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WSJ What’s News

Tariffs Are About to Separate Retail’s Winners and Losers

Wed, 14 May 2025

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A.M. Edition for May 14. We head to a gathering of top global retailers to hear why this week’s 90-day tariff rollback by the U.S. and China isn’t delivering the long-term certainty businesses are looking for. Plus, President Trump met with the new president of Syria, marking a major turning point in global recognition of the country’s leadership. And the U.S. reverses Biden-era export controls on advanced AI chips. Luke Vargas hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Audio
Transcription

Chapter 1: What recent changes have been made to U.S. tariffs?

55.586 - 71.998 Michael Gordon

If we're a global player, do we need to have multiple supply chains effectively servicing different geographies? All that is incremental cost. So I think we're heading into a higher product cost environment under pretty much every scenario. It's Wednesday, May 14th.

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72.339 - 98.354 Luke Vargas

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 met this morning with the new president of Syria, marking a major turning point in global recognition of the country's leadership. On the sidelines of a regional summit in Saudi Arabia, a U.S.

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Chapter 2: How are retailers responding to tariff uncertainty?

98.395 - 119.645 Luke Vargas

official said that Trump spoke with Ahmed al-Shara, a one-time insurgent aligned with Islamic State and al-Qaeda in Iraq and who is still designated by Washington as a terrorist. Al-Shara led the overthrow of longtime dictator Bashar al-Assad in December. A U.S. spokesman said it was the first meeting between the presidents of the U.S.

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119.705 - 142.096 Luke Vargas

and Syria in 25 years, which came after Trump announced he would lift crippling economic sanctions on the war-torn country as he kicked off his four-day Middle East tour in Saudi Arabia. Meanwhile, the president hasn't escaped the growing criticism in Washington over his potential acceptance of a $400 million luxury airplane from the government of Qatar.

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Chapter 3: What are the implications of Trump's meeting with the president of Syria?

142.736 - 162.457 Luke Vargas

Democrats have raised legal and ethical concerns, and now Republican lawmakers are questioning the potential security risk and cost of retrofitting the plane for use as the next Air Force One. On his way to Qatar, national security reporter Alex Ward told us the blowback could overshadow today's state visit.

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162.838 - 180.312 Alex Ossola

The criticisms coming from Democrats and Republicans are actually basically the same. They are ethical, political, legal, unethical. the ethics, you know, can a foreign government really provide a gift of that size, not only physically, but in terms of cost to Trump in a way that does smack of corruption or trying to influence him?

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180.893 - 192.68 Alex Ossola

And then there's the foreign policy aspect, you know, is Qatar using this plane to really grant Trump's favor? And is Trump making a visit here in part because he's expecting such lovely gifts and investments from Qatar?

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193.2 - 202.366 Alex Ossola

And then there's genuine national security concern, which I think is actually somewhat animated Republicans, which is when a president goes on Air Force One, that thing is basically a fortress in the sky. It's a White House in the sky.

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202.386 - 215.776 Alex Ossola

And the plane that the Qataris are going to give doesn't seem like it's going to be fitted with that kind of equipment and security measures, in which case the plane isn't that free. It's going to cost millions of taxpayer dollars to retrofit it for the president's purposes.

216.136 - 238.942 Luke Vargas

On social media, Trump said only a fool wouldn't accept the plane as a gift. and has repeatedly expressed frustration about delays to a contract with Boeing for a new set of presidential planes. Well, elsewhere in the region, Israel says an airstrike that struck near a hospital in Khan Yunis yesterday was targeting a top Hamas leader in Gaza, Mohamed Sinwar.

239.562 - 258.515 Luke Vargas

He effectively took over as the head of Hamas in Gaza after Israel killed his brother Yahya Sinwar in October. Gaza's health ministry said six people were killed and more than 40 injured as a result of the attack. And Israeli officials said it could still take days to determine whether the strike killed Sinwar.

259.515 - 273.98 Luke Vargas

Back in the U.S., we are reporting that White House and agency officials are pushing back against a bid by Health Secretary Robert F. Kennedy Jr. to label pesticides as harmful to health. There's concern the move would disrupt the food supply chain.

274.52 - 290.57 Luke Vargas

People familiar with Kennedy's Make America Healthy Again report due out next week said it's expected to single out two problematic toxins, glyphosate, the active ingredient in Roundup made by Bayer, and atrazine, an herbicide used on grasses and corn.

