A.M. Edition for June 3. The OECD is warning the U.S. and global economies are likely to face slowing growth this year and next, amid tariff-related uncertainty and the prospect of higher-for-longer inflation. Plus, chief China correspondent Lingling Wei profiles Beijing’s new trade negotiator and his mandate from Xi Jinping not to cater to Washington. And FEMA scraps its new hurricane plan as storm season kicks off. 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 is the OECD's forecast for U.S. growth?
OECD Secretary General Matthias Korman. The Mayan headwinds are lower export growth as a result of retaliatory measures from some trading partners. The impact of high policy uncertainty
According to the OECD forecast, US inflation could reach close to 4% this year, part of a global trend that Corman said could keep interest rates elevated, leading to higher borrowing costs and dragging economic activity. Meanwhile, fresh manufacturing data out of China is showing the steepest drop-off in new orders in over two and a half years. The Journal's Rebecca Fung has more.
The China Caixin Manufacturing Purchasing Managers Index, which is a private gauge of activity, fell to 48.3 in May. And basically a reading below 15 means that manufacturing activities has contracted. And then a sub-index tracking factory production fell for the first time in 19 months.
Chapter 2: How are U.S. tariffs affecting the economy?
So it's fair to say Chinese manufacturing activities has not fully recovered despite the US and China trade truce.
Despite those weak readings, business optimism improved last month compared to a low in April, with companies hopeful that the US-China trade conflict could subside in the near future. Well, for that to happen, the two sides will need to negotiate, especially after Treasury Secretary Scott Besant signaled last week that talks had effectively stalled.
The Journal's chief China correspondent Lingling Wei has been looking into the trade team assembled by Xi Jinping for negotiations. And she joins me now to discuss what we can learn by studying it. Lingling, this is an angle on trade negotiations that we don't often dwell on. The who of talks as opposed to the what's and the when's.
I'm curious, what's jumping out to you about what we're seeing from China here?
Right. What really jumped out at me is how Xi Jinping wants a different kind of negotiation than the one in the first Trump term. Back then, Xi Jinping's chief trade negotiator was someone who was trained by Harvard, was known as a very pro-market pragmatist. who really understood US concerns. And fast forward to today, Xi Jinping himself really wants to play hardball with the United States.
And then his chief negotiator is someone who thinks just like him, who believes in state planning, believes in central government control and has a clear mandate of not catering to the US.
You mentioned the chief negotiator in all of this. Let's talk a bit more about him. This is He Lifeng. What should we know about him?
Unlike previous Chinese officials in task with dealing with foreign governments and especially American officials, He Lifeng doesn't speak English and he doesn't have as much of experience dealing with Americans as some of his predecessors did.
He's quite different from a lot of so-called barbarian handlers in China who were English-speaking, more exposed to Western way of thinking and sometimes considered maybe even a little bit too sympathetic to Western concerns. He really has been staunchly defending China's industrial policy and refused to admit that China has an overcapacity problem.
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Chapter 3: What does China's new trade negotiator mean for U.S.-China relations?
One big powerful new weapon the Chinese have realized that they have is export controls. That might sound really counterintuitive because export controls have traditionally been a big tool by the United States, right? The U.S. has significantly tightened export controls on sale of technology, high-tech products to China. And the Chinese have learned the American way.
But their export controls are aimed at rare earths and critical minerals US companies need to use to produce semiconductors, EVs or even fighter jets. So the Chinese really have already used export controls as a very potent tool to hit back at the US and will continue to use that as leverage in future negotiations.
And as you report, if they are going to, let's say, dangle more purchases of American goods in the course of talks, they're going to do it in exchange for getting something very much in their core interests.
Right, exactly. Xi Jinping has significantly beefed up the country's self-reliance. They believe they're in a better position to drive a harder bargain. If the US wants China to buy more stuff from the United States, the Chinese would argue, okay, you need to sell us stuff we really want to buy, such as semiconductors and other high-end technology products.
