A.M. Edition for April 10. Relief sweeps through global markets after President Trump blinked on reciprocal tariffs yesterday, even as the U.S. and China hurtle toward an all-out trade showdown. China bureau chief Jonathan Cheng explains Beijing’s options as it prepares to hit the U.S. where it hurts. Plus, the U.S. and Russia complete a prisoner swap. And Kyiv claims more than 150 Chinese citizens are fighting alongside Russian troops in Ukraine. 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: How did President Trump's tariff decision affect global markets?
Relief for global markets after President Trump blinks on tariffs. Though for China, it's full steam ahead toward a trade war.
Chapter 2: What options does China have in the trade war with the U.S.?
China comes into this pretty well prepared psychologically. They have thought about all the bits of leverage that they have. So there is some pain that China can inflict on the U.S. reciprocally. But beyond the tit-for-tat tariffs, there's so much that China can do.
Chapter 3: What was the outcome of the U.S. and Russia prisoner swap?
Plus, the U.S. and Russia complete a prisoner swap. And our Ukraine editor shares an exclusive glimpse into Ukrainian intelligence on the extent of Beijing's involvement in the war. It's Thursday, April 10th. 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.
Investors around the world are breathing a sigh of relief after President Trump announced a 90-day pause on so-called reciprocal tariffs yesterday, an abrupt change in direction that followed what had been simultaneous declines in equities, bonds and the dollar.
Journal markets editor Katie Barnato says almost all international exchanges are rising today, though there's also an undertone of skepticism.
Perhaps the biggest gainer among major indexes is in Japan. The Nikkei is up over 9%. In South Korea, the KOSPI is up well over 6%. We've got some big moves over in Europe as well. The German DAX is up 6%. The wrinkle in the picture at the moment is over in the US. Stock futures are actually down in what would be quite a big move in more typical trading, pushing towards 2% down.
But given the size of the rally yesterday, it could just be viewed as a gentle paring back. Perhaps things are more interesting if you look into some other assets, however. We've got 10-year treasury yields still hovering close to 4.3%. To put that in context, before the April 2nd tariff announcement, they were actually below 4.2%.
Treasuries are viewed as a haven asset, so that could be signalling something about people's level of anxiety over the markets. The other notable fact is the dollar is actually still weakening against other currencies. You might expect in this circumstance there would be a bit of vote of favour in terms of the dollar, but that doesn't seem to be happening at the moment.
Well, while reciprocal tariffs for much of the world have been put on the back burner for now, Washington's trade war with Beijing is getting hotter by the day. And here with a look at China's options going forward, I'm joined by our China bureau chief, Jonathan Chang.
John, we've reported that President Trump's decision to pause tariffs on dozens of countries while raising them to 125 percent on China could all be a part of an attempt to pressure Beijing into cutting some sort of deal with the U.S., though, at least for the time being, we've not seen any signs of a desire on Beijing's part to work this out, have we?
Yeah, that's right. I mean, China is either playing hard to get. That's one way to look at it. The other way is they're just not interested in talking. And if they're not interested in talking, it may just be that they feel comfortable. They feel like they're coming into this from a position of strength. So it's hard to know what exactly is the case.
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Chapter 4: Why are Chinese equities moving higher despite trade tensions?
Well, I mean, the way to read it may be that you have somewhat of a relief rally because what it showed is that Trump can blink, if that's the word you want to use, or be more pragmatic or respond to some of the pressures that he's feeling around him. It signals that Trump is not going to launch and persist with a destructive trade war even when everyone around him is telling him otherwise.
On the other hand, the relief rally you see in the China-linked markets is obviously not as much as you've seen in other markets, and that's because China remains the main target. Now, the fact that tariffs have gone up from 104% to 125%, I think most economists would tell you that that really doesn't matter. I mean, after a certain level, call it 60% or higher,
It really doesn't matter what the tariff level is because it will bring trade on that tranche of products basically to a standstill.
In terms of what this means for China's options going forward, we spoke to reporter Stu Wu this week. He's been traveling through Vietnam, a country that was poised to be hit with 46% reciprocal tariffs. Those are now on hold.
But even before we knew that, Stu was telling us that there was kind of a narrative that even those tariffs might not have altered supply chains that see Chinese materials sent to Vietnam to be turned into finished goods and then exported to the U.S. and to others. Let's play a clip of that.
I actually have been talking to some foreign investors who want to continue keeping their supply chain in Vietnam. They're saying, you know what, 46%, that's not great. But it's still cheaper than going anywhere else. It's still cheaper than China, which has an even higher tariff. I talked to a garment worker whose average wage was $2 per hour, right?
And 46% tariff, let's say that's roughly $3 an hour. That's still cheaper than a lot of the places, even in Asia, definitely in the United States. So it's still attractive as a destination because the economics at the end of the day favor Vietnam because of those low labor costs and the infrastructure that they already have here.
John, if that trade continues, does this 90 day pause then not represent a loophole of sorts that would allow China to keep exporting to the U.S. in spite of these tariffs via other countries like Vietnam?
Maybe so. But if it's only for 90 days, then it's not much of a reprieve because you need to figure out where you want to be, not just for the next 90 days, but for the foreseeable future.
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