Chapter 4: How do recent AI chip export rule changes affect the market?

498.361 - 518.658 Luke Vargas

The mood among manufacturers and retailers was more buoyant than I expected, thanks in large part to Monday's tariff rollback. But executives weren't ready to sound the all-clear. And there were two main reasons why. The first is that the aftershocks of Liberation Day are still being felt, even if China-U.S. trade is about to pick up.

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519.199 - 529.888 Michael Gordon

You've got a lot of products in containers ready to go, and I'm sure they'll be on ship soon. The next issue with that, of course, is are there enough containers? Are there enough ships? So my guess is we're going to get into some sort of congestion.

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530.349 - 547.103 Luke Vargas

Ian Bailey is the chairman of Anco Global, a product development company that sells over 1.5 billion items a year, primarily in Kmart stores across Australia. He told me that retailers that waited until this week's tariff news to place orders could be disappointed.

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547.683 - 561.987 Michael Gordon

So they just haven't ordered. And in the U.S., you'll see that in the next two or three months. There'll be increasing amounts of empty shelves in retailers because there's a lag effect between not ordering and it getting through the system and showing up in the retail stores.

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562.447 - 581.153 Luke Vargas

As importers race to bring in cargo during the 90-day tariff rollback, carriers have already started raising Trans-Pacific shipping prices, with the cost of some June departures more than double current prices. It's the kind of handbrake turn in trade winds that Bailey told me is keeping everyone on their toes.

581.714 - 599.062 Michael Gordon

If you're in the rest of the world, there's actually pretty good deals to be done with China right now. For us to buy products to sell to Australia, it's even easier from China because there's more capacity available because all the volumes have dropped going to the U.S. Now, in the last two days, that may have changed because of the alleviation of the level of tariffs.

599.602 - 612.345 Michael Gordon

Of course, what the shipping companies will do is they'll divert more ships to the US to serve that market, which means less sailings to other parts of the world. So you then get a supply chain disruption because of that imbalance of that global supply chain.

612.952 - 613.913 Luke Vargas

That could be an issue for you?

Chapter 5: What are the economic impacts of tariffs on global businesses?

614.333 - 614.733 Michael Gordon

It could be.

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615.573 - 638.685 Luke Vargas

So that is lesson one. But this week's dialing back of U.S.-China tariffs isn't the end of the story. Aftershocks will persist, and even the best-laid plans might need to be torn up in short order. Which brings me to the second thing I learned, that trying to reduce supply chain vulnerability is expensive, a fact likely to widen the gaps between retail's winners and losers.

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639.272 - 649.603 Sarah Randazzo

In order to meet the customer needs, we have to have product on the floor. And so we were not one of the retailers that chose to leave product in the ports or at the factories. We brought it in. We have full stores.

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649.924 - 657.212 Luke Vargas

Breanne Olson is the CEO of teen retailer PacSun, which is riding the success of having a hit product among Gen Z customers.

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657.708 - 670.677 Sarah Randazzo

We've sold almost 200,000 pairs of the baggy jean on TikTok shop over the last 12 months, which is pretty significant. And we've made an effort to bring in the product that we need to continue to drive those sales.

671.337 - 684.947 Luke Vargas

Olson said she's convening a tariff task force every week in order to work out sourcing strategies that may need to shift by the quarter. For now, though, things are running smoothly enough that she broke the news to us the brand is expanding into the Middle East.

685.498 - 696.994 Sarah Randazzo

Taking PacSun on a global scale has been something that we've been wanting to do for many years and it does feel like an exciting moment to do so and so we're also exploring other international territories.

697.728 - 700.669 Luke Vargas

But the California sun isn't shining for everyone.

Chapter 6: How are manufacturers coping with tariff volatility?

Chapter 7: What concerns do lawmakers have about Trump's luxury plane gift?

239.562 - 258.515 Luke Vargas

He effectively took over as the head of Hamas in Gaza after Israel killed his brother Yahya Sinwar in October. Gaza's health ministry said six people were killed and more than 40 injured as a result of the attack. And Israeli officials said it could still take days to determine whether the strike killed Sinwar.

0

259.515 - 273.98 Luke Vargas

Back in the U.S., we are reporting that White House and agency officials are pushing back against a bid by Health Secretary Robert F. Kennedy Jr. to label pesticides as harmful to health. There's concern the move would disrupt the food supply chain.

