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Hello and welcome to World Business Report from the BBC World Service.
I'm Leanna Byrne and on this edition... Brazil is rolling out a multi-billion dollar rescue plan after the U.S. slapped tariffs of up to 50% on some of its exports.
Also, remember that controversial deal we've been talking about that forced Nvidia and AMD to hand over a cut? or if they're Chinese sales to the US Treasury.
Well, this could be copied in other industries.
Would you take your shoes off at work? We'll find out why some US tech startups are going shoeless. the office.
But first, let's start with Brazil, because when it comes to US tariffs, Brazil is one of the hardest countries hit.
So it's just come up with a plan to help companies after the United States slapped import tariffs as up to 50%.
So here's the plan. Brazil's President Lula da Silva says more than $5 billion in credit will be made available to affected companies. and has agreed to buy the goods made by firms that had their contracts suspended since the tariffs came in earlier this month.
The Trump administration is linking the tariffs to what it calls restrictions on free speech and the trial of former President Jair Bolsonaro over an alleged coup attempt in 2020.
President Bolsonaro is a good man. I've gotten to know a lot of prime ministers and presidents and kings and queens.
And I know him, and I'm pretty good at this.
President Bolsonaro is not a dishonest man.
He loves the people of Brazil. He fought hard for the people of Brazil.
He negotiated trade deals against me for the people of Brazil.
And he was very tough. And he was tough because he wanted to do a good deal for his country.
He was not a dishonest man. And I believe it's a witch hunt and it shouldn't be happening.
Now, President Lula rejected the accusations and said Brazil would look for new markets for its exports.
He also said there's no room for direct talks with President Trump that would likely be a humiliation.
So what is happening? The civilized way for two heads of state to negotiate is to have the will to take the decision along with Brazil.
He could have communicated with Brazil. He could have called.
He could have proposed a negotiation. But we received the taxation statement in a completely authoritarian manner.
And we are not used to negotiating in this way.
Not like this. One of the people potentially affected by these tariffs is Amarim Tashar who collects and sells acai berries.
With these tariffs we're facing, our products' production and price will drop.
And it's going to be hard for us, really hard for us working in the acai business.
It's tough because they're imposing high tariffs and Açaí is a source of income here.
We're already feeling the impact. If no negotiations happen, it will be difficult for us.
Our plan B might be selling within Brazil, within the country.
Now let's get more from the ground and bring in our reporter Camila Mota in Sao Paulo.
Camilla, paint the picture for us. What's been the immediate impact of these tariffs on exporters?
Right, Leanna. So it's been exactly a week now.
So we're still waiting for consolidated numbers, but sectors like The fruit industry and the seafood industry have already reported losses.
We've heard that dozens of containers with lobster fish ready to be shipped were held at ports.
We just heard from acai producers. We spoke here. in Brazil with mango producers that said that tons of the fruit would likely go rot because they wouldn't be able to export it.
Meat exporters are estimating a billion dollars in losses until the end of the year.
You know, in Brazil is a big coffee exporters, coffee exporter and coffee producers haven't given a number, but almost 17% of all their exports are shipped to the U.S.
They're trying to redirect their product to other markets, but as we know, that's not an easy move.
They're worried and meanwhile still trying to negotiate, you know, that their product is included in the exemption list.
Also with us is Welber Bahao in Brasilia.
He's the former Brazilian Secretary of Foreign Trade from when current President Lula was previously in power.
He's now a lawyer specialising in international trade.
Wilbur, thank you so much for joining us.
You've heard Camilla describe... This almighty hit.
I mean, is this what you'd expect when these tariffs were announced?
And also, are you thinking it's probably a good thing I'm not in government at the moment?
Yeah, so thanks for the invitation. It's a pleasure to talk to you.
No, I agree fully. But I have a remark, which is the United States is not the main trading partner of Brazil.
It's China today. So Brazil exports around 11% of its total exports to the United States.
Some sectors are particularly hit. When you think about fruits, for example, or coconut juice, Or furniture, 80% of the Brazilian exports go to... of furniture go to the US market.
So you have some particular sectors especially with middle-sized companies.
