Trump’s Tariffs on Canada, Mexico and China to Go Into Effect Saturday

Summary

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.

Transcript

[Alex Osola]

President Trump's tariffs on Canada, Mexico and China are scheduled to go into effect tomorrow. Plus how a lending rut may spell trouble for some regional banks.

[Matt Grossman]

That is particularly a challenge for retail banks because that is really a bread and butter business for them. It's a much smaller part of the business for the JP Morgans and Bank of Americas and Goldman Sachs of the world.

[Alex Osola]

And Meta considers leaving Delaware to incorporate in Texas or another state. Alex It's Friday, January 31st. 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. We're mere hours away from President Trump's self imposed deadline to impose tariffs on some of the US's top trading partners. White House press Secretary Caroline Levitt announced today the coming tariffs would be going into effect tomorrow without a grace period. The President will be implementing tomorrow a 25% tariffs on Mexico, 25% tariffs on Canada, and a 10% tariff on China for the illegal fentanyl that they have sourced and allowed to distribute into our country, which has killed tens of millions of Americans. I'm joined now by Gavin Baid who covers trade and economic policy for the Journal. Gavin, assuming we get these universal tariffs, what will be the immediate effect?

[Gavin Bade]

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, right? Industries that have cross border supply chains to try to comply with this and to try to figure out actually what it means. You know, does this mean for a car that has parts that go across the us, Canada, US, Mexico border multiple times, do they get a tariff every single time? Could some sectors be exempted like the automotive sector or oil and gas? It just depends how far they want to go. The other big open question is what legal authority do they use for this? Do they declare an economic or a national security emergency and use emergency law to put these tariffs in place? The President says it's a national emergency. He has pretty broad remit to impose tariffs how he wants. However, that's never been done before under this law and it would be certain to face legal challenges.

[Alex Osola]

So it sounds like many different industries are just going to figure out what this means. But in terms of trickling down to the consumer, when might they start to feel the impact?

[Gavin Bade]

That is actually an open question as well. People have been trying to prepare for this, right? Stockpiling, for instance, cars in parking lots at auto dealerships. So maybe consumers don't feel it that soon, right. If these tariffs stay in place for a week or two weeks, you're probably not going to see that much. But you start getting beyond that and things are going to start trickling down to consumers. If there are no exemptions, that will be dollar for dol, a larger tariff move than anything he did in his first term. And so we're looking at a serious, serious change to the US Economy. And especially if they do it all in one with no notice and comment period, with no way for people to apply for exemptions and things like that, that will be a shock to the system here.

[Alex Osola]

That was WSJ reporter Gavin Bade. Gavin, thank you.

[Gavin Bade]

Appreciate being here. Thank you so much, Alex.

[Alex Osola]

U.S. stock indexes finished lower today after the White House's tariffs announcement. The Nasdaq was down about 0.3%. The S&P 500 dipped half a percent, and the Dow fell three quarters of a percent. The Personal Consumption Expenditures Price Index, the Federal Reserve's preferred metric for inflation, accelerated in December, rising by 0.3% compared with 0.1% in November. That contributed to a 2.6% increase overall in 2024, higher than the Fed's target of 2%. Matt Grossman, who covers business for the Wall Street Journal, says what really matters for the Fed is the core PCE index that excludes volatile food and energy prices.

[Telis Demos]

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. And, and so they still probably might feel they need to be a bit more patient with further rate cuts. On the other hand, there are some things that the Fed is probably happy about in these numbers. A lot of that elevated inflation over the last year really came earlier on in 2024. And in the last few months, the monthly price increases have looked a lot closer to what the Fed wants. So 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.

[Alex Osola]

Turning now to the latest on the DC aircraft collision. Rescue crews have recovered at least 41 bodies, though 26 victims are still unaccounted for. Investigators are analyzing the black box data from the plane and are still looking for the recording device from the helicopter. They'll be looking to understand the helicopter's altitude, which may have been too high, as well as what the helicopter team could see and whether the night vision goggles they were wearing played a role. Coming up, what slower loan growth could mean for regional banks. That's after the break. It's tax season. So what's new this year that could save you money?

[Isabel Busquet]

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.

[Alex Osola]

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 February 2 and 9 on your money Briefing for Wall Street. Business is booming, and by most metrics, it should be for regional banks, too. They're no longer living in the shadow of the 2023 crisis sparked by the collapse of lenders like Silic, but instead, a recent report shows that loan growth is slow. Federal Reserve data shows that across US commercial banks, loans grew about 2.7% from the end of 2023 to the end of 2024, only slightly faster than the 2.3% rise the year before. Here to tell us more about what this means is Telis Demos, who's a writer for WSJ's Hurt on the Street Telus. What have we learned from the latest bank's earnings reports?

[Matt Grossman]

What we've learned is there are a lot of things that are working for banks in their earnings at the moment.

[Isabel Busquet]

Right.