0

274.52 - 290.57 Luke Vargas

People familiar with Kennedy's Make America Healthy Again report due out next week said it's expected to single out two problematic toxins, glyphosate, the active ingredient in Roundup made by Bayer, and atrazine, an herbicide used on grasses and corn.

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291.271 - 315.888 Luke Vargas

It's not clear where President Trump stands on the issue, though he pledged to investigate pesticides on the campaign trail as part of an effort to win support from Kennedy's backers. The U.S. has scrapped its AI diffusion rule implemented under President Biden, which limited chip exports, claiming that it undermined diplomatic relations with friendly nations.

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316.468 - 330.338 Luke Vargas

The Trump administration said it aims to keep AI tech from adversaries, warning against using U.S. chips for Chinese AI models. Journal reporter Sherry Queen says the rule change benefits American AI players like Nvidia.

330.788 - 362.432 Sherry Queen

We saw NVIDIA has already signed deals in Middle East. It looks like a first step toward more deals coming. But if they can duplicate the success we have seen in the Middle East, that remains the question. So we don't know who will really benefit from this revamp now, but it seems like U.S. chipmakers, NVIDIA, Intel, AMD, they could get some breathing room while they're redrafting the rules.

363.012 - 388.38 Luke Vargas

NVIDIA's stock rallied in off-hours trading following the announcement. Microsoft is laying off thousands of employees, or around 3% of its workforce. The effort to become more streamlined impacts various divisions around the world and will result in fewer managers as the company focuses on high-performing teams. And turning to earnings, tariffs are still hurting forecasts of major companies.

388.78 - 410.735 Luke Vargas

As this morning, Japanese electronics giant Sony warned that annual profit is expected to drop 13 percent, even as its movie and music business boosted first quarter earnings. Similarly, Taiwanese electronics maker Foxconn also cut its forward guidance. That said, it still expects revenues to be higher than last year, thanks to its work building AI servers for U.S.

410.775 - 427.953 Luke Vargas

tech giants like Amazon and Nvidia. Coming up, this week's tariff truce has lifted markets and kicked off a rush by businesses to place orders from China. But as global retailers tell me, their long-term outlook remains as uncertain as ever. That's after the break.

Chapter 8: What is the outlook for U.S. companies amid tariff rollbacks?

773.194 - 780.218 Luke Vargas

Geography could determine other winners and losers, too. Ira Kalish is the chief economist at consulting giant Deloitte.

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780.779 - 804.714 Emily Johnson

If you look, for example, at what happened in the first quarter, the GDP numbers showed that business investment in equipment was up dramatically because it was front-loading in anticipation of tariffs. But business investment in structures, factories, warehouses, was flat. So that tells me businesses were already pausing strategic decisions because of the uncertain environment.

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805.255 - 825.67 Emily Johnson

And don't forget that more than half of what the US imports are intermediate goods, not consumer goods. So this is a cost increase for US companies that their competitors don't see. So they're facing a loss of competitiveness. And for them, where they source those things may have to change, but they don't know in what way.

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826.368 - 847.653 Luke Vargas

And of course, the fortunes of retailers depend on the health of consumers. Kalish said the middle class in particular remains spooked by tariffs in ways that could dent discretionary spending, even if the S&P 500 is back into the black for 2025. The conference board recently found Americans now expect inflation to reach 7% next year.

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848.273 - 854.234 Luke Vargas

And even if things don't get that bad, Ian Bailey told me that retailers should be bracing for a shakeup.

854.654 - 876.512 Michael Gordon

Okay, so follow this bouncing ball. Where does that take us to? The importance of finding great value for both retailers and manufacturers I think is going to be the big trend. And I think you'll start to see it in discount stores, in value stores, because we're going to see more and more customers dropping into value retail who might have previously been mid-market or even high-end.

876.892 - 879.995 Michael Gordon

In every environment there's winners and losers. I think value retail will be the winner.

880.791 - 895.766 Luke Vargas

And that's it for What's News for this Wednesday 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.

904.474 - 922.446 Unknown

Americans love using their credit cards, the most secure and hassle-free way to pay. But D.C. politicians want to change that with the Durbin Marshall Credit Card Bill. This bill lets corporate megastores pick how your credit card is processed, allowing them to use untested payment networks that jeopardize your data security and rewards.

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