And that's what the government is trying to help now.
Well, Camilla, will you talk us through this package?
What's in it? Right. So today in Brazil, Lula laid out this plan to help exporters, which has...
Three main pillars, I'd say. A credit line worth around $5.5 billion that companies can resort to. and ease on their tax burden and a strengthening of government purchases, prioritizing the worst affected sectors.
Lula said his team is still trying to reach out to Washington to negotiate while Washington also seeking for other markets Brazil could sell its products to.
Over the past week, Lula had phone calls with Indian Prime Minister Narendra Modi and with China's President Xi Jinping.
So a lot of things going on at the same time.
So Welba, you think from a policy point of view that this is going to make a big difference?
Yes, it is, because the fact is that Brazil decided to resist, because many of the U.S. are related to domestic policies in Brazil.
And Brazil doesn't know, not even the president is able to negotiate things like decisions from our Supreme Court or the interpretation of laws regarding the digital platforms.
This can't be negotiated. And Brazil is trying to export. these products to other destinations.
And of course, it's not going to be possible for large products like coffee.
30% of the U.S. consumption comes from Brazil, but I don't think they are going to fight coffee anywhere.
Camilla, what are business owners, what are they saying about all this?
Who stands to gain the most from this support?
Right. So companies had a strong input on the aid package announced today.
Weeks ago, the government had set up a committee with businesses and government officials to discuss possible alternatives, how Brazil could respond to the tariffs.
And the business people I spoke to were very afraid that Brazil would choose the path of retaliation when that happened. that could potentially escalate the current crisis.
So they're glad in general that this was the first response. the aid package could alleviate the impact of these first few months, I'd say, and give time to companies to reorganize their strategies.
But of course, it won't completely avoid losses.
You know, I was speaking to seafood exporters in one of the worst affected regions in the northeast of Brazil, And they said they would probably have to squeeze their margins to sell their products to government programs, because due to...
The exchange rate, the price they get exporting is considerably higher than what they get domestically.
I mean, Wilbur, you know, listening to that, I know it's not necessarily Brazil's biggest export country, but I mean...
It comes against a pretty tense political backdrop.
US-Brazil relations, surely they're important for Brazil's economy.
Welber, can you hear? I think we've lost Wilbur Baha.
I'm going to come back to you, Camelia. What are you going to be watching for in the next coming weeks?
What do we need for Brazil's economy? Right.
So we're hearing from different sectors to try to feel what are the consequences of the possible consequences of the tariffs and also watching out for you know possible uh... products that could be added to the list of exemptions Trump announced a list of 700 items that would be excluded of the 50 percent tariff imposed on Brazil's products.
That's almost 45 percent of Brazil's exports to the U.S. so it's it's it's a considerable number but we still have fifty five percent you know of exports and of business people trying to, you know, trying to negotiate and very worried about what might happen in the next few weeks and months.
Yeah, absolutely. Camilla Mota in Sao Paulo, thank you so much for all your analysis and all your reporting.
Also, thank you to Wilbur Bajo. Hopefully he can hear me somewhere in Brasilia.
We really appreciate your time for coming on the programme.
Now, let's move on because and talk about, you know, another... somewhat in the same theme, more on exports.
The US Treasury Secretary said a controversial deal the White House struck with computers. chip makers NVIDIA and AMD handing over 15% of their Chinese sales in return for export licenses. could be rolled out to other industries.
Scott Besson said the arrangement is a beta test that could go wider, but critics call it an export tax in all but name. and I asked Dan Kim, Chief Strategy Officer at Tech Insights based in Washington D.C., to remind us what was unusual about that NVIDIA AMD deal.
The administration seems to have bought into this idea that the proliferation of certain AI chips, not the best ones, but certain AI chips, would be a positive benefit for US national security.
And so let's sell more of them. Let's sell them into China so that they don't develop their own or create market access opening for them to do so.
And if there is some revenue to be made along the way, let's take advantage of that.
That is a very new way of thinking. And I'm sure there are strong arguments on both sides of the argument here.
Now, I'm hearing this and I'm thinking, is this essentially the US inventing a new kind of export tax?
