A.M. Edition for May 8. In a first since President Trump’s ‘Liberation Day’ tariff announcements, the U.S. is expected to announce a framework of a trade deal with the United Kingdom. Correspondent Max Colchester explains that despite the likely straightforward nature of the agreement, it hints at the White House’s broader strategy. Plus, why tariff whiplash is spurring some central banks to cut rates, even as the Fed stands pat. And President Trump looks to cement his ‘Make America Healthy Again’ agenda with his pick for surgeon general. 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 trade deal is the U.S. announcing with the U.K.?
One bunch of central banks has a fairly clear one-sided problem, which is growth is slowing without any real sign of an inflation pickup. The Fed has really the biggest challenge.
Chapter 2: How are tariffs affecting central banks' decisions?
It's Thursday, May 8th. 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. President Trump is expected to announce the framework of a trade deal with the United Kingdom today in what would be the first major agreement of his second term.
The UK is hoping to get a reduction on the 25 percent tariffs the U.S. has levied on steel, aluminum and automobiles. But our London-based correspondent Max Colchester says the baseline 10 percent tariff imposed on all countries will will likely remain in place.
Chapter 3: What are the implications of the new U.S.-U.K. trade framework?
This isn't going to be a comprehensive trade deal that covers a lot of sectors. It's likely to be focused on a few key areas, notably the steel tariffs that Trump imposed on the UK and automobile tariffs that the two countries imposed on each other. And there will also be potentially a tweak to the amount of tax the UK levies on big US tech companies here.
Max said that the agreement could be one of the more straightforward deals for the Trump administration, but nonetheless hints at a broader strategy.
The UK and the US are very close transatlantic partners. Trade between the two countries is broadly balanced. So there wasn't a huge trade deficit as there is, for example, between the US and the EU or China. So this is always going to be one of the easier trade negotiations to undertake. And actually, most of the trade between the US and the UK is in services, not in goods.
Chapter 4: How are Trump's policies reshaping global trade?
So it's important, but it's also quite symbolic. And it shows the Trump administration is serious when it says it does want to try to ease some of the trade restrictions it imposed earlier this year. But I think what it shows is that the tariffs are here to stay, that the US will maintain a basic tax on imports into its country. And that isn't up for negotiation at this stage.
And Max said that whether or not countries feel they will get concessions from the U.S., Trump's policies have spurred an economic rethink.
The idea that Trump's moves are sort of the death knell for globalization might be slightly overstated. So we've seen, for instance, the U.K. just this week sign quite a comprehensive trade deal with India. So now you've seen the fifth and sixth largest economies in the world signing a deal to ease trade. So it seems like Trump's efforts have actually kind of spurred
countries to get more serious about lowering trade barriers, if anything, to offset the tariff effect of the U.S. That was Journal correspondent Max Colchester.
Meanwhile, President Trump has said that he won't reduce the 145 percent tariffs on Chinese goods in order to negotiate a trade deal with Beijing. His comments come as Treasury Secretary Scott Besant and U.S. Trade Representative Jameson Greer travel to Switzerland to meet with their Chinese counterparts. China has said the de-escalation of tariffs is essential to kick off trade negotiations.
According to people familiar with the matter in both Beijing and Washington, China's outreach on cracking down on fentanyl paved the way for the initial talks between the two countries. And the Trump administration is looking to overhaul controversial export controls set to come into force next week that would limit how many AI chips individual countries can buy.
The controls were announced in the final days of the Biden administration over fears that countries would route U.S. chips to adversaries, including China. Tech reporter Amrith Ramkumar says any changes to the export controls could take several months.
The Biden rule would have divided countries into three tiers, and that would determine how many advanced chips the country could buy. Many U.S. allies, such as Switzerland, India, and Israel, were in Tier 2 and would still face limits and controls on the number of chips they could get.
That fueled a strict backlash from those countries and many companies like Microsoft and Oracle that worried that that system would hurt their business. Our reporting indicates that the Trump administration is considering getting rid of that tiered system in favor of a series of bilateral country-by-country agreements and will now go about negotiating those.
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Chapter 5: What changes are expected in U.S. export controls on chips?
For the Bank of England and the ECB, it's more about the growth story. They've looked at the impact of the tariff announcement so far, And it increasingly looks to them as if this is not an inflationary blow. In fact, it may lead to some cooling of prices in the months to come. There is the potential for a diversion of goods from China. This is a big worry for Europe.
that Chinese businesses looking for alternatives to their U.S. customers will come to Europe and are prepared to cut their prices very steeply in order to offload those goods that they can no longer find buyers for in America.
How should we be thinking about the dynamics in the U.S. going forward, especially if we see more monetary easing in the U.K. and Europe this year? I mean, just last month, President Trump had lashed out at the Fed chair saying basically you should be following the ECB's example and cutting.
I mean, you're comparing economies that are in fundamentally different situations. I think the Fed is obviously determined to kind of do things its way.
And Fed Chair Powell made it clear that there's an advantage to waiting to see how all of this plays out rather than jump on one side of this difficult balance that they have to carry off and make a mistake that they would then have to unwind or that might make the situation that they face even more difficult.
I mean, it has to be said that investors generally believe that the Fed will cut later in the year because over time, the hit to growth will become the dominant story. As economies weaken, inflationary pressure is weakened. So maybe the initial inflation hit from tariffs will wane over time as demand in the US economy cools down because activity has slowed.
Paul Hannon is the economics editor for Dow Jones Newswires. Paul, thanks as always for the update. Thanks, Luke. In other markets news, Japanese carmaker Toyota is revising down its profit expectations for the year, forecasting that U.S. tariffs and higher material costs will dent its bottom line. Toyota stock has fallen 14 percent so far this year.
Well, holding its guidance steady today, Danish shipping giant Maersk, the beneficiary of a 13 percent increase in first quarter freight revenue and which has already priced in continued disruption in the Red Sea. Despite news of a tentative ceasefire this week between the U.S.
and Yemen's Houthi militia, the world's top five container shippers have said they have no immediate plans to return to the area where the Houthis have frequently targeted merchant ships. And German arms manufacturer Rheinmetall posted double-digit Q1 sales growth this morning as defense spending surges across Europe.
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Chapter 6: Why is the Federal Reserve maintaining its current rates?
The maker of tanks and munitions expects a 35 to 40 percent jump in sales this year, but could revise that higher should the NATO alliance agree to a further boost in defense spending at a June summit.
New York City police have made arrests at Columbia University after pro-Palestinian protesters occupied a campus library yesterday in an attempt to restart demonstrations that overwhelmed the school last spring.
Columbia's acting president said that two campus safety officers were injured as protesters forced their way into the library and that she had asked the NYPD to help with securing the building. And President Trump has picked California doctor and wellness influencer Casey Means to be America's next Surgeon General.
Means, who dropped out of her surgical residency amid frustration with what she saw as the field's inability to treat underlying chronic conditions, co-founded a company that offers continuous glucose monitoring and regularly touts supplements and other health-related products on social media and in an email newsletter.
If confirmed to be what's known as the nation's doctor, Means would be tasked with providing health advice and overseeing 6,000 uniformed public health professionals within the U.S. Public Health Service. And that's it for What's News for this Thursday 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. And until then, thanks for listening.
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