered every other country subject to the reciprocal tariffs... They would look at other things that the US is concerned about, such as Chinese currency policies and non-tariff barriers."
— Scott Besant [03:25]

Besant emphasized optimism regarding the framework established to prevent future escalations:

"They are optimistic that they've got the framework in place to give it a good go."
— Scott Besant [03:25]

Avoiding Economic Decoupling

Both U.S. and Chinese representatives expressed a mutual desire to avoid an economic decoupling, despite lingering challenges:

"Neither wants an economic decoupling... There are still serious US concerns about the trade deficit and national security issues around sensitive technologies like semiconductors."
— Scott Besant [05:13]

Jason Douglas highlighted the overarching consensus that a complete economic separation is not desired by either party, though underlying issues persist.

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Stock Market Surge Driven by Tariff News

The announcement of the tariff cuts led to a significant rally in global stock markets. Futures tied to the tech-heavy NASDAQ saw substantial gains, with major companies like Amazon, Apple, and Tesla experiencing notable surges in premarket trading.

"Futures contracts tied to the tech heavy NASDAQ are driving gains this morning with Amazon, Apple and Tesla surging in premarket trade."
— Luke Vargas [05:49]

Additionally, global shipping giants such as Maersk and Hapag Lloyd soared over 10%, reflecting increased optimism in international trade logistics. Mining stocks, luxury brands, and global carmakers also trended higher, underscoring the broad market impact of the tariff reductions.

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Geopolitical Developments

Ukraine and Peace Talks

Ukrainian President Volodymyr Zelensky extended a direct challenge to Russian President Vladimir Putin for peace negotiations in Istanbul:

"I will be in Turkey this Thursday, May 15, and expect Putin to come to Turkey as well, personally... We are ready to talk to end this war Thursday."
— Volodymyr Zelensky [06:40]

This move follows President Trump's support for the peace talks, aiming to broker a ceasefire amidst ongoing conflicts.

Hamas and Gaza Humanitarian Efforts

Amidst the broader geopolitical tensions, Hamas announced the release of the last American hostage in Gaza contingent upon a ceasefire and the allowance of humanitarian aid into the region. A U.S. official indicated that Middle East envoy Steve Witkoff is set to travel to Israel to facilitate the release process:

"Hamas says it will release the last American hostage held in Gaza after discussions with the US over a ceasefire deal and a deal to allow humanitarian aid to enter the strip."
— Luke Vargas [06:59]

PKK Disarmament

In a significant development, the Kurdish militant group PKK announced its decision to disarm and disband after decades of conflict with Turkish forces. This move is expected to ease longstanding tensions between Turkey and Kurdish populations across the region.

India-Pakistan Ceasefire

A tentative ceasefire between India and Pakistan has held following severe clashes, with both nations reporting no overnight incidents. This follows previous accusations by Indian officials against Islamabad for violating the pact, though current reports indicate a period of relative calm.

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U.S. Domestic Policy: Drug Prices and Medicaid Cuts

Lowering Drug Prices

President Trump is set to sign an executive order aimed at reducing drug prices by tying them to international standards:

"The president is expected to sign an executive order today tying US drug prices to what other countries pay, prices that are often lower because of negotiations by their single-payer health care systems."
— Luke Vargas [11:02]

Pharmaceutical companies have expressed strong opposition, highlighting the potential financial impact:

"Pharma shares in Asia and Europe have dropped this morning significantly, especially Novo Nordisk... They are among the biggest losers in European morning trading overall."
— Helena Smolek [11:02]

Despite pushback, there is a consensus among drug makers and analysts that the wide price disparity between the U.S. and other countries is unsustainable.

Medicaid Cuts Proposed by Republicans

House Republicans have unveiled plans to cut Medicaid, which currently covers over 70 million low-income and disabled Americans. The proposed measures include:

• Instituting work requirements
• Implementing twice-yearly eligibility checks
• Cutting a 5% boost in federal incentives added during the pandemic

These proposals aim to be passed by Memorial Day but are expected to face significant opposition from Democrats, healthcare providers, and other stakeholders reliant on Medicaid funding.

