Trump Hits Iran’s Trading Partners With 25% Tariff

0:02Tehran offers nuclear talks with Washington, but President Trump leans towards strikes ahead of a briefing on U. options for Iran. Plus, Minnesota sues the Trump administration over its immigration tactics. And data centers push power grids to their limit with no end to construction in sight. Pretty much every market that we're seeing is double-digit growth across the board. It's Tuesday, January 13th. 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.

0:40President Trump is set to meet with senior officials today as he weighs how to respond to anti-regime protests in Iran. We report that the White House is considering a last-ditch offer from Iran to resume nuclear talks, an option backed by Vice President J.D. Vance, while Trump is leaning toward military strikes. Other options include launching cyber attacks or boosting anti-regime accounts online. But the U.S. didn't wait for today's meeting to dial up the pressure on Tehran. Yesterday, Trump okayed 25 percent tariffs on countries that do business with Iran. Journal reporter Gavin Bade told us that Turkey, India, Pakistan, and Armenia could be hard hit by those tariffs.

1:20But it is China, Iran's top trading partner, that could be most affected. The U.S. and China are supposedly in a trade truce right now, after a meeting last October between President Trump and Xi Jinping, where they agreed to keep the trade war to a dull roar for the next few months in anticipation of a leader's summit this spring. One would assume if the Trump administration increases tariffs on China by 25%, that could put that summit at risk coming this spring. The other question is about what legal authority would underpin this tariff threat. Typically, when Trump has threatened tariffs like this before, he has used the emergency powers under a law called IEPA, the International Emergency Economic Powers Act.

2:06The catch here is that the Supreme Court is about to rule whether Trump's use of IEPA is legal or not. That could happen as soon as Wednesday. So you could see him issuing or threatening these tariffs under IEPA and then the Supreme Court coming back literally a day later and saying you're not allowed to do that. Back in Iran, we report that a battle over information is intensifying, with Tehran dialing up efforts to jam Elon Musk's Starlink satellite internet service and hunt down users. Iranians have leaned heavily on the service, including to share videos of protests after the government throttled phone services and shut down most internet connections for the country's 90 million inhabitants last week.

2:50Minnesota is suing U.S. immigration officials in a bid to end what it calls an unlawful surge of federal agents in the state. The suit, which names agencies including ICE and U.S. Customs and Border Protection, as well as top officials including Homeland Security Secretary Kristi Noem, alleges that agents have acted illegally while carrying out operations, sparking fear and distress among residents. It also argues that the administration is using a sprawling welfare fraud scandal in the state as a pretext for the president to retaliate against his political opponents and sow discord in left-leaning cities.

3:25Minnesota Attorney General Keith Ellison. The deployment of thousands of armed mass DHS agents to Minnesota has done our state serious harm. This is, in essence, a federal invasion of the Twin Cities and Minnesota, and it must stop. Speaking on Fox News, acting ICE director Todd Lyons defended his agency, saying it was carrying out its lawful law enforcement mission and justified its deployment to the state. You know, we only are increasing our numbers because ICE agents are getting attacked due to the lax policies that Minnesota has. The Minnesota suit follows similar efforts to rein in ICE in other states, including Illinois, California, New York, New Jersey and Tennessee.

4:10It's earnings season again, at least for banks. Investors will be scouring JPMorgan Chase's Q4 results this morning for clues about American consumer health, with December's inflation report filling in more details at 8.30 a.m. Eastern. Economists polled by the Journal expect consumer prices rose 2.7 percent from a year earlier. Pharmaceutical company AbbVie has struck a deal with the Trump administration in exchange for tariff and pricing exemptions. AbbVie plans to lower Medicaid prices, invest$100 billion in its U.S. operations, and expand the range of medicines it offers directly to patients through the government portal TrumpRx.

4:50Work on a major wind farm off the coast of Rhode Island in Connecticut can now resume despite objections from the Trump administration. The ruling from a federal judge marks a temporary win for the offshore wind industry as President Trump seeks to block any windmills from being built. The case is the first of three challenging the administration this week, following Trump's order in December to freeze five big projects on the East Coast over national security concerns. And the AI boom is pushing America's largest power grid to the brink. 67 million people in a 13-state region stretching from New Jersey to Kentucky share their power supply with a slew of AI data centers in northern Virginia.

5:33During periods of high demand, the grid's capacity is in danger of exceeding supply, which could force grid operator PGM to call for rolling blackouts during extreme weather. Well, if grids are struggling now, how will they cope with a projected$3 trillion in global data center spending over the next five years? Moody's Ratings' John Medina joins us to discuss the challenges and opportunities of the data center build-out after the break.

