Trump Administration Announces New Tariffs on Over 80 Countries

Key takeaways

The U.S. is implementing new tariffs on 60 countries, with a focus on combating forced labor, amidst ongoing trade tensions.
Escalating conflicts in the Middle East and with Iran are causing a spike in oil prices and a rise in treasury yields, which could impact borrowing costs and inflation.
Despite higher borrowing costs, investment in artificial intelligence infrastructure is sustaining economic growth, with companies continuing to borrow heavily.
IBM’s recent earnings disappointment highlights challenges in the infrastructure and mainframe segments, but the company sees potential opportunities with AI and ongoing enterprise needs.
Heavy AI investments by tech giants like Alphabet and Tesla are impacting their cash flows but reflect continued focus on innovation.

Summary

U.S. Tariffs and International Relations

The U.S. government announced new tariffs targeting 60 countries, replacing the previous temporary global tariffs. The new tariffs are aimed at combating forced labor, with differentiated rates based on each country’s labor laws. The Trump administration is also complicating Saudi Arabia’s nuclear deal, linking it to the normalization of relations with Israel, which is now contingent on Palestinian statehood. Tensions with Iran are escalating, with threats of military action following attacks on Saudi ships in the Red Sea attributed to Houthis, who have a known relationship with Iran. These developments are causing a further squeeze on oil supplies and prices, with Brent crude surpassing $100 a barrel.

Market and Economic Developments

Market reactions included a sharp rise in oil prices and increased treasury yields, the highest in 18 months, influencing mortgage rates and investment choices. Despite rising borrowing costs, investment in artificial intelligence infrastructure continues to drive economic growth, as companies see large returns from borrowing. Consumer spending remains resilient, buoyed by rising wages—especially among lower-income earners—though inflation remains a concern. Recent economic data shows payroll gains for low and median earners, but higher mortgage rates could eventually impact consumer spending and economic stability.

Corporate Earnings and Tech Sector Insights

IBM’s latest earnings report revealed significant challenges, particularly with its infrastructure and mainframe business, leading to a sharp stock decline the previous week. The company’s CEO attributes the poor quarter to delayed deals and shifts in customer priorities toward AI-related infrastructure. IBM has reduced its full-year revenue guidance but remains optimistic about the future, emphasizing the ongoing importance of mainframes for enterprise workloads. Meanwhile, Alphabet and Tesla experienced declines following earnings reports showing negative free cash flow, reflecting heavy investments in AI. Intel and Blackstone posted positive results, indicating some resilience in their sectors.

Show notes

P.M. Edition for July 23. The U.S. plans to impose new tariffs on most trade partners, replacing President Trump’s temporary global 10% tariff. Plus, the threat of escalating conflict in the Middle East drove oil prices over $100, and concerns around higher inflation made bond yields surge. WSJ markets reporter Sam Goldfarb discusses how that ripples through the economy. Meanwhile, heavy AI spending from Alphabet and Tesla spooked investors, and the Nasdaq dropped more than 2%. And after IBM issued a rare profit warning last week, the company’s earnings shed more light on what went wrong. We hear from reporter Anissa Gardizy about where its business goes from here, while tech columnist Christopher Mims spoke with IBM CEO Arvind Krishna. Alex Ossola hosts.

Correction: New U.S. tariffs target 60 economies, or more than 80 countries. An earlier version of this podcast incorrectly said the tariffs target 60 countries. (Corrected on July 24.)

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