Companies Turn to Foreign-Trade Zones to Shelter From U.S. Tariffs
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What are foreign trade zones and how do they work?
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U.S. inflation ticked up in April, showing an early hint of the impact of tariffs.
A good way to think about it is this report is a bit like observing sunny weather ahead of a widely anticipated storm where the rainfall remains highly uncertain.
Plus, companies are rushing to access foreign trade zones as refuge from tariff volatility. And UnitedHealth places a new bet on its old CEO who made it a giant after its current chief executive steps down. It's Tuesday, May 13th. 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.
How are U.S. tariffs affecting inflation?
Monthly inflation in the U.S. picked up slightly in April. The Labor Department said today that the Consumer Price Index rose a seasonally adjusted 0.2 percent last month, matching economists' forecasts. Year-over-year inflation cooled to a 2.3 percent increase in April, below what economists had expected and below March's annual rate. For more, I'm joined by WSJ economics reporter Chow Dang. Chow, April was a particularly back and forth month for Trump's tariff policies. How much do these new inflation numbers reflect that?
Overall, economists couldn't take a lot of comfort in this report because all this volatility still needs time to be reflected in the data. So in that sense, this report by no means reflects how businesses are going to react to the tariffs. And that's something that we'll probably see later this summer.
As we've reported in the past, many businesses have tried to hold off so far on passing tariff costs along to customers. Does that mean we haven't felt the full impact yet of the tariffs?
There were hints of tariff pass-through in this report. In a few categories exposed to tariffs, like furniture, car parts, and audio equipment, we did see prices up over the months. At the same time, prices fell for airline fares, which could be a sign that people are holding off on vacations.
What did President Trump announce regarding Syria?
Prices also were down for used cars, even though there was a rush of people buying vehicles to try to get ahead of the inflation. But again, economists aren't reading much into it because they're expecting more of that pass-through effect in the coming months. So what does all this mean for the Fed? This report gives the Fed little reason to change their stance, which has been one of wait and see, essentially, again, because officials are bracing for cost increases and distortions as tariffs take their full effect. A good way to think about it is this report is a bit like observing sunny weather ahead of a widely anticipated storm where the rainfall remains highly uncertain.
That was WSJ economics reporter Chow Dang. Thank you, Chow. Thanks. U.S. markets closed mostly higher today after the good news on inflation. The S&P 500 added 0.7 percent and is now slightly positive on the year after spending the past two months in the red. The Nasdaq jumped 1.6 percent and the Dow slipped 0.6 percent in part due to a big sell-off in UnitedHealth that saw its CEO stepping down. More on that later. President Trump has decided to lift sanctions on Syria. He announced the change during a policy address in Saudi Arabia, his first stop on a four-day trip in the Middle East.
I will be ordering the cessation of sanctions against Syria in order to give them a chance at greatness.
What challenges do companies face with tariffs?
The move gives the country a financial lifeline after a lightning campaign overthrew its decades-long dictator late last year. The announcement sets the table for Trump to speak with new Syrian President Ahmed al-Shara tomorrow in the Saudi capital. The White House has billed it as a quick meet-and-greet. Trump's remarks capped a busy first day of his visit to the Middle East.
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Chapters
6 chapters
1
What are foreign trade zones and how do they work?
0:24–1:17
2
How are U.S. tariffs affecting inflation?
1:17–2:44
3
What did President Trump announce regarding Syria?
2:44–4:19
4
What challenges do companies face with tariffs?
4:19–5:58
5
Why are companies rushing to foreign trade zones?
5:58–6:56
6
How does the tariff rate work in foreign trade zones?
6:56–12:29
Speakers
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