Tariffs on Canada and Mexico Go Into Effect at Midnight, Trump Says

Summary

WSJ What’s News - Episode: Tariffs on Canada and Mexico Go Into Effect at Midnight, Trump Says
Release Date: March 3, 2025

The latest episode of WSJ What’s News delves into pivotal developments impacting global markets, highlighting President Trump’s enforcement of tariffs on Canadian and Mexican goods, the resurgence of asset-backed securities, significant investments in the U.S. semiconductor industry, and notable shifts in the real estate landscape of Los Angeles. The episode, hosted by Alex Osola, provides comprehensive insights into these topics, enriched with expert opinions and detailed analyses.

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1. President Trump Implements 25% Tariffs on Canadian and Mexican Goods

Timestamp: 00:03 - 02:46

President Trump confirmed the imposition of a 25% tariff on goods imported from Canada and Mexico, set to take effect at midnight. Alex Osola opens the discussion by highlighting the potential repercussions for the auto industry, a sector deeply entwined with the North American supply chain.

Anthony Bansi, a commentator on the show, elaborates on the complexity of the North American automotive supply chain:

“The integration of the supply chain is something that has taken decades, that won't be very easy to unwind, be easy to destroy. But to recreate and unwind is a really hard task.” [00:16]

Bansi underscores the challenges car manufacturers face as each auto part crosses borders multiple times:

“Each time the part crosses the U.S. Canada border, the U.S. Mexico border, there'd be a 25% tariff on that part… the numbers really add up very quickly.” [02:12]

The segment highlights the intricate logistics involved in automobile manufacturing, where a single transmission part may traverse the U.S., Canada, and Mexico several times before final assembly, significantly increasing costs due to the new tariffs.

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2. Market Reaction and Manufacturing Outlook

Timestamp: 02:46 - 05:00

Following the tariff announcement, U.S. stock markets reacted negatively. The Nasdaq experienced a significant drop of 2.6%, while the S&P 500 and the Dow Jones Industrial Average fell by approximately 1.8% and 1.5%, respectively. The tariffs have also cast a shadow over the U.S. manufacturing sector's growth prospects.

The Purchasing Managers Index (PMI) for manufacturing dipped to 50.3 in February from 50.9 in January, falling short of economists' expectations despite remaining above the contraction threshold of 50. Timothy Fiore, chair of the ISM's manufacturing business survey Committee, commented:

“Respondents were experiencing, quote, the first operational shock of the new administration's tariff policy.” [04:30]

This decline indicates emerging challenges for U.S. manufacturing amid the new tariff regime.

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3. TSMC’s Strategic Investment in U.S. Chip Manufacturing

Timestamp: 05:00 - 07:35

A significant bright spot in the episode is the announcement by Taiwan Semiconductor Manufacturing Co. (TSMC) to invest $100 billion in U.S. manufacturing facilities over the coming years. This strategic move, unveiled at the White House, aligns with President Trump’s objective to bolster the domestic semiconductor industry, deemed crucial for economic and national security.

Justin Baer, WSJ Deputy Markets Editor, provides context on the resurgence of asset-backed securities and TSMC’s investment:

“There are a couple things that have happened since then… the demand for these kinds of debt structures is grown off the charts… you had a lot of investors that were desperate to add various investments that had a higher yield to them.” [06:12]

Baer explains that the growth of private investment firms and the increased demand for higher-yield investments have revitalized interest in asset-backed securities, paralleling the strategic investments like TSMC’s in the semiconductor sector.

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4. Leadership Changes at Kroger

Timestamp: 07:35 - 09:20

In corporate news, Rodney McMullen, CEO of Kroger, the largest U.S. supermarket chain by sales, has resigned amid an investigation into his personal conduct. While Kroger emphasizes that his actions were unrelated to company business and did not involve any associates, they stated his behavior conflicted with their ethics policy.

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5. Resurgence of Asset-Backed Securities

Timestamp: 05:37 - 08:29

Asset-backed securities (ABS), which played a significant role in the 2008 financial crisis, are making a comeback. Justin Baer discusses the factors driving this resurgence, noting the reduced role of banks due to post-crisis regulations and the increasing prominence of private investment firms managing diverse debt forms. The quest for higher yields in a low-interest-rate environment post-COVID has further fueled investor interest in ABS.

