A.M. Edition for May 12. Washington and Beijing take a major step toward thawing their trade conflict by agreeing to lower tariffs on each other’s goods by 115%. WSJ reporter Jason Douglas recaps the results of weekend talks and explains which issues the two sides still need to sort out. Plus, President Trump is expected to sign an executive order today tying U.S. drug prices to what other countries pay. And Ukrainian President Volodymyr Zelensky challenges Russian President Vladimir Putin to meet him for peace talks this week. Luke Vargas hosts. Sign up for the WSJ’s free What’s News newsletter. Ankara is the capital of Turkey. An earlier version of this podcast said Istanbul was the country’s capital. (Corrected on May 13) Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: What major trade agreement did the U.S. and China reach?
Our reciprocal tariff rate will go down to 10% on the United States side, so it goes down 115%. We enter into a 90-day pause period for negotiations, which both the Chinese and the United States are very committed to.
Chapter 2: What are the details of President Trump's executive order on drug prices?
Plus, President Trump says he'll sign an executive order today aimed at lowering drug prices. And Ukrainian President Volodymyr Zelensky challenges Russia's Vladimir Putin to meet for peace talks this week. It's Monday, May 12th. 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 U.S.
and China have sent stocks and the dollar surging this morning after both sides cut tariffs by 115 percent, ending an effective embargo on trade. Treasury Secretary Scott Besant and U.S. Trade Representative Jameson Greer also announced a 90-day tariff pause in which substantial talks on trade with Beijing would take place.
Journal reporter Jason Douglas has been dissecting the news coming in this morning. Jason, sum up the details for us here. We've got a lot of tariffs, it seems, getting cut, but some remaining. Walk us through what fits into both categories there.
Sure. So the big cuts happened to the reciprocal tariffs and the retaliation that followed that. So if you remember, on April 2nd, President Trump slapped tariffs on pretty much everyone. That included China. But then over the next couple of weeks, China retaliated. And by the end of it, both sides have put tariffs of more than 100% on each other's imports.
Chapter 3: What does the 90-day tariff pause entail?
So this reduction primarily focuses on that. They've reduced tariffs by 115%. So they're down now to about 10% at a baseline. But the US still has these additional tariffs that aren't related to those reciprocal ones on China. That includes the tariffs related to fentanyl. Overall, what it adds up to is tariffs on most Chinese imports are about 30%, which is a lot better than 145%.
And there might be still some different tariff rates for things like auto steel and a few other things that are subject to separate tariffs.
Chapter 4: How does fentanyl factor into U.S.-China trade talks?
Fentanyl, you mentioned there, seems to have been an important starting point for Washington. This was talked about a lot at a press conference in Switzerland this morning held by these U.S. delegates. Tell us a little bit about how that factored into negotiations as far as we understand.
It does seem to be something that helped prize negotiations open, if you like. I mean, the U.S. takes this very seriously and China has shown that it does too. So one of the attendees, in fact, at the trade talks was the Chinese minister for public security who talked at length to the U.S. delegation about what China was doing on fentanyl. That's pretty unusual in trade talks, right?
You usually don't get these kind of officials there. And from what we understand, that was very much appreciated and taken on board by the U.S. delegation. So, yes, fentanyl does seem to be important. So we could probably expect some more movement on that in the near future.
Chapter 5: What challenges remain in U.S.-China relations?
crucially, and this seems to be a part that has investors very excited today, is that there's this 90-day pause in tariffs in order to kind of propel further talks forward. What do we know about those plans from here on out?
The 90-day pause is very similar to what Trump has offered every other country, right, subject to reciprocal tariffs. I think two things stand out. One is Scott Messer, the Treasury Secretary, was pretty enthusiastic about the talks that are to come and said that they would encompass more than just tariffs and they would look at other things that the U.S. is concerned about, such as
Chinese currency policies, such as non-tariff barriers, regulations, and other restrictions to US companies operating in China. The other important thing that he talked about was that they now have a mechanism that should prevent future escalation. So they have established a regular dialogue, if you like, at a sort of lower level.
So quite what gets achieved in that 90 days and whether the two sides could really come together to make a durable trade deal, who knows, but they are at least optimistic that they've got the framework in place to give it a good go.
Were you surprised the extent to which these American representatives today were describing what happened after Liberation Day as sort of being unintended, right? They really seem to want to emphasize they're dialing back the clock a few months, not to before the inauguration, but they kind of want to get back onto a different footing than where things had gone in recent weeks.
I think it was surprising, but I suppose the escalation in the first place was pretty surprising and pretty shocking when it happened. The message from the U.S. delegation was very much that, as you said, that that wasn't really what they wanted to happen.
They felt that the guardrails that would have kind of prevented that kind of thing from happening weren't in place because the relationship between Beijing and Washington had deteriorated so much. So they are saying that these guardrails are back and now this kind of escalation hopefully shouldn't happen again.
Yeah, I was going to say the consensus from both sides, as the Treasury Secretary put it, is that neither wants an economic decoupling. What can we read into their statements over the weekend and this morning about kind of where US-China relations now sit?
I think there are still some challenges. I think it's right to say they don't want a full decoupling. There's lots of trade that both sides are very happy to participate in. But I think there are still pretty serious US concerns, firstly, about their trade deficit with China and what they feel is unbalanced nature with trade with China.
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Chapter 6: How are tech stocks reacting to the trade news?
Trump, who has expressed frustration for years about delays in Boeing's work to deliver a new Air Force One, is expected to visit Qatar this week. The Qatari government said the matter was still under discussion. Meanwhile, the president is expected to sign an executive order today tying U.S.
drug prices to what other countries pay, prices that are often lower because of negotiations by their single-payer health care systems. Trump didn't specify whether the order would apply to Medicare, Medicaid or other government programs.
Major drug companies have pushed back on the idea, with pharmaceutical executives estimating that instituting a most favored nation policy for Medicaid alone would cost their industry more than a trillion dollars over the next decade. Here's pharma reporter Helena Smolek.
Pharma shares in Asia and Europe have dropped this morning significantly, especially Novo Nordisk, who derives a large share of profit from the US. It could be one of the hardest hit. Hence, its share price is among the biggest losers in European morning trading.
Overall, there's this tone or this overall view of drug makers not being in favor of that policy since it would mean a major profit fall for them. However, drug makers as well as analysts share the view that the significant price gap between U.S. and other countries is no longer sustainable and has to change.
And on Capitol Hill, House Republicans have unveiled proposed cuts to Medicaid, which covers health insurance for more than 70 million low income and disabled people. The proposed changes include instituting work requirements, implementing twice yearly eligibility checks and cutting a 5 percent boost in federal incentives enacted during the pandemic.
that many states use to expand their Medicaid rosters. Party leaders hope to pass the measures through the House by Memorial Day, efforts likely to face unified opposition from congressional Democrats, hospitals, and other groups that depend on Medicaid funding. And before we go, a quick correction. An earlier version of this episode incorrectly stated that Istanbul is Turkey's capital.
It is, in fact, Ankara. And that's it for What's News for this Monday morning. Today's show was produced by Daniel Bach and Kate Bullivant. 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.
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