Lingling Wei ist The Wall Street Journal's Chief China Correspondent. Lingling, thank you so much as always. Thank you for having me. Coming up, South Koreans choose a new president as the country contends with US trade talks and tensions with Beijing. And record labels try to set the rules of the road for how artists are paid when AI remixes their music.
We have got those stories and more after the break.
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Chapter 4: Who is He Lifeng and what is his approach?
South Koreans have been voting to select their next president today, following months of political uncertainty after the country's short-lived imposition of martial law late last year. Opinion polls show voters are set to punish the ruling conservatives. And as our Korea Bureau Chief Tim Martin explains, the winner of the snap election...
will determine how Seoul approaches key foreign policy issues.
The stakes are very high for South Korea, one of America's biggest trading partners and allies, home to America's largest overseas military base and corporate giants like Samsung, Hyundai and LG. Nun, Martial Law wurde vor sechs Monaten erklärt, aber das schmerzt wirklich Seoul.
Chapter 5: How does China's manufacturing sector compare now?
In einem Zeitpunkt wie diesem, wo Trade Talks mit der Trump-Administration stattfinden, gibt es große Bewegungen auf wichtige Industrien für Südkorea, von Autos bis zu Semikonduktern bis zu Aluminium und Stahl. Ein permanenter Führer, ein gewählter Führer ermöglicht Südkorea, A president who can meet Trump directly and make South Korea's case to get reprieve from the new levies.
In addition to trade, South Korea also has major security issues to deal with from how the U.S. contends with China and the rising nuclear threat from North Korea.
Back in the US, federal emergency management agency officials are scrapping its new hurricane response plan just two days into the annual hurricane season. Instead, the agency is returning to last year's guidance, leaving some confused about how that would be possible, given sharp workforce cuts and the elimination of key programs.
Agency workers were left stunned after new FEMA leader David Richardson suggested he recently learned there was an annual hurricane season which lasts from June 1st through the end of November. A FEMA representative called it an attempt to, quote, falsely frame a joke as policy, end quote, and said there is no uncertainty about how the agency will handle hurricane season.
Lawyers from Meta-Plattforms are taking on the European Commission today, challenging the Blocks' crackdown on the company's social networking business. At issue are Facebook's Messenger and Marketplace features, which Meta argues shouldn't be classified as so-called core platform services that must obey the Blocks' antitrust rulebook, the Digital Markets Act.
Apple's iOS-Operating System and Safari Browser and Alphabet's Google Search Engine have also come under the scope of the law, which forces companies to make it easier for rivals to operate on their platforms or face fines of up to 10% of their annual sales.
Meta is one of three tech companies suing the commission over DMA enforcement, with Apple and ByteDance-owned TikTok filing legal challenges of their own. And three major players in the music industry are in talks with a pair of startups that could set a new precedent for how songs can be used and how artists are paid for remixes generated by AI.
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Chapter 6: What strategies might Beijing employ in trade talks?
Universal, Warner und Sony wollen von Start-Ups Suno und Udeo bezahlt werden, wenn Musik von Künstlern auf ihren Labels, wie Sony's Miley Cyrus, aufgetragen wird, um generative AI-Modelle zu trainieren und neue Musik zu produzieren.
Die Leute, die mit den Gesprächen kennengelernt sind, sagen, dass die Firmen die Start-ups für die Entwicklung von Fingerprinting- und Attributionstechnologien wie YouTube's Content ID entwickeln wollen, um zu prüfen, wann und wie ein Song benutzt wird, um zu beurteilen, wie viel die Künstler und Labels bezahlt werden sollen.
Jede Firma negotiiert mit den Start-ups individuell, und die Gespräche werden an verschiedenen Phasen der Progression gesetzt, obwohl wir gelernt haben, dass die Verträge mit den KI-Firmen die Labels betreiben könnten. And that's it for What's News for this Tuesday morning. Today's show was produced by Daniel Bach and Kate Boulevent. Our supervising producer is Sandra Kilhoff.
And I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.