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Controversial Deal with Qatar

A contentious story involves the Trump administration's negotiations with Qatar to receive a new plane serving as Air Force One, potentially to be used post-presidency. While administration lawyers deem the arrangement legal, critics argue it violates the Constitution's emoluments clause:

"Democrats and good government groups criticized the pending deal, citing it as a potential violation of the Constitution's emoluments clause."
— Luke Vargas [09:35]

President Trump plans to visit Qatar to discuss the matter further, with Qatari officials indicating ongoing discussions.

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Conclusion

The episode of WSJ What’s News on May 12, 2025, provided a thorough examination of pivotal developments in U.S.-China trade relations, market reactions, and significant geopolitical and domestic policy issues. The reduction of tariffs between the U.S. and China marks a potential turning point in global trade dynamics, while other international and domestic stories underline the complex interplay of politics, economics, and security worldwide.

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Produced by Daniel Bach and Kate Bullivant. Supervising Producer: Sandra Kilhoff. Presented by Luke Vargas for The Wall Street Journal.

Transcript

[Morningstar Representative]

Data is everywhere. When orchestrated properly, it sings. At Morningstar, we analyze and enrich data, making it actionable and powerful for you. Morningstar, where data speaks.

[Luke Vargas]

Stocks surge as the US And China agree to slash tariffs.

[Volodymyr Zelensky]

Our reciprocal tariff rate will go down to a 10, will go down to 10% on the United States side. So it goes down 115%. We enter into a 90 day pause period for negotiations which both the Chinese and the United States are very committed to.

[Luke Vargas]

Plus, President Trump says he'll sign an executive order today aimed at lowering drug prices. And Ukrainian President Volodymyr Zelensky challenges Russia's Vladimir Putin to meet for peace talks this week. It's Monday, May 12th. 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 today. The US And China have sent stocks and the dollar surging this morning after both sides cut tariffs by 115%, ending an effective embargo on trade. Treasury Secretary Scott Besant and U.S. trade Representative Jamison Greer also announced a 90 day tariff pause in which substantial talks on trade with Beijing would take place. Journal reporter Jason Douglas has been dissecting the news coming in this morning. Jason, sum up details for us here.

[Jason Douglas]

We've got a lot of tariffs, it.

[Luke Vargas]

Seems, getting cut, but some remaining. Walk us through what fits into both categories there.

[Scott Besant]

Sure. So the big cuts happened to the reciprocal tariffs and the retaliation that followed that. So if you remember, on April 2nd, President Trump slapped tariffs on pretty much everyone that included China. But then over the next couple of weeks, China retaliated and by the end of it, both sides had put tariffs of more than 100% on each other's imports. So this reduction primarily focuses on that. They've reduced tariffs by 115%. So they're down now to about 10% at a baseline. But the US still has these additional tariffs that aren't related to those reciprocal ones on China. That includes the tariffs related to fentanyl. Overall, what it adds up to is tariffs on most Chinese imports are about 30%, which is a lot better than 145%. And there might be still some different tariff rates for things like autos, steel and a few other things that are subject to separate tariffs.

[Luke Vargas]

Fentanyl you mentioned there seems to have.

[Jason Douglas]

Been an important starting point for Washington. This was talked about a lot at a press conference in Switzerland this morning held by these US Delegates. Tell us a little bit about how that factored into negotiations as far as.

[Scott Besant]

We understand it does seem to be something that helped prize negotiations open, if you like. I mean, the US Takes this very seriously and China has shown that it does too. So one of the attendees, in fact at the trade talks with the Chinese Minister for Public Security, who talked at length to the US delegation about what China was doing on fentanyl. That's pretty unusual in trade talks, right. You usually don't get these kind of officials there. And from what we understand, that was very much appreciated and taken on board by the US delegation. So yes, Ventimil does seem to be important. So we could probably expect some more movement on that in the near future.

