WSJ What’s News - The Case for Trump’s Tariffs

Episode Date: April 1, 2025

A.M. Edition for April 1. President Trump says he has settled on a strategy for his ‘Liberation Day’ tariffs to be announced on Wednesday. Oren Cass, founder of the conservative think tank American Compass, makes the case for how the new levies can be used to reset the U.S. economy. Plus, Meta’s Mark Zuckerberg tries to enlist the White House to fight a European law that could undermine its ad business. And president Trump signs an executive order targeting ticket scalpers and fees. Luke Vargas hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Mark Zuckerberg looks to the White House for help as he fights an EU law that could undermine Metta's ad business. Plus, a day before the unveiling of sweeping U.S. tariffs, we hear a case for the president's trade agenda. Well, in some respects, you need a permanent policy. You need a change in just the baseline American economic strategy, which for decades now has been free trade. And so step one is that baseline shift that says, no, the default is now actually, we

are going to use tariffs if trade is imbalanced. And Trump pledges a crackdown on price gouging in the ticket market. It's Tuesday, April 1st. 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 says he has settled on a plan for his latest batch of tariffs due to be announced tomorrow, but for now is keeping those plans close to the vest.

Among the options he's been weighing is whether to apply a universal tariff of up to 20 percent on all imports, or take a so-called reciprocal tariff approach that would levy individual tariff rates on specific countries, subject to negotiation. As we await details, we spoke to someone with a strong sense about why Trump and his allies are leaning so hard on a tariff strategy. Orrin Cass is the founder of the conservative populist think tank American Compass, which since its establishment in 2020 has become the most influential group on Capitol Hill among the pro-Trump policy movement that calls itself the New Right. He's also a longtime friend of Vice President J.D.

Vance. And I began by asking him to summarize the various use cases for tariffs. Sure. Well, I think the most important thing to recognize is that tariffs can both be an economic policy. Let's say, you know, we want to encourage domestic manufacturing, we want to try to reduce our trade deficit, then we might want to have tariffs in place. But they can also be a negotiating tool, a tool of statecraft that

just as we use sanctions, just as we even threaten military force, we can threaten a country with a tariff. So it's important to ask the question, what is the tariff supposed to be doing, and then evaluate it on those terms. Is there a risk of maybe muddling the message if you're using tariffs so broadly? It sounds like you see all of those as legitimate uses, but do you need to be clear about why you're wielding each particular tariff? That's definitely a risk, and I think it's a challenge the administration is facing right now because for political purposes, you need to be signaling clearly to your domestic audience,

what you're doing and why. Obviously, there are costs also to tariffs. If you're asking people to accept costs, you need to explain why and what they're going to get out of them. It's really important to signal to investors if the goal here is to change where capital gets deployed. And then third, it's really important to be clear to allies to other countries that we do want to work with. If we are using tariffs to try to in some cases force them to change their behaviors, to say we want to see changes in your policies that either keep China out, that reduce your trade surplus with us, they need to know that so

that what you're doing doesn't just look like kind of arbitrary axe wielding, but actually comes with a clear if this then that I mean, I guess we'll see if we hear that articulated and and then how countries respond to that for now though Orin We've we've seen a good deal of frustration over US policy Is there a risk that that frustration gets so severe that it leads countries to pursue? I don't know closer economic relations with China Maybe in a way that would truly hurt the US in the long run? Is that something worth being concerned about? Well, look, I think the frustration is entirely natural and to be expected. And I think the reality in the long run is that if you step back and look at this situation objectively,

the countries that we want to be allied with and working with closely, you know, countries in the Anglosphere, the EU, Japan, India, Korea, these countries, for very good reasons, have a very, very strong preference for being allied to the United States and part of a US-led bloc over falling into China's orbit. And the US has a lot of room to run on being more demanding of what it looks like to be in our alliance. That being said, we should want to treat allies well and reasonably and fairly and to have good relationships, not extortionary relationships with them. And so I think there are ways that we can improve on what we're doing and that that communication really does matter because are there going to be costs and frustrations?

Absolutely. But you don't want to make those any bigger than they have to be. On those costs, you've argued before that tariffs are too often judged by economists along the lines of their impact on GDP or corporate profits or equity prices, which we are seeing done now. Though these policies will obviously be felt by and judged by individual Americans. The president has described people potentially feeling a little disturbance. The Treasury secretary saying the economy could be in for a detox. I'm curious how you'd describe

it. I think the way to describe it is that we're making a different trade off and we are reversing the decision that we made in the last generation. And so, yes, absolutely, there are going to be effect on equity prices. There could be an effect for a year or two on some of those top line economic measures. There are going to be some effects on prices, but you're also going to get the side of the scale that goes up. You're going to get a lot more domestic investment. You're going to get a lot more economic opportunity in parts of the country that have fallen behind. You're going to get a lot more resilience and security. And so nothing is free. The question is, what trade-off do you want to make? And I think,

