WSJ What’s News - Stocks Surge as U.S. and China Slash Tariffs

Episode Date: May 12, 2025

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. Learn more about your ad choices. Visit megaphone.fm/adchoices

When does fast grocery delivery through Instacart matter most? When your famous grainy mustard potato salad isn't so famous without the grainy mustard. When the barbecue's lit, but there's nothing to grill. When the in-laws decide that, actually, they will stay for dinner. Instacart has all your groceries covered this summer, so download the app and get delivery in as fast as 60 minutes. Plus enjoy zero dollar delivery fees on your first three orders. Service fees exclusions and terms apply. Instacart. Groceries that over-deliver.

Stocks surge as the U.S. and China agree to slash tariffs. Our reciprocal tariff rate will go down to 10 percent 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. 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 happen 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. By the end of it, both sides have put tariffs of more than 100% on each other's imports. 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 age for things like auto steel and a few other things that are subject to separate tariffs. 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 US 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 US 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 US delegation about what China was doing on fentanyl. That's pretty unusual in trade talks, right? You usually don't get these kinds of officials there. And from what we understand, that was very much appreciated and taken on board by the US delegation. So yes, fentanyl does seem to be important. So we could probably expect some more movement on that in the near future.

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, that was subject to the reciprocal tariffs. I think two things stand out. One is Scott Vest of the Treasury Secretary was pretty enthusiastic about the talks that are to come and said that they would encompass more than just tariffs, so they would look at other things that the US 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 can 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 this 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 US delegation was very much that, as you said, that that wasn't really what they wanted to happen. They felt that the guard rails would have 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. And I think there are still national security issues around sensitive technologies such as semiconductors and so on that will persist and exactly where all this sort of shakes out. It's hard to say, but the idea of a full blown kind of break, a clean break just doesn't seem to be what they want. That was Journal Reporter Jason Douglas. Jason, thanks as always for the update.

Okay, my pleasure. The futures contracts tied to the tech-heavy NASDAQ are driving gains this morning with Amazon, Apple, and Tesla surging in pre-market trade. News of lower trade barriers between the world's two biggest economies is also boosting global shipping companies, Merck and Hapag-Lloyd, which are both up more than 10 percent, while mining stocks, luxury brands, and global car makers are also trending higher. Ukrainian President Vladimir Zelensky has challenged Vladimir Putin to meet him in Istanbul

this week after President Trump backed the Russian leader's offer to hold peace talks ahead of a ceasefire. In a video message to Ukrainians, Zelensky demanded a pause in fighting begin today and said he'd be waiting for Putin in the Turkish capital. I will be in Turkey this Thursday, May 15th, and I expect Putin to come to Turkey as well, personally. And I hope that this time Putin won't be looking for excuses as to why he can't make it. We are ready to talk, to end this war, Thursday.

Turkey, President Trump has expressed support, all the leaders support this." Putin didn't immediately respond to Zelensky's offer. Trump last week threatened to impose sanctions on whichever side didn't agree to a 30-day ceasefire and in recent weeks said the U.S. would walk away from talks if no progress is made soon. Hamas says it will release the last American hostage held in Gaza after discussions with the U.S. over a ceasefire deal and a deal to allow humanitarian aid to enter the Strip. A U.S. official said Middle East envoy Steve Wyckoff is expected to travel to Israel to pick up Israeli-American Edan Alexander today.

Israel hasn't allowed the entry of any humanitarian aid into Gaza since a previous ceasefire between Israel and Hamas collapsed in March, with a group's warning that the enclave is running dangerously low on food, fuel, and medicine. The Kurdish military group known as the PKK has decided to lay down its arms and disband after four decades of conflict with Turkish forces, according to a news agency aligned with the group. The PKK is designated as a terrorist group by Turkey and the U.S. It initially fought for an independent Kurdish state and later demanded greater rights for

tens of millions of Kurds spread across Turkey, Syria, Iraq, and Iran. Turkey's long-running war with Kurdish separatists has been a source of tension with the U.S., which has partnered with Kurdish militias in Syria to stamp out Islamic State extremists. The decision to disarm comes nearly three months after the group's imprisoned leader called for a ceasefire. And a weekend ceasefire agreement between India and Pakistan appears to be holding following the worst violence in years between the two nuclear-armed rivals. Indian officials initially accused Islamabad of violating the pact made on Saturday, but

both Indian and Pakistani authorities said today there were no reported incidents of firing overnight along the heavily militarized region between the countries. Coming up, President Trump moves to lower drug prices, and Republicans propose work requirements and eligibility checks as a part of controversial cuts to Medicaid. We've got those stories and more after the break. Hey, wouldn't it be great if life came with remote control? You know, you could hit pause when you needed to or hit rewind, like that time you knocked down

that wasps nest. Uh-oh. Well, life doesn't always give you time to change the outcome, but pre-diabetes does. With early diagnosis and a few healthy changes, you can stop pre-diabetes before it leads to type 2 diabetes. To learn your risk, take the one-minute test today at DoIHavePreDiabetes.org. Brought to you by the Ad Council and its pre-diabetes awareness partners.

In a story that is raising legal and ethical concerns, the Trump administration is in talks with the government of Qatar to accept the gift of a new plane that would serve as Air Force One and then potentially be used by President Trump after he leaves office. We report that administration lawyers who reviewed the arrangement concluded it was legal, while Democrats and good government groups criticized the pending deal, citing it as a potential violation of the Constitution's Emoluments Clause, which prevents officeholders from accepting anything of value from foreign states without Congress's permission.

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 healthcare 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 Smolak. Pharma shares in Asia and Europe have dropped this morning significantly, especially Novo Nordisk, who derives a large share of profit from the U.S. 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 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.