[Matt Grossman]

If you looked at the headlines, you'd see, oh, profits are up, revenues are up, the stocks are up. But at the core, lending is just not really happening at the levels that you would expect it to be based on what seems like a fairly strong economy. There's just something missing, and that is loan growth. If you look at other times in recent history, you've seen loan growth at 10% year over year. Right now, though, almost across the board, categories of lending are growing at 1, 2, 3%. They are just not really growing.

[Alex Osola]

Any sense of why this is happening?

[Matt Grossman]

There could be a couple of things. One is that because interest rates are high, companies just don't want to borrow at this rate. There might be other even more thorny things going on in banking, though, which could be maybe people want to borrow, but not from banks. Perhaps they're going to other places, right? Like Apollo and Aries and Blue Owl. These are fund managers. These are companies that have raised money from investors like pension funds and sovereign wealth funds and even some retail investors and want to lend out that money. They are not banks.

[Alex Osola]

Right. If this isn't an issue affecting all banks, is there a sense that maybe it has a bigger or an outsized impact on regional banks?

[Matt Grossman]

Yes, because regional banks are generally bigger, more reliant on the lending business than the big global Wall street mega banks are. Another thing that regional banks in particular are heavy in is commercial real estate lending. And that activity has been particularly slow and a lot of banks have been forced to shrink their commercial real estate portfolios because of problems in the office market. Right. And so that is particularly a challenge for retail banks because that is really a bread and butter business for them. It's a much smaller part of the business for the JP Morgans and Bank of Americ Americas and Goldman Sachs of the world.

[Alex Osola]

So given that regional banks are a bit more exposed, what is the outlook for them in the year ahead?

[Matt Grossman]

Lending is really vital to the longer term outlook for those businesses. And I don't think that you're necessarily going to see like bad results in the first quarter, 2025 or the second quarter. But unless this loan picture improves, it's going to be tough for regional banks for their stocks to go much further than they already have.

[Alex Osola]

That was heard on the street columnist Telus Dimos. Thank you so much, Telus.

[Matt Grossman]

Thank you.

[Alex Osola]

We're exclusively reporting that Meta is looking to move its headquarters to Texas or another state. That's according to people familiar with the matter. The company is currently incorporated in Delaware, where most big US Companies are legally housed. Texas has billed itself as a better destination for companies with controlling shareholders like Mark Zuckerberg. A Meta spokesman said there are no plans to move the company's corporate headquarters headquarters from California and declined to comment further. Chinese company Deepseek shocked the world and rattled markets at the start of the week with the release of its sophisticated, cheaper artificial intelligence model. And though it may have tech giants on edge, some companies are already putting that model to use. Isabel Busquet, who covers enterprise technology for the Journal, is here to tell us more. So, Isabel, what is attracting companies to Deep Seq's AI model?

[Isabel Busquet]

Pretty much any company that's out there has been really trying to leverage AI and get the benefits of that over the last couple years. But a big hindrance has been the cost of these models. So now they see this new model coming out of China and it's promising to be orders of magnitudes cheaper. It's exciting for them. I don't know if they're jumping in full force to be like, oh, you know, instead of Claud or instead of GPT, we're immediately going to use this. I think there's still a lot of concerns about data privacy. But what it shows is just it can be done a lot cheaper, and that's really encouraging for them.

[Alex Osola]

So what are they doing with it?

[Isabel Busquet]

No one that I know of is using this in production today. But I think what they're looking at is just sort of testing the effectiveness and testing the cost effectiveness. A lot of companies have systems set up to evaluate how well different models perform a given use case. And a lot of companies are at the point where they realize, you know, we're not just going to use one model for everything. What also excites them about this model is that it's an open source model, so they can essentially download the source code and just play around with it in a closed, safe environment. There's still questions around how secure that is, considering the provenance of this coming out of China, but that's more the route that these companies have taken.

[Alex Osola]

I feel like we're kind of circling around this, this question, which has been a big one when it comes to AI in business, which is, can this actually make money? And is the advent of Deep SEQ kind of getting us closer to an answer on that?

[Isabel Busquet]

It's kind of hard to measure because productivity is something that's kind of hard to measure. And at the same time, you might be saving someone an hour on something, but you're spending hundreds of thousands of dollars on this AI tool for the whole organization. So, yes, the idea that models are getting cheaper and AI tools are getting cheaper, it does mean that those productivity enhancements basically are delivering more value. And this is maybe a bigger leap in that direction, but it's something that will definitely spur more adoption, lower prices and more value.

[Alex Osola]

That was WSJ reporter Isabel Busquet. Thanks, Isabel.

[Isabel Busquet]

Thanks for having me.

[Alex Osola]

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. Then on Sunday, we'll be looking at how President Trump's moves to stamp out diversity, inclusion and equity policies are rippling across corporate America. That's in what's New Sunday and we'll be back with our regular show on Monday morning. Today's show was produced by Pierre Bienname and Anthony Banci, with supervising producer Michael Kosmides. Michael Lavall wrote our theme music. Aisha El Moosleem 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.