[Luke Vargas]

Crucially, and this seems to be a.

[Jason Douglas]

Part that has investors very excited today is that there's this 90 day pause in tariffs in order to kind of propel further talks forward. What do we know about those plans from here out?

[Scott Besant]

The 90 day polls is very similar to what Trump has offered every other country subject to the reciprocal tariffs. I think two things stand out. One is Scott Bessett, the Treasury Secretary, was pretty enthusiastic about the talks that are to come and said that they would encompass more than just tariffs and they would look at other things that the US Is concerned about, such as Chinese currency policies, such as non tariff barriers, regulations and other restrictions to US Companies operating in China. The other important thing that he talked about was that they now have a mechanism that should prevent future escalation. So they have established a regular dialogue, if you like, at a sort of lower level. So quite what gets achieved in that 90 days and whether the two sides could really come together to make a durable trade deal, who knows? But they are at least optimistic that they've got the framework in place to give it a good go.

[Luke Vargas]

Were you surprised the extent to which.

[Jason Douglas]

These American representatives today were describing what happened after Liberation Day as sort of being unintended? Right. They really seem to want to emphasize they're dialing back the clock a few months not to before the inauguration, but they kind of want to get back onto a different footing than where things had gone in recent weeks.

[Scott Besant]

I think it was surprising, but I suppose the escalation in the first place was pretty surprising and pretty shocking when it happened. The message from the US delegation was very much that, as you said, that that wasn't really what they wanted to happen and they felt that the guardrails that would have kind of prevented that kind of thing from happening weren't in place because the relationship between Beijing and Washington deteriorated so much. So they are saying that these guardrails are back and now this kind of escalation hopefully shouldn't happen again.

[Jason Douglas]

Yeah, I was going to say the consensus from both sides, as the treasury secretary put it, is that neither wants an economic decoupling. What can we read into their statements over the weekend and this morning about kind of where US China relations now sit?

[Scott Besant]

I think there are still some challenges. I think it's right to say they don't want a full decoupling. There's lots of trade that both sides are very happy to participate in. But I think there are still pretty serious US Concerns, firstly about their trade deficit with China and what they feel is unbalanced nature with trade with China. And I think there are still national security issues around sensitive technologies such as semiconductors and so on that will persist. And exactly where all this sort of shakes out, it's hard to say. But the idea of a full blown kind of break, a clean break, just doesn't seem to be what they want.

[Luke Vargas]

That was Journal reporter Jason Douglas. Jason, thanks as always for the update.

[Scott Besant]

Okay, my pleasure.

[Luke Vargas]

Futures contracts tied to the tech heavy NASDAQ are driving gains this morning with Amazon, Apple and Tesla surging in premarket trade. News of lower trade barriers between the world's two biggest economies is also boosting global shipping companies Maersk and Hapag Lloyd, which are both up more than 10%, while mining stocks, luxury brands and global carmakers are also trending higher.

[Helena Smolek]

FOREIGN.

[Luke Vargas]

Volodymyr Zelensky has challenged Vladimir Putin to meet him in Istanbul this week after President Trump backed the Russian leader's offer to hold peace talks ahead of a ceasefire. In a video message to Ukrainians, Zelensky demanded a pause in fighting begin today and said he'd be waiting for Putin in the Turkish capital.

[Volodymyr Zelensky]

I will be in Turkey this Thursday, May 15, and expect Putin to come to Turkey as well, personally. And I hope that this time Putin won't be looking for excuses as to why he can't make it. We are ready to talk to end this war Thursday. Turkey President Trump has expressed support. All the leaders support this.

