A.M. Edition for April 3. Markets around the world are reeling after yesterday’s unveiling of sweeping new U.S. tariffs. The Journal’s Alex Frangos and Deborah Ball take stock of what’s changing and how America’s trade partners are responding. Plus, the Council on Foreign Relations’ Brad Setser explains the shocks in store for the global auto industry - and consumers - as U.S. duties on foreign-made vehicles and parts kick in. Luke Vargas hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: What are the new U.S. tariffs and their global impact?
Global markets reel after the U.S. unveils sweeping tariffs. We'll look at how world leaders are reacting as China and the EU promise to hit back.
President Trump's announcement of universal tariffs on the whole world, including the European Union. is a major blow to the world economy.
Chapter 2: How will the auto industry be affected by the U.S. tariffs?
And the auto industry stares down major changes as 25% U.S. tariffs on foreign-made cars and parts go into effect. It's Thursday, April 3rd. 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 world is waking up to the new realities of trade after President Trump yesterday unveiled a suite of protectionist measures that he justified by citing his emergency economic authority.
Chronic trade deficits are no longer merely an economic problem. They're a national emergency that threatens our security and our very way of life. It's a very great threat to our country.
Among the moves that Trump announced were a 10 percent baseline tariff on all global imports, which will go into effect on Saturday. And for countries that the White House considers bad actors on trade, they'll be hit instead with a so-called discounted reciprocal tariff.
Chapter 3: What are discounted reciprocal tariffs?
New duties amounting to 24 percent for Japan, 20 percent for the EU and above 40 percent for select countries in South and Southeast Asia. Well, here to put these measures into context, I'm joined by Journal Europe finance editor Alex Frangos and Asia editor Deborah Ball. Alex, let me start with you. Explain these discounted reciprocal tariffs for us. What's the math behind them?
I'll try. But basically what the White House has come up with is a formula not based on what the tariffs are imposed by other countries, but taking The goods trades deficit of a country and dividing it by the amount of goods that the U.S. imports from that country and getting a percentage and then chopping that in half and saying this is what our reciprocal tariff will be.
The logic that the White House is giving for this is that the trade imbalance contains all of the various indicators. tariffs and non-tariff barriers that other countries impose that the White House sees as negative for the U.S.
Chapter 4: How will Southeast Asia be impacted by the new trade policies?
With a huge global effect, Deb, you're there in Singapore. I'm curious if you could just weigh in on the significance of this policy pivot we're witnessing, one that really hits Asian countries particularly hard.
Yes, the Southeast Asian countries got hit, Vietnam very hard. China has all told their tariffs are now up to about 70% of goods going into the U.S. on top of the previous tariffs. So I think we feel that there could be a pretty significant rewriting and rewiring of supply chains that have been running through China.
Southeast Asia, a lot of countries had moved away from China, out of China and into areas in particular like Vietnam. There was a massive move after the first round of Trump tariffs in his first term. And now Vietnam has huge tariffs. So I think the impact on the Chinese economy will be significant. This is hundreds of billions of dollars worth of exports that are now being tariffed.
So we think basically this will be kind of a diversion of a lot of these trade routes into other countries. What's unclear is where they could go, which countries could provide a bit of a safe harbor with lower tariffs as well. So there'll be a lot of very painful conversations going on in boardrooms around the world, as well as among policymakers in Asia.
Chapter 5: What is the historical context of U.S. tariffs and their intended effects?
Lots of big decisions being made around the world, Alex. But back to the U.S., Trump saying he wants to bring America back to how its economy functioned before 1913, a date that got a lot of play in that speech in the Rose Garden yesterday, the year when the U.S. really began to undo its longstanding policies of protectionism.
Yeah. I mean, he sees tariffs as a revenue generator that can make up for income taxes. The question is whether that works in the modern world, because what happens when you impose a tariff is people try to avoid it. And so they don't want to pay the tax. And especially if you make the tax very, very high, like they've done with China, it just doesn't make sense to do those trades anymore.
And so the question is, will the tariffs raise as much as the White House thinks they will?
Right. We saw an estimate from Capital Economics yesterday saying that the tariffs will raise a maximum of $835 billion via customs duties. But we do have to consider how they could also trigger a decline in imports, which might offset that.
Yeah, I mean, I think the number that they actually put on it was a bit lower because they said imports will decline. I mean, you can't have both things at once. The aim of these tariffs is, number one, bring manufacturing back to the U.S. Number two, raise revenue from imports. But if you're bringing manufacturing back to the U.S., you're not importing things because you're making it at home.
So you kind of can't have both. The other important point here is that Trump has given a weak signal. for the reciprocal tariffs to come into effect. And people are really looking at this as an opportunity to get in there with the Trump administration from all these countries and say, look, we're going to do a whole bunch of things we promised. We promise we'll buy a bunch of U.S. goods.
We'll stop shipping things to you that are causing these trade deficits. Please lower our reciprocal tariff. So it's possible that this is the beginning of the negotiation or the beginning of these tariffs, not the end.
Deb, we are now beginning to hear from world leaders reacting to all of this from the likes of the Australian Prime Minister Anthony Albanese, who was pledging to fight back.
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Chapter 6: How are world leaders reacting to the new U.S. trade policies?
For Australia, these tariffs are not unexpected. But let me be clear, they are totally unwarranted.
Notably, the president of the European Commission, Ursula von der Leyen, said she actually agreed with Trump that there are people taking advantage unfairly of current trade rules. And she said she was willing to try to remake the global trading system, though she didn't think tariffs were the way to do that.
Reaching for tariffs as your first and last tool will not fix it. This is why from the outset we have always been ready to negotiate with the United States. to remove the remaining barriers to transatlantic trade.
David, it almost seems like we're hearing in real time the wheels turning for world leaders trying to kind of reason out how much room they have to actually negotiate with the U.S. here or just kind of submit to a new reality. What are you hearing?
I think there's a real hard calculus that policymakers, leaders are making in different capitals as to how much leverage they really have to fight back. And they know that this is a very difficult administration to deal with. And so I think certainly in Asia, what we've seen so far, China has said that they're going to hit back. It's interesting, though, that the first tariffs he put on about a
The Chinese did respond, but they did in a very, very measured way, in a way that showed that they did not want to escalate this. They did not want this to spiral and spiral and get worse. The Southeast Asian countries, they're too small. All of them have come out today and said they're not going to retaliate. They're going to try to negotiate something and see what they can do.
This is sort of realpolitik when it comes to trade and economics. It's, you know, how much can you really hit back? Is it going to be effective? Are you going to end up in a tit-for-tat situation that's going to be just damaging for your own country?
Alex, looking at the market response we're seeing this morning, what does that tell us about where negotiations might be possible with the U.S. or which companies, which supply chains, business models are likely to be affected maybe irrevocably?
It's going to take a little while for the market to process all of the information. But the initial reaction is this is bad for the economy. So we're seeing kind of a recession trade. Stock futures are down. Oil prices are down. Bond yields are down. And one thing that's surprising is the dollar is also down, which is usually a sign that people are kind of negative on the U.S. economy.
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