Or is this more complicated than what I've just said?
Well, with this administration, new things come out that are quite paradigm shifting.
And so I think this is one of those things.
The president values personal relationships.
The president values dealmaking. And so it's really interesting to hear the conversation that he and Jensen Wang, the CEO of NVIDIA had, the president proposing 20%, Jensen saying 15%, and settling on that.
It'll be really interesting to see whether this is a one-time deal or whether this is a new opportunity framework to be imposed for expert controls broadly, or even access to the Chinese market broadly.
You are a former senior official in US government.
So in your experience, how would a model like this even work outside semiconductors?
Well, actually, my first thought is to stay within the semiconductor space and consider what other chips this might apply to.
Presumably, this type of licensing fee would only apply to items that currently require license but has not been given.
So this includes... certain type of memory chips, certain types of manufacturing equipment that has been restricted into China to keep them from making the most advanced semiconductors.
So if the Secretary is signaling that all of that would be in play, if there are sufficient revenues attached to the Treasury, then... that would be a wholesale change to how the export controls work.
Now, he did seem to suggest that there would still be some red lines not to be crossed based on national security grounds.
But as we saw in the last four months with the Nvidia H20 chips, at least some of those red lines seem to be up for negotiation.
So if we broaden out that circle, There are many types of chips that are not controlled.
That is, they don't require a license to sell into the Chinese market generally.
And this portion of the market is much, much bigger.
And that market is close to, say, $200 billion. which is a little less than 30% of the global market.
So after the US, China is a close second when it comes to market size.
And so pretty much all the semiconductor companies in the industry, revenues from China can be somewhere between 15-25 percent, or in some cases, a majority of their sales.
For example, if you're selling into the smartphone market, a majority of the smartphones sold into the world, by volume are Chinese handsets.
So it's very difficult for them to say, well, just don't do business there.
And they're already facing increasing competition from China's domestic champions and chipmakers, undercutting them in price.
So for them to have to pay a tax on Chinese revenue... would essentially mean that they have to give up a significant portion of their margins just to have access to a very, very important market.
But taking a step back, though, what is NVIDIA paying for here, and why do they agree to it?
If I could venture a guess, one way to think about it is... a risk premium for market access predictability.
So they can make supply chain decisions and not have inventory sitting around when expert controls and tariff policies are putting so much uncertainty into the system.
So some companies might be tempted to look at this and say, okay, fine.
Let's pay a 15 or 10% tax revenue to exempt us from everything.
Tariffs, expert controls, licenses to operate fabs there.
And a number of items that keep CEOs up at night because of uncertainties.
Other companies, probably most companies, will be horrified at this prospect and the precedent this could set.
And you can then expand out that logic to other industries outside of the semiconductor industry.
If you're selling into China, you're likely to be involved in a complex supply chain that involves both imports and exports.
They're already reckoning with a high tariff rates that has been imposed, more higher rates than in decades for imports into the U.S., And if they now face an export tax, that could be trouble for them.
I'm also wondering how China is likely to respond if this becomes more than just a one-off in the chip sector.
Well, in some ways, this is quite good for China because if U.S. exporters to China, and we're assuming this could be applied broadly, If they now face an export tax and they face slimmer margins or have to raise their prices, then that makes their domestic competitors in the Chinese market more competitive. relative to US competitors.
And so this could actually be good for them, which allows Chinese competitors within China to actually raise their prices and have higher profit margins.
So they actually might not complain at all.
But taking a step back, China hawks for many years have warned against doing business in China and becoming revenue dependent there.
And for those that are pushing for a technology or market decoupling from China, a market access tax could actually be seen as a useful tool.
So they can say, instead of 15%, Mr. President, why not make it 50%?
Make it really painful to do business there.
That was Dan Kim, Chief Strategy Officer at Tech Insights, based in Washington, D.C.
This is Jacob Goldstein from What's Your Problem?
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And you're listening to World Business Report from the BBC World Service.
With me is Susan Schmidt, Portfolio Manager at Exchange Capital Resources in Chicago.
Hello, Susan. Hello. Susan, that concept of handing over a percentage of your Chinese sales in return for an export license...
