WSJ What’s News: January 31, 2025 – Summary

The latest episode of WSJ What’s News delivered a comprehensive overview of significant developments impacting global markets and the U.S. economy. Hosted by Alex Osola from The Wall Street Journal, the episode delved into President Trump's impending tariffs, the state of regional banks, technological advancements in AI, and more. Here's a detailed breakdown of the key discussions, insights, and conclusions from the episode.

1. President Trump’s Tariffs on Canada, Mexico, and China

Tariff Implementation Details President Trump is set to impose significant tariffs on some of the U.S.'s top trading partners without any grace period. According to White House Press Secretary Caroline Levitt, a 25% tariff on Mexico and Canada and a 10% tariff on China targeting illegal fentanyl imports will take effect on Saturday (00:23). These measures aim to address the illicit fentanyl crisis that has severely impacted American lives.

Economic Impact Analysis Gavin Bade, a reporter covering trade and economic policy, provided insights into the potential ramifications of these tariffs:

• Immediate Market Reaction: "The immediate effect is going to be, well first I think a stock market hit. You're going to see a lot of scrambling from continental industries" (01:28). Bade anticipates a short-term decline in the stock market as businesses with cross-border supply chains adjust to the new tariffs.
• Consumer Impact Timeline: Bade noted that consumers might not feel the impact immediately, but tariffs could trickle down within a few weeks. He emphasized that "this will be a serious, serious change to the US Economy" if tariffs are imposed swiftly and without exemptions (02:31).

Market Reaction Following the announcement, U.S. stock indexes reacted negatively:

• Nasdaq declined by approximately 0.3%.
• The S&P 500 fell by 0.5%.
• The Dow Jones Industrial Average dropped by 0.75% (03:21).

2. Federal Reserve’s Inflation Metrics and Monetary Policy

PCE Price Index Update The Personal Consumption Expenditures (PCE) Price Index, favored by the Federal Reserve as an inflation measure, rose by 0.3% in December, up from 0.1% in November, contributing to a 2.6% annual increase in 2024, surpassing the Fed's target of 2% (03:21).

Core PCE Insights Matt Grossman introduced Telis Demos, a writer from WSJ’s Hurt on the Street, to discuss the core PCE index:

• Steady Inflation Rate: "The core PCE inflation rate has now stayed the same for the last three months, 2.8%. It's obviously still somewhat above the Fed's 2% target," Demos explained (04:03).
• Future Monetary Policy: While elevated inflation remains a concern, recent trends show monthly price increases aligning more closely with the Fed's goals. Demos suggested that "if we get more of the same over the next few months, we could be in a place where the Fed is comfortable cutting rates further" (04:49).

3. DC Aircraft Collision Update

A tragic aircraft collision in Washington, D.C., resulted in the recovery of at least 41 bodies, with 26 victims still unaccounted for (04:49). Investigators are currently analyzing black box data from the plane and searching for the helicopter's recording device. Key areas of focus include the helicopter's altitude, visibility conditions, and the potential impact of night vision goggles used by the rescue team.

4. Tax Season Insights

Tax Preparation Challenges Tax season presents significant challenges for taxpayers, who spend an average of 13 hours and $290 on tax preparation and payments each year (05:30). Isabel Busquet highlighted the importance of exploring various tax preparation options to save time and money.

WSJ Money Briefing Podcast The episode promoted the Money Briefing podcast series, which offers tips on the latest tax rules, data security, and free filing options. Upcoming episodes, titled "Tax Season 2025: What’s New," are scheduled for February 2 and 9 (05:41).

5. Regional Banks Face Sluggish Loan Growth

Despite a robust business environment, regional banks are grappling with slow loan growth, which could pose challenges for their future performance.

Loan Growth Statistics Federal Reserve data indicates that from the end of 2023 to the end of 2024, loans across U.S. commercial banks grew by 2.7%, marginally above the previous year's 2.3% increase (05:41).

Insights from Matt Grossman Matt Grossman discussed the implications of these figures:

• Underperformance Compared to Past Trends: "If you look at other times in recent history, you've seen loan growth at 10% year over year. Right now... they are just not really growing" (06:44).
• Potential Reasons for Slow Growth: High interest rates may deter companies from borrowing. Additionally, non-traditional lenders like Apollo, Aries, and Blue Owl are attracting funds that might otherwise flow to banks (07:21).

Impact on Regional Banks Regional banks are particularly vulnerable due to their reliance on the lending business and significant exposure to commercial real estate, which is currently underperforming. Matt Grossman noted, "Lending is really vital to the longer term outlook for those businesses... unless this loan picture improves, it's going to be tough for regional banks" (08:46).

6. Meta Considers Relocating Headquarters

Potential Move from Delaware to Texas Meta is reportedly exploring the possibility of relocating its corporate headquarters from Delaware to Texas or another state. Texas is seen as an attractive destination for companies with controlling shareholders like Mark Zuckerberg (09:15). However, a Meta spokesperson confirmed that there are "no plans to move the company's corporate headquarters from California" and declined to comment further (09:15).

7. Impact of Deepseek’s AI Model on the Tech Industry

Introduction of a Cost-Effective AI Model Chinese company Deepseek has introduced an advanced and more affordable artificial intelligence model that has stirred both excitement and concern in the tech community. Isabel Busquet provided an analysis of the potential impacts:

• Affordability and Accessibility: "A big hindrance has been the cost of these models. Now they see this new model... promising to be orders of magnitudes cheaper... that's really encouraging for them" (10:05).
• Adoption and Testing: While no companies are currently using Deepseek's model in production, organizations are testing its effectiveness and cost-efficiency. The open-source nature of the model allows companies to experiment in controlled environments, despite concerns over data privacy (10:43).

Economic Viability and Productivity The affordability of Deepseek's AI model may enhance productivity by reducing costs, although measuring this impact remains challenging. Isabel Busquet emphasized that "models are getting cheaper and AI tools are getting cheaper... it's something that will definitely spur more adoption, lower prices and more value" (11:28).

8. Upcoming Episodes and Closing Remarks

The podcast concluded with a preview of upcoming episodes:

• Weekly Markets Wrap-Up: Scheduled for the following day.
• What’s News Sunday: Featuring an analysis of President Trump's policies on diversity, inclusion, and equity and their effects on corporate America.

Production credits were given to the production team, including Pierre Bienname, Anthony Banci, and others, ensuring the audience of a well-crafted and informative program.

Conclusion

This episode of WSJ What’s News provided listeners with an in-depth analysis of critical economic policies, market reactions, and emerging trends in technology and banking. From President Trump's bold move on tariffs to the evolving landscape of AI and regional banking challenges, the discussions offer valuable insights for investors, business leaders, and policymakers alike.

Note: Timestamps correspond to portions of the podcast transcript for reference.