OECD Slashes U.S. Growth Forecast
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Get their newest arrivals in-store, online, and in the app. FEMA scraps its new hurricane plan as storm season kicks off. Plus, the OECD forecasts the U.S. and global economies will lose steam as tariff-related turmoil drags on. And we'll look at China's trade negotiating team for clues about the likely hardball talks to come.

They believe they're in a better position to drive a harder bargain. If the U.S. wants China to buy more stuff from the United States, the Chinese would argue, OK, you need to sell us stuff we really want, such as semiconductors. It's Tuesday, June 3rd. 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. ♪

Global growth is set to slow this year and next as U.S. tariffs introduce widespread economic uncertainty and risk leading to higher for longer inflation.

That's according to the Organization for Economic Cooperation and Development, or OECD, which projected the U.S. could be among the worst-hit economies, with 2025 growth of just 1.6 percent, a sharp deceleration from a 3.3 percent forecast last year and a March projection of 2.2 percent.

OECD Secretary General Matthias Korman. The Mayan headwinds are lower export growth as a result of retaliatory measures from some trading partners, the impact of high policy uncertainty and a marked slowdown.

in net immigration. According to the OECD forecast, U.S. inflation could reach close to 4% this year, part of a global trend that Corman said could keep interest rates elevated, leading to higher borrowing costs and dragging economic activity. Meanwhile, fresh manufacturing data out of China is showing the steepest drop-off in new orders in over two and a half years.

The journal's Rebecca Fung has more. The China Caixin Manufacturing Purchasing Managers Index, which is a private gauge of activity, fell to 48.3 in May. And basically a reading below 15 means that manufacturing activities has contracted. And then a sub-index tracking factory production fell for the first time in 19 months.

So it's fair to say Chinese manufacturing activities has not fully recovered despite the U.S. and China trade truce, and that domestic demand in China continues to be pretty weak. Despite those weak readings, business optimism improved last month compared to a low in April, with companies hopeful that the U.S.-China trade conflict could subside in the near future.

Well, for that to happen, the two sides will need to negotiate, especially after Treasury Secretary Scott Besson signaled last week that talks had effectively stalled. The journal's chief China correspondent Lingling Wei has been looking into the trade team assembled by Xi Jinping for negotiations, and she joins me now to discuss what we can learn by studying it further.

Lingling, this is an angle on trade negotiations that we don't often dwell on, the who of talks as opposed to the what's and the when's. I'm curious, what's jumping out to you about what we're seeing from China here? Right. What really jumped out at me is how Xi Jinping wants a different kind of negotiation than the one in China.

the first Trump term. Back then, Xi Jinping's chief trade negotiator was someone who was trained by Harvard, was known as a very pro-market pragmatist who really understood U.S. concerns.

And fast forward to today, Xi Jinping himself really wants to play hardball with the United States. And then his chief negotiator is someone who thinks just like him, who believes in state planning, believes in central government control, and has a clear mandate of not catering to the U.S.

You mentioned the chief negotiator in all of this. Let's talk a bit more about him. This is He Lifeng. What should we know about him? Unlike previous Chinese officials in task with dealing with foreign governments and especially American officials, He Lifeng doesn't speak English and he doesn't have as much of experience dealing with Americans as some of his predecessors did.

He's quite different from a lot of so-called barbarian handlers in China who were English speaking, more exposed to Western way of thinking, and sometimes considered maybe even a little bit too sympathetic to Western concerns.

he really has been staunchly defending China's industrial policy and refused to admit that China has an overcapacity problem. He's told American officials that the fact that we're selling so much cheap stuff to the rest of the world should be viewed as a

By comparison, his predecessor, the previous trade negotiator for Xi Jinping, Liu He, he really acknowledged the problems with China's industrial policy and how that policy has led to waste and inefficiencies in China.

Yeah, I'm glad you brought up his lack of interest, it seems, in reining in production. What other kinds of moves from Beijing might we be likely to see as these talks play out? Where do they see their leverage as being? One big, powerful new weapon the Chinese have realized that they have is

is export controls. That might sound really counterintuitive because export controls have traditionally been a big tool by the United States, right? The U.S. has significantly tightened export controls on sale of technology, high-tech products to China.