I'm wondering, is there any market's reaction to this, the idea that that could actually be rolled out to other industries?
Could other industries be a bit spooked now?
So investors are taking a wait and see approach on that.
It's particularly relevant for Nvidia And in this case, because of AI, artificial intelligence, the NVIDIA chips and the Intel way that this effective tax has been deployed has been about those AI chips that initially President Trump dictated that they would not be or felt that They should not be sold to China and was restricting on that.
We are in, effectively, an AI arms race.
NVIDIA desperately wants wants to have their chips be the basis for the AI development, and therefore they really want to be selling their chips into China.
I think this is more a look for tech companies to make sure that they're not missing out on that Chinese market.
And it's President Trump's way of doing some creative deal-making.
And with the pressure around AI, I think these discussions were... easier to have with these companies because the companies recognize how important it is for them to be in that Chinese market.
And it's an interesting point that Dan Kim made is that NVIDIA is such a huge giant.
It's margins are so big that 15% it's actually a drop in the water for them, isn't it?
It is. And again, they're looking to the future on this.
So five, 10 years out, future development, they want to make sure that they're an integral part of the AI development worldwide.
And that is a small part of the cost right now to ensure that they're a large part of the food chain as we progress.
Now, other comments Treasury Secretary Scott Besant made recently that I saw, he told...
Fox Business. President Trump even considered reappointing Janet Yellen as Fed chair.
And that's despite replacing her with Jerome Powell back in 2018.
Well, what does that tell us about Trump's thinking at the moment, Susan?
Well, I think we've seen President Trump come up with multiple names added to the list of potential candidates to replace President Chairman Powell in the coming months.
And he had two specific candidates he was focused on in the past month.
In the last week, we've seen that expand by eight to 10 candidates.
I think Besson's comments are very interesting because I think what they're trying to do is signal that the administration is open to a broad range of candidates, certainly not trying to be close-minded.
Although I think at this moment, investors really expect it to be back to one of the two front runners that President Trump initially favored to ultimately take that spot.
There's no love lost with Jerome Powell.
He doesn't like when people criticise him.
And actually, the latest person Donald Trump has criticised is Goldman Sachs CEO David Solomon. after the bank's chief economist questioned Trump's tariff policies.
I mean, is there a real risk to investor sentiment when a president singles out a specific CEO?
Absolutely, there is risk. He singled out the Intel CEO as well.
But this is more about economic data, economic outlook.
We're really seeing President Trump make comments.
Remember that we just got labor data out recently.
And he removed the head of the government agency that supplies the labor data saying that the data was incorrect and has replaced that person.
Now he's talking about the economist at Goldman Sachs and that the CEO, David Solomon of Goldman Sachs, should switch out their economist because that economist as many other economists have not been in alignment with the administration's thinking on how tariffs will impact the economy.
This is a cause for investor concern. So far, it hasn't seemed to create nervousness, but if it continues, it certainly will.
Nobody's safe, Susan. Now, just stay there because I want you to listen to the story.
I want to know what the dress code is like where you work.
And you can answer this after we listen to the tape.
Is there anything you would like to wear or not wear?
Well, in the US, some companies have gone as far as bringing in a no-shoes policy.
And that means you take off your shoes when you come into the office and wear optional slippers.
It's getting a lot of reaction online. Some are surprised and then some are saying, actually, this is the norm in my part of the world.
One of the companies that have no shoes in policy in their office policy is Smallest.ai. a startup that builds AI voice models.
And earlier, I spoke to their CEO, Sudarshan Kamath.
I think this is a really unique thing for us.
Like we just wanted our office to be like a house you know we did not want it to be like a professional setting so people sit on the floor people can sleep on the floor if they want to lie down in random places and then If you get your shoes in, it gets a little dirty.
So generally we kept like a, nice carpet and place for people to just come in and lie around.
And that's the reason we said, hey, keep your shoes outside so that people can treat this like a house.
It sounds nice. I think I'd get in trouble if I lay down on the floor and my producer wouldn't be very happy with me.
But how did your team react the first time you told them just to leave their shoes at the door?