Baer emphasizes the structural appeal of ABS:

“It's an opportunity to take a basket of loans and slice those up in different ways that would appeal to different investors… [it’s] a way to distribute those various risks to different investors.” [07:35]

This versatility allows ABS to cater to a broad spectrum of investors, from conservative insurance companies to aggressive hedge funds seeking higher returns.

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6. Real Estate Boom in Post-Fire Los Angeles

Timestamp: 08:29 - 11:59

Despite recent devastating fires in Los Angeles, the real estate market in affected areas like Altadena is experiencing robust demand. Properties damaged by fires are being snapped up by investors at prices exceeding pre-fire valuations. For instance, in Altadena, land parcels are selling at an average of $69 per square foot, a substantial increase from the $22 average in previous years.

Rebecca Pichotto, covering residential real estate, explains the dynamics driving this surge:

“It's actually quite expensive to hold onto these destroyed homes… Some homeowners are doing this calculation in their head and realizing that they simply can't afford the years-long carrying costs.” [09:20]

Investors, primarily small to mid-sized, are purchasing these properties with plans to either flip the land or rebuild and resell homes. However, this trend raises concerns about the demographic shifts in historically predominantly Black neighborhoods like Altadena. Residents fear that the influx of investors could lead to gentrification and alter the community's character.

Pichotto highlights the community's response:

“You can walk down the streets and see all of these yard signs outside of homes that say 'Altadena not for sale.'” [11:20]

This grassroots movement aims to preserve the neighborhood's integrity amidst the rebuilding process.

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7. Mishui: Surpassing McDonald’s as the World’s Largest Fast Food Chain

Timestamp: 11:59 - End

Contrary to popular belief that McDonald’s or Starbucks are the world's largest fast-food chains by location, a Chinese chain named Mishui holds that title. With over 45,000 stores across Asia and Australia, Mishui specializes in affordable snacks like $1 ice cream and bubble tea. The company made a successful initial public offering (IPO) in Hong Kong, raising over $400 million and witnessing its stock price surge 43% above the IPO level, valuing the company at over $10 billion.

Mishui’s rapid expansion, having more than doubled its locations in three years, underscores its aggressive growth strategy and potential to establish a global presence, posing a significant challenge to established Western fast-food giants.

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Conclusion

The episode of WSJ What’s News on March 3, 2025, provides a multifaceted overview of critical economic and market developments. From the significant implications of President Trump's tariffs on North American trade and the consequential impact on the automotive industry, to the revival of asset-backed securities and strategic investments in the semiconductor sector, the discussions offer valuable insights into the evolving global economic landscape. Additionally, the resilient real estate market in post-fire Los Angeles and the meteoric rise of Mishui as the world's largest fast-food chain exemplify the dynamic nature of today’s markets. The episode effectively equips listeners with the knowledge to navigate and understand the complexities of current financial and economic trends.

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Produced by Anthony Bansi and Pierre Vianname with supervising producer Michael Kosmides. Host: Alex Osola.

Transcript

[Alex Osola]

Asset backed securities crashed the economy in 2008. Now they're back. Plus, President Trump's tariffs against Canada and Mexico are expected to go into effect tonight. That's not good news for the auto industry.

[Anthony Bansi]

The integration of the supply chain is something that has taken decades, that won't be very easy to unwind, be easy to destroy. But to recreate and unwind is a really hard task.

[Alex Osola]

And properties damaged by the recent fires in Los Angeles are in demand. Alex It's Monday, March 3rd. 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's 25% tariffs on goods from Canada and Mexico are set to go into effect tonight at midnight. Trump said today that his administration will go ahead with them, saying there is, quote, no room left for negotiations with the US's continental neighbors. One industry that would be hit particularly hard by these tariffs, the auto industry. My colleague Anthony Bansi spoke with WSJ reporter Vipal Manga about how the tariffs would add cost to the deeply integrated North American automotive supply chain.

[Anthony Bansi]

We've been reporting a lot about how tightly integrated the automotive supply chain is across North America. It's Canada, the us, and then Mexico. You cannot make an automobile in North America without parts touching all three of those countries. So, for example, to make a transmission, what you have to do is send parts from Ontario, through Pennsylvania, Ohio, Illinois and back again as well as Mexico before the part is finally installed in a car in Ontario, which is then sold all across the United States. Just that one part goes across the borders six or seven times, depending on how you count. That makes the prospect of adding tariffs to this entire supply chain really frightening for carmakers.

[Rebecca Pichotto]

And will tariffs be imposed on that.