again, this is where that communication, this time directed domestically, is so important. Can you unstick Americans from the cheap prices of some of the things we've gotten used to, particularly importing from China and elsewhere? That does seem like a tough nut to crack. Well, one question is how much change are we actually talking about in prices? Because the first thing to recognize, of course, is that the share of consumption that is these cheap imports is not that high, right? Only about 15% of our GDP is imports to begin with. And so when you think about even very substantial tariffs on imported consumption, it's nothing like what we went through over the past few years with across the board, you know, 10% inflation in a single year hitting everything

you're trying to buy. You're talking about a particular subset of products. And what you're really looking at is asking, well, how long would it take to make those things in the United States? And how much more expensive would it actually be to make them in the United States? Because one thing that we see is that when you actually do create the incentives to produce again in the United States,

we do that quite well. I mean, one classic example is when, thanks again to the Reagan administration's policies, Japanese auto industry moved its again to the Reagan administration's policies, Japanese auto industry moved its production to the American South. I don't hear a lot of people running around complaining about how much more expensive Toyotas and Hondas are because they're made in America. In fact, there is no cost-related problem with them being made in America.

You can absolutely do it. I think what you want to have is a clear plan that corporations and investors can also respond to. And ideally you want to phase these in so that you don't have tariffs charging people extra money faster than it is plausible to bring alternatives online. Orrin Cass is the founder and chief economist at the think tank American Compass. Orrin, thanks for being with us on What's News. My pleasure, thank you.

Coming up, we've got the rest of the day's headlines, including an exclusive journal report on Mark Zuckerberg's bid to enlist the president in pushing back on EU regulations. We've got that story and much more after the break. We are exclusively reporting that Metta CEO Mark Zuckerberg is pressing U.S. trade officials to help fight an expected European Union fine and cease and desist order with the goal of pushing the Trump administration to respond aggressively against what the company says would be a discriminatory decision.

After President Trump's election, Zuckerberg was quick to embrace the incoming president's priorities, scrapping Metta's diversity team, ending its fact-checking program, and appointing Trump ally, UFC president Dana White to its board. And as European tech reporter Sam Schechner explains, Metta's chief executive is now looking to call in a favor. This is the end point of what's been years of wrangling between Metta and the EU over its advertising business model. And it really isn't even about the fine that may come in this case.

It's really about the fine that may come in this case. It's really about the business model. Effectively, what Meta is contesting is this idea that it might have to offer a free version of its service without highly targeted advertising. They've already, in an attempt to settle this case, rolled out something they call less personalized ads in Europe. Meta is concerned that the EU is going to push them to go even further than that, to use even less data. And the problem is that those ads are sold for much less revenue. And so if a significant number of people in the EU sign up for a free version of Instagram

or Facebook without highly targeted ads, it could be a significant drag on the company's revenue. SoftBank has agreed to lead a funding of up to $40 billion for OpenAI, valuing the CHAP GPT maker at $300 billion. The Japanese technology investment group said it wants to further support OpenAI's growth, having already invested $2.2 billion since September. To receive the full sum, the journal reports that OpenAI has to successfully restructure into an independent for-profit company by the end of the year, and that if it doesn't, SoftBank can pare back the funding round's size to $20 billion.

The State Department is imposing sanctions on six Chinese officials, citing the political crackdown in Hong Kong and restrictions on access to Tibet. The move re-injects human rights into the contentious U.S.-China relationship, where Trump has more recently kept his focus on trade imbalances and imposing tariffs. The sanctions follow penalties placed on dozens of top Hong Kong officials under President Biden and during Trump's first term. Meanwhile, the Trump administration is opening a review of nearly $9 billion in federal grants and contracts with Harvard University and its affiliates, including Boston Area Hospitals,

making it the latest target of an investigation into how schools have handled anti-Semitism. This after the government cancelled $400 million in grants and contracts with Columbia University before it agreed to meet a series of demands to get the money reinstated. Last month, the Education Department contacted 60 schools warning them of potential enforcement actions if they didn't do more to protect Jewish students on campus in the wake of last year's pro-Palestinian protests. In a letter to the Harvard community Monday night, President Alan Garber called for urgent action to combat anti-Semitism, saying the removal of federal funding would halt life-saving

research. And finally, President Trump says he is cracking down on ticket price gouging, in part by going after professional brokers that use bots to snap up large amounts of face value tickets and resell them at a high markup. During an executive order signing in the Oval Office, Trump was joined by musician Kid Rock, who expressed frustration at the state of the ticket industry. Anyone who's bought a concert ticket in the last decade, maybe 20 years, no matter what your politics are, knows it is a conundrum.

You buy a ticket for a hundred bucks, by the time you check out it's 170, you don't know what you're getting charged for, but more importantly, these bots, you know, they come in to get all the good tickets to your favorite shows you want to go to, and then they're relisted immediately for sometimes a four or five hundred percent markup. And the artists don't see any of that money. Trump said the Federal Trade Commission, along with the Treasury and Justice Departments, will deliver a report within 180 days with details on whether more regulation or legislation is needed to protect consumers. And that's it for What's News for this Tuesday morning.

Today's show was produced by Kate Boulevent and Daniel Bach, with supervising producer 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.