I think they love the flexibility of just sleeping anywhere, lying in any position and not being judged in the office. over having to wear some footwear inside.
I think most of the people are just comfortable.
I think humans are just naturally comfortable being barefoot in my opinion like while shoes do look great I think like when you're sitting for like 10 hours straight working, you generally want to sort of your feet to just breathe easy and then not having shoes and just having that flexibility is really something that they enjoy.
So what I'm getting from you is that it actually helps with productivity because you're talking about, you know, people lying around relaxing.
I'm like, how do they get any work done in there?
No, you'd be surprised. It's in fact much, much better because they actually focus more.
So it's We just make sure that people are comfortable in the office environment and then the people we hire, they are like really high agency people who are really interested in their work.
So we do not do this to make them a distractor or anything like that.
This in fact helps them just relax and they can just focus on what they are working on.
They don't worry about how they are sitting, where they are sitting.
They can change positions. They can go lie on a couch.
They can lie on the floor. on the floor.
But as long as the work gets done, no one really cares, right?
So it's actually been better once we introduced this.
I think more people should do this. So you noticed a difference once you introduced it?
Oh yeah, absolutely. I think initially it was a little too formal.
Honestly, people used to wear dirty shoes and come inside the office as well.
So it was like a lot of headache. to clean that up and people used to complain that, Oh, why are you, you know, bringing dirty shoes in and so on.
But now all those issues are gone. The floor is clean.
People are more comfortable. People are more productive.
People treat it like a house. I've seen people just... get drenched in their work and just forget about where they are, how they are sleeping, all of those things, right?
So it's definitely, I've seen a remarkable change.
What about socks? Would you say to your workers, you need to wear socks because if people are going around barefoot, There could be a bit of a funky smell.
Yeah, I think personal hygiene generally is something...
A kind of culture we have in our office, if someone has stinky feet, we will call them out and say, hey, you're not allowed if you do that.
Better wash your feet and come. And it's a really relaxed kind of semi-formal culture.
So we can do that and they won't get offended.
But I do not force anyone to wear socks.
I generally expect people to have good hygiene and I make it very explicitly clear that, hey guys, like, maintaining your foot hygiene should not be your boss's job to tell you but like please do that if you want to enjoy this luxury so i think that has worked out really well for us Apart from the no shoes rule, is there any other dress code that you have?
Oh, nothing. People, as long as they wear something, they're welcome in office.
Just wear something. Yeah. yeah just just wear something and like don't offend anyone but like yeah you can wear your shorts you can wear bermudas like don't come topless Don't like don't wear your underpants, but like, just just wear anything, anything that is normally you would dress outside and you're completely fine with it.
Yeah, I wonder what the reaction is from people who come from the outside world, maybe a client or just somebody you're meeting. at the office, what's the vibe that they get when they come in the door?
So generally, while the clients also enjoy the no foot sort of thing, we have seen that and they respect that.
Our sales team, let's say there is a client coming in, we do dress up a little more appropriately to welcome clients if we are expecting them.
The other thing is, I think we take a lot of pride in our work.
So we've also seen that As long as your work is really good, people generally care less about how you present.
I mean, obviously, you shouldn't present yourself really... really poorly.
But then even if it's like a semi-casual thing, people are fine with that as long as you deliver outcomes for them.
That was Sudarshan Kamath, CEO of Smallest.ai.
Susan, what do you think? No shoes in your office?
I don't think that's going to fly in the world of finance.
But it's a nice concept and I think this sort of akin to when we saw a lot of startups and smaller companies initiating the idea of bringing your dog to work or making the office more comfortable and and creating non-desk workspaces, more like couches and comfy chairs.
But I think in the bigger firms with the older cultures, this is going to be very hard to get buy-in.
I would imagine so and I think a lot of them have actually quite strict dress codes even, don't they?
You have to wear heels and all that sort of thing.
Anyway, we've run out of time. Susan Smith, Portfolio Manager at Exchange Capital Resources in Chicago.
That's it from World Business Report from the BBC World Service.
I'm Leanne Byrne. Thanks for listening.