[Alex Osola]

Part every time it crosses one of those borders?

[Anthony Bansi]

We don't really have any detail on how this actually would play out, but based on what Trump has said and what we've heard out of our Washington sources is that each time the part crosses the U.S. canada border, the U.S. mexico border, there'd be a 25% tariff on that part. Now, you start off with, let's say, a little part that goes into transmission. That part in itself might be a couple of hundred dollars, but each time that part is added to another piece of equipment, that becomes a much more expensive piece of equipment. So you can see how the numbers really add up very quickly.

[Alex Osola]

That was our reporter VPAL Manga speaking with Anthony Bansi. To see just how integrated the automotive supply chain is. Along with graphics. You can check out vpal's story on our site. We'll leave a link in the show. Notes US stocks tumbled after President Trump confirmed he would impose 25% tariffs on Canadian and Mexican goods. The tech heavy Nasdaq led the declines, dropping about 2.6%. The S&P 500 fell roughly 1.8% and the Dow lost about 1 1/2 percent. The threat of new tariffs slowed an expansion in US manufacturing. The purchasing Managers Index, a closely watched survey from the Institute for Supply Management, ticked down to 50.3 in February from 50.9 the previous month, below economists expectations but still above the 50 mark that separates growth from contraction. Timothy Fiore, who chairs the ISM's manufacturing business survey Committee, said respondents were experiencing, quote, the first operational shock of the new administration's tariff policy. In other News chipmaker Taiwan Semiconductor Manufacturing Co. Intends to invest $100 billion in manufacturing plants in the US over the next several years. The company and President Trump announced the plan at the White House. Tsmc, which is the world's largest contract chip maker, plans to use the funds to add to its chip manufacturing facilities in Arizona. Such an expansion would advance a long pursued U.S. goal to regrow the domestic semiconductor industry. Trump called building up the industry a matter of economic and national security, as well as evidence that his tariff threats were working. And KRoger CEO Rodney McMullen has resigned following an investigation into his personal conduct ending a more than four decade career at the grocery chain. Kroger, the biggest US Supermarket chain by sales, said that while the conduct was unrelated to the company's business and didn't involve any Kroger associates, it was inconsistent with its ethics policy. McMullen couldn't be reached for comment. Coming up, why investors are excited again about asset backed securities. That's after the break.

[Rebecca Pichotto]

It's tax season. So what's new this year that could save you money?

[Alex Osola]

The IRS says that taxpayers spend 13 hours and $290 preparing and paying just for the tax prep, so it's worth looking into different options.

[Rebecca Pichotto]

On the youe Money Briefing podcast from the Wall Street Journal, we're breaking down the latest tax rules, how to keep your tax data safe, and ways to file for free. Catch our Series tax season 2025 what's new and everything else you need to know leading up to tax day on your Money briefing.

[Alex Osola]

Asset Backed securities does that sound familiar? They're the bonds backed by income producing assets and a flavor of them were what crashed the U.S. economy in 2008. Now they're back. New U.S. issuance of some of the most popular flavors of structured credit, including asset backed securities, hit record levels in 2024. And according to S and P Global, they're expected to surpass that tally this year. Wall Street Journal Deputy Markets editor Justin Baer is here with more. Justin, these are the instruments that contributed to the 2008 financial crisis. Why are people coming back to these?

[Justin Baer]

There are a couple things that have happened since then. One big thing is that the banks, which have historically been the main lenders for both consumers and companies, because of all the new rules that came about after the crisis, they've had to gradually recede from those markets so they don't hold or all those loans on their balance sheets as they once had. A second factor has been just the growth of all of these private investment firms that manage all forms of debt. And they've grown quite popular with all sorts of pensions and insurance companies. And the funds that they've raised have been pretty extraordinary. And that leads to the third part of this, which is that the demand for these kinds of debt structures is grown off the charts. You've seen, particularly after Covid, when the Fed stepped in and they cut rates to near zero again, you had a lot of investors that were desperate to add various investments that had a higher yield to them. And so that really lit the fire for many of these products which can be rated highly and are deemed safe, but generate a much higher yield than say, owning government bonds.

[Alex Osola]

You know, when I hear about ABS and I hear that it was so involved in the 2008 crisis, I think, wow, it's gotta be really risky, right? I mean, what makes these appealing for investors?