And the Chinese have learned the American way, but their export controls are aimed at rare earths and critical minerals U.S. companies need to use to produce semiconductors, EVs, or even fighter jets.

So the Chinese really have already used export controls as a very potent tool to hit back at the U.S. and will continue to use that as leverage in future negotiations. And as you report, if they are going to, let's say, dangle more purchases of American goods in the course of talks, they're going to do it in exchange for getting something very much in their core interests.

Right, exactly. Xi Jinping has significantly beefed up the country's self-reliance. They believe they're in a better position to drive a harder bargain. If the U.S. wants China to buy more stuff from the United States, the Chinese would argue, OK, you need to sell us stuff we really want to buy, such as semiconductors and other high-end technology products.

Lingling Wei is The Wall Street Journal's chief China correspondent. Lingling, thank you so much, as always. Thank you for having me. Coming up, South Koreans choose a new president as the country contends with U.S. trade talks and tensions with Beijing. And record labels try to set the rules of the road for how artists are paid when AI remixes their music. We have got those stories and more after the break.

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South Koreans have been voting to select their next president today, following months of political uncertainty after the country's short-lived imposition of martial law late last year. Opinion polls show voters are set to punish the ruling conservatives. And as our Korea bureau chief Tim Martin explains, the winner of the snap election will determine how Seoul approaches key foreign policy issues.

The stakes are very high for South Korea, one of America's biggest trading partners and allies, home to America's largest overseas military base and corporate giants like Samsung, Hyundai, and LG.

Now, martial law was declared six months ago, but that's really hurt Seoul. At a time like this, there are trade talks unfolding with the Trump administration, big moves on key industries for South Korea, from cars to semiconductors to aluminum and steel. Having a permanent leader, an elected leader, enables South Korea to have a president who can meet Trump directly and make South Korea's case to get reprieve from the new levies.

In addition to trade, South Korea also has major security issues to deal with from how the U.S. contends with China and the rising nuclear threat from North Korea.

Back in the U.S., Federal Emergency Management Agency officials are scrapping its new hurricane response plan just two days into the annual hurricane season. Instead, the agency is returning to last year's guidance, leaving some confused about how that would be possible given sharp workforce cuts and the elimination of key programs.

Agency workers were left stunned after new FEMA leader David Richardson suggested he recently learned there was an annual hurricane season, which lasts from June 1st through the end of November. A FEMA representative called it an attempt to, quote, falsely frame a joke as policy, end quote, and said there is no uncertainty about how the agency will handle hurricane season.

Lawyers from Meta Platforms are taking on the European Commission today, challenging the bloc's crackdown on the company's social networking business. At issue are Facebook's Messenger and Marketplace features, which Meta argues shouldn't be classified as so-called core platform services that must obey the bloc's antitrust rulebook, the Digital Markets Act.

Apple's iOS operating system and Safari browser and Alphabet's Google search engine have also come under the scope of the law, which forces companies to make it easier for rivals to operate on their platforms or face fines of up to 10% of their annual sales. Meta is one of three tech companies suing the commission over DMA enforcement, with Apple and ByteDance-owned TikTok filing legal challenges of their own.

And three major players in the music industry are in talks with a pair of startups that could set a new precedent for how songs can be used and how artists are paid for remixes generated by AI. Universal, Warner, and Sony want to be compensated by startups Suno and Udeo if music by artists on their labels, like Sony's Miley Cyrus, is used to train generative AI models and produce new music.

People familiar with the talks say the companies want the startups to develop fingerprinting and attribution technology similar to YouTube's Content ID to track when and how a song is used to help determine how much artists and labels should be paid. Each company is negotiating with the startups individually, and the talks are said to be at different stages of progression, though we've learned the agreements could involve the labels taking stakes in the AI companies.

And that's it for What's News for this Tuesday morning. Today's show was produced by Daniel Bach and Kate Boulivant. 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.