6:07Some of the AI boom's big winners so far, besides members of the MAG-7, have been the developers and operators of data centers. But could regulations, power demand issues, and water use fears crash the party? Ratings agency Moody's just published its 2026 Global Data Center Outlook. And SVP for Global Project and Infrastructure Finance John Medina is here to enlighten us. John, it doesn't sound like this big infrastructure scale-up is ending anytime soon. Far from it, with this report highlighting that there are actually a bunch of data centers soon to be coming online that could potentially fuel more growth.

6:43Talk us through this. We are adjusting our forecast to look at the International Energy Agency forecast. We actually think our internal forecast aligns more with theirs for what's realistic growth. And they're actually seeing about 14 % increase in global capacity in the next year, which is coming off a 20 % growth the year before. And most of that is in the U.S., to be honest. We're the largest market at about half of it. We're seeing an acceleration as new data centers are opening and coming online, and others are starting construction at the same time. They're getting larger and larger, and almost all of those are in the United States right now.

7:19There are other large developments you've heard elsewhere, particularly in China and in Asia, with Europe kind of a little bit slower, but still having large developments coming in and Latin America kind of coming up at the sort of rear there because it's a smaller market, but looking to grow and expand given they have good renewable resources and cheap costs of labor and to build. But pretty much every market that we're seeing is double digit growth across the board. John, with all of this build out underway, is there a risk of overcapacity here? I think that's the million or now trillion dollar question, frankly, in this space, because there is a lot being built and it is being built essentially in a race, right?

7:58We're racing to build new computing capacity to build new products that don't exist yet, right? So there is an element of that capacity built for something coming. But what I can say is all of this is pre-leased, meaning long-term leases from high investment-grade rated, you know, big tech companies. So even if they may not use it in the first few years, they're still on the hook to pay for it. So I think we're going through what could be considered a rational bubble, meaning we need all this growth, and it's hard to predict what exactly the demand will be because a new model comes out tomorrow, creates a new product, boom, everybody uses it, right?

8:34There's a lot of new services that you're actually seeing a greater focus, like in China, more on the inference, more on the use of the AI models. Whereas here often in North America, we're looking at building, getting to that generative AI, building the best models possible, and sort of use cases are going kind of at the same time. So the question of overcapacity, no one's really going to know for several more years because everything that's opening is really being used because right now we have a backlog of need for computing. It sounds like based on your report, another potential risk here is local pushback, resistance in various communities to new and existing projects, which would then in turn trigger regulation.

9:12And this could stem from anything from the amount of power these facilities are drawing to something else that Moody's ratings has been highlighting lately, water usage. Yes, water is always local, right? But the push to support and bring some of these projects into some locations is often at the state or sovereign level, right, a higher level of government. And then when it comes down to actually building the project and coming to local resources, the locals may be against it or may not be for it. Now you're seeing outreach to the communities. You're seeing, hey, we're going to build this here.

9:43We're going to provide jobs. We're going to work with you on a new water treatment plan to help the community as well as ourselves. So you're seeing more partnerships in that regard. Same thing on the power side, because nobody wants to do all of the development costs and then not be able to finish your project. You mentioned big tech companies should be able to find a use for these data centers, and most of them also have quite robust balance sheets. So is the credit risk then here primarily among the developers or financiers of these projects, especially with more of them being backed by debt?

10:13I think all of the projects, I don't want to say are highly leveraged because it's infrastructure. Infrastructure is a highly leveraged asset class kind of in general because they last a long time, right? These are 50-year assets, generally speaking, as long as you upgrade it and keep them up and running. So there's definitely a risk in terms of who's going to pay for that. If I have to put more leverage into my asset and I can't recover it from higher rents, then that's a problem, right? Or if I can't upgrade my facility because my tenant needs the newest cooling equipment, then maybe I don't have my tenant anymore, right?

10:46Maybe they don't renew their lease or maybe they go somewhere else. So it's a balance in this space more than other spaces because the technology changes a little bit quicker, right? So like we say our old malls, our new malls, our old hotels, our new hotels, they're not that different. Data centers are notably different when they change the types of internal compute. They could be quite different and quite expensive in terms of the internal configurations. John Medina is Senior Vice President of Moody's Ratings Global Project in Infrastructure Finance Group. John, thank you so much for being with us on What's News.

11:18Thanks, Luke. Appreciate it. And that's it for What's News for this Tuesday morning. Today's show was produced by Hattie Moyer and Daniel Bach. Our supervising producer was Sondra 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.