[Justin Baer]

The big part of it is the way, just in terms of the mechanism that they choose. So it's an opportunity to take a basket of loans and slice those up in different ways that would appeal to different investors. So if you are, let's say an insurance company that you really only want to hold really safe stuff, you can get the slice that's the most senior and is more highly rated and deemed less risky. But if you're a hedge fund that's just trying to generate as high return as you can, you want the riskier stuff. And so a lot of folks need to describe these as machines, as technology. And the technology, what it enables is for you to distribute those various risks to different investors. That variant needs.

[Alex Osola]

That was WSJ Deputy Markets editor Justin Baer. Thank you, Justin.

[Justin Baer]

Sure. Thank you.

[Alex Osola]

Home selling season is underway in Los Angeles. And if you were expecting that the recent fires would put a damper on buyers enthusiasm. Think again. Land parcels where homes once stood are commanding selling prices above early expectations, and sellers are asking for roughly the same value or even a above their land's estimated pre fire valuation. In Altadena, for example, the first four lot sales have closed at an average of $69 a square foot, well above the $22 average from 2023 to 2024. One local real estate agent said she was about to close on a burned piece of land that was selling for about $99 a square foot. And property values are expected to rebound even more once the neighborhoods are fully reconstructed and fireproofed. I'm joined now by Rebecca Pichotto, who covers residential real estate for the Journal. Rebecca, tell me what's driving this.

[Rebecca Pichotto]

It's a combination of factors. A big reason is that it's actually quite expensive to hold onto these destroyed homes. For your average homeowner, it could mean paying for both temporary housing and a mortgage for years, while also fielding the costs of the rebuild. So some homeowners are doing this calculation in their head and realizing that they simply can't afford the years long carrying costs. But there are a few other reasons. Some other homeowners may have received insurance payouts well below what they expected and are coming to terms with the exorbitant out of pocket costs that it might take to rebuild. Others have young kids who just want to get resettled quickly. And not to mention, there are also homeowners who had already been thinking about moving out and the fires just sped up their timeline.

[Alex Osola]

Who is buying up these properties?

[Rebecca Pichotto]

So far a lot of the purchasing bids are coming from small to mid sized investors primarily who might either flip the vacant lots once they appreciate in value, or they might plan to rebuild the single family homes themselves and sell them off later. Ultimately, the bulk of the value in any property is in the land. So what these investors are really looking at is prime real estate, prime land plots in a place that they expect to rebuild and be fireproofed potentially better than previously.

[Alex Osola]

How is this turnover affecting the demographics of who is living in these neighborhoods? And I'm thinking specifically of Altadena, which we've covered a bit on the show and had a high proportion of black homeowners living there. Is that going to change?

[Rebecca Pichotto]

It's likely too soon to say whether this turnover in ownership is actually changing the demographic composition of these areas right now. After all, the numbers of sales and listings that we've seen are still a very small portion of the thousands of homes that ultimately burned. But, but the fact that many of these homes are getting mostly bids from investors, that's certainly raising alarm. Altadena is a historically black neighborhood. Black homeownership is a major feature of the neighborhood. And so residents are concerned that as the rebuild gets underway, people who have been living in their homes for decades or who might have inherited their homes from family members, that they might get priced out of the rebuild and that that might change the composition of and character of these neighborhoods that they love. In ultimate, you can walk down the streets and see all of these yard signs outside of homes that say altadena not for sale. And this is part of this broader movement to fend off predatory investor bids and ultimately try to preserve the character of the area.

[Alex Osola]

That was WSJ reporter Rebecca Pichotto. Thank you so much, Rebecca.

[Rebecca Pichotto]

Thank you for having me.

[Alex Osola]

And finally, what do you think is the biggest fast food chain in the world? I mean, by number of locations, I assumed it was McDonald's, which I've eaten at in many different countries, or maybe Starbucks, where here in New York, two locations can be sometimes just a block apart. But the truth is it's a Chinese chain called Mishui. It sells $1 ice cream and bubble tea in more than 45,000 stores across Asia and Australia. Those cheap snacks can really add up. In its initial public offering in Hong Kong today, the company raised more than $400 million. Its stock closed at 43% above its IPO price, giving Michue a valuation of more than $10 billion. The pace of Michue's growth has been blistering as it more than doubled its locations in three years. And it isn't done expanding. Maybe get ready for a Michue near you. And that's what's news for this Monday afternoon. Today's show was produced by Anthony Bansi and Pierre Vianname with supervising producer Michael Kosmides. I'm Alex Osola for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.