[Luke Vargas]

Putin didn't immediately respond to Zelensky's offer. Trump last week threatened to impose sanctions on whichever side didn't agree to a 30 day ceasefire and in recent weeks said the US would walk away from talks if no progress is made soon. Hamas says it will release the last American hostage held in Gaza after discussions with the US Over a ceasefire deal and a deal to allow humanitarian aid to enter the strip. A US Official said Middle east envoy Steve Witkoff is expected to travel to Israel to pick up Israeli American Idan Alexander today. Israel hasn't allowed the entry of any humanitarian aid into Gaza since a previous ceasefire between Israel and Hamas collapsed in March, with a groups warning that the enclave is running dangerously low on food, fuel and medicine. The Kurdish military group known as the PKK has decided to lay down its arms and disband after four decades of conflict with Turkish forces, according to a news agency aligned with the group. The PKK is designated as a terrorist group by Turkey and the us it initially fought for an independent Kurdish state and later demanded greater rights for tens of millions of Kurds spread across Tur, Syria, Iraq and Iran. Turkey's long running war with Kurdish separatists has been a source of tension with the US which has partnered with Kurdish militias in Syria to stamp out Islamic State extremists. The decision to disarm comes nearly three months after the group's imprisoned leader called for a ceasefire, and a weekend ceasefire agreement between India and Pakistan appears to be holding following the worst violence in years between the two nuclear armed rivals. Indian officials initially accused Islamabad of violating the pact made on Saturday, but both Indian and Pakistani authorities said today there were no reported incidents of firing overnight along the heavily militarized region between the countries. Coming up, President Trump moves to lower drug prices and Republicans propose work requirements and eligibility checks as a part of controversial cuts to Medicaid. We've got those stories and more after the break.

[Morningstar Representative]

Data is everywhere, but is it ready for consumption? Morningstar developed the language of global investment data so you have the right ingredients to help you shine. Morningstar, where data speaks.

[Luke Vargas]

In a story that is raising legal and ethical concerns. The Trump administration is in talks with the government of Qatar to accept the gift of a new plane that would serve as Air Force One and then potentially be used by President Trump after he leaves office. We report that administration lawyers who reviewed the arrangement concluded it was legal, while Democrats and good government groups criticized the pending deal, citing it as a potential violation of the Constitution's emoluments clause, which prevents office holders from accepting anything of value from foreign states without Congress permission. Trump, who has expressed frustration for years about delays in Boeing's work to deliver a new Air Force One, is expected to visit Qatar this week. The Qatari government said the matter was still under discussion. Meanwhile, the president is expected to sign an executive order today tying US Drug prices to what other countries pay, prices that are often lower because of negotiations by their single payer health care systems. Trump didn't specify whether the order would apply to Medicare, Medicaid or other government programs. Major drug companies have pushed back on the idea, with pharmaceutical executives estimating that instituting a most favored nation policy for Medicaid alone would cost their industry more than a trillion dollars over the next decade. Here's Pharma reporter Helena Smolek.

[Helena Smolek]

Pharma shares in Asia and Europe have dropped this morning significantly, especially Novo Nordisk, who derives a large share of profit from the US it could be one of the hardest hit. Hence, its share price is among the biggest losers in European morning trading overall. There's this tone or this overall view of drug makers not being in favor of that policy, since it would mean a major profit fall for them. However, drug makers as well as analysts share the view that the significant price gap between US and other countries is no longer sustainable and has to change.

[Luke Vargas]

And on Capitol Hill, House Republicans have unveiled proposed cuts to Medicaid, which covers health insurance for more than 70 million low income and disabled people. The proposed changes include instituting work requirements, implementing twice yearly eligibility checks, and cutting a 5% boost in federal incentives enacted during the pandemic that many states used to expand their Medicaid rosters. Party leaders hope to pass the measures through the House by Memorial Day, efforts likely to face unified opposition from congressional Democrats, hospitals and other groups that depend on Medicaid funding. And that's it for what's news for this Monday 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 a new show. Until then, thanks for listening.

[Morningstar Representative]

Data is everywhere, but is it ready for consumption? Morningstar developed the language of global investment data so you have the right ingredients to help you shine. Morningstar, where data speaks.