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Hello and welcome to World Business Report from the BBC World Service.
I'm Roger Hearing, and on this edition, as the new US tariffs begin to bite, is there a way for the countries that face the highest charges to defy Donald Trump?
Also, how steelmaking is going green in Sweden, and how good is the latest AI app GPT-5?
But let's start with the new tough tariffs on goods entering the United States that have now come into effect.
Some countries, like the UK and Japan, have deals that have mitigated the impact.
Others are still scrabbling to get an agreement with Washington.
But some of the bigger economies are hanging tough.
India and Brazil, for example. In a phone call, Prime Minister Modi and President Lula vowed to defend multilateralism against what they see as rising US protectionism.
A statement from President Lula da Silva's office emphasised they are the two countries most affected by US tariffs.
Our South America correspondent, Ione Wells, is following developments.
So far, Brazil has decided to try and prioritise financial support for affected businesses, particularly smaller farmers and producers.
They are also trying to collaborate more with other affected nations.
President Lula da Silva of Brazil spoke with Prime Minister Modi of India on Thursday.
Both these countries have been hit with this 50% rate, the highest rate in the world.
Now, as part of that phone call, both leaders pledged to defend multilateralism.
Both leaders are expected to continue talking about this and avert further collaboration.
And next week, there will be a meeting between the finance ministers, respectively, in Brazil and the US to try and speak about potential further negotiations.
Ione Wells. Well, in Delhi, speaking at an agricultural conference, the Prime Minister, Narendra Modi, tried to sound resolute on tariffs.
Harder. In India, the livelihoods of our farmers, fisher folk and cattle herders are a top priority.
We will not compromise their welfare, even if we have to pay a high price for this.
India is ready for this. Narendra Modi.
Well, it's easy to voice defiance, but what does it feel like at the sharp end?
Vishwanshu Agarwal is director at Creative Group, a large textile exporter, which up to now sent around 50% of their products from India to America, worth around $100 million.
He's been telling our India business correspondent, Archana Shukla, what hiking tariffs to 50% could mean for his company.
The impact is quite devastating, Archana.
If these tariffs stand as they are, it's going to be very detrimental to our entire trade industry it's going to create a lot of job losses a lot of trade is going to reduce out of india because a lot of the apparel exports and the bedsheet home exports go to the us so it's it's going to have devastating impacts people are saying is just point like the exports to us are just 0.25 percent of the gdp but i'm sure the impact is going to be more widespread because of the sheer number of employment that this sector generates Personally, if we talk about your business, what is the situation on ground right now?
Right now, the 25% comes into effect. What's happening with your shipments, your orders?
Our customers are almost as confused as we are.
They haven't placed the next season business yet, just waiting and watching.
So, you know, normally spring orders are placed by June. and it's august and still the orders haven't been placed yet to not just us but any other country in the world current orders which were there of last season this 25 did not impact like the customers were still talking about picking up the goods but then when he added 25 again then you know they they're showing some resistance to pick up the goods after 27th of august so that is going to impact us significantly right now for us it's a wait and watch situation in terms of your discussions with your buyers Is there a discussion on who absorbs the additional tariffs, at least the 25% that has come on board?
Will it be passed on to the consumer or you can absorb some at your end?
I don't think anyone can absorb this, to be honest.
If you ask me, the retailers, because we are a relatively large manufacturer, the retailers that we work with are catering to the mass market in the US.
The people who shop in Walmart, you know, they're not very, very well off.
They are middle class. and for them also to absorb this 25 is not possible to our customers or importers or retailers to about absorb this 25 is probably not possible we also work on percent margins which are not very very high so i don't know who's who can absorb it so it might even lead to a situation where overall the sales dip as inflation goes up in the us Vishwanshu Agarwal there.
Well, Switzerland is another country that hasn't done well with the new tariffs.
The government held an emergency meeting there after President Karin Kelisuta and the economy minister Guy Parmelin returned home empty-handed from a last-minute trip to Washington to try to avert tariffs of 39%.
The Swiss president said, "...we want our rule-based relationships with the United States, but not at any price."
So how big a problem is this for the world's 21st largest economy?
I asked Reto Fomi, Professor of International Economics at the University of St Gallen.
Well, indeed, this is a severe blow. But of course, we should not exaggerate the blow.
What we're talking about here, it's about 4 billion of exports per month and around 2 billion Swiss francs of exports will be subject to this new tariff.
So if there is no reshuffling or trade diversion, we're talking about 800 million Swiss francs per month of tariff duties to be paid.
So this is 0.1% of the annual GDP. So this is really a blow, but of course it doesn't kill the Swiss economy.
But just take me through, what is it that Switzerland and the US trade in?
What are the kind of things? Actually, the majority of exports from Switzerland to the US are...
Pharmaceutical products, Novartis and Roche are the famous companies.
And these exports still to date are not subject to the tariff.
But as you know, President Trump also reached out to the pharmaceutical companies worldwide last week because he wants to reduce prices for drugs in the United States.
And what about imports from the United States on which Switzerland could impose tariffs as well?
What is it that Switzerland needs from the US?
It's chemical and pharmaceutical products.
It's machinery, cars. What we import, of course, mostly is these are more than tax things and, of course, license fees paid to Netflix and so on.
But again, these are services and not goods.
Indeed, and Switzerland's main trade partner then is not the United States.
No, the main trade partner is Germany and, of course, our neighbouring countries in Europe.
So the US accounts for around 18% of Swiss trade.
Is Switzerland now then going to make real efforts to try and get a deal of some kind, or are they going to say, well, it's 18% of our trade, we can live with it, and just say, fair enough, let's leave it at that?
That's certainly an option, in some sense, to leave the negotiation.
This would be the exit option. But certainly it makes sense for Switzerland to keep the contacts running.
That's why also the two members of the cabinet went to the United States this week for an emergency visit and visited the Secretary of State there.
I expect actually a deal relatively soon because it's actually also from the U.S. side, but complicated.
All our neighboring countries, including Liechtenstein, which is a country where we are in the customs union with Switzerland, they all have 15 percent.
So it's a 25 percent point difference. And that's, of course, is huge incentives for goods to the other cross-border shipments.
This all has to be controlled, leads a lot of bureaucracy. also from the viewpoint of the United States.
Reto foamy there. Well, another country that is suffering the effects of very high tariffs is Canada.
But what's the experience of people who have to work with this kind of trading situation?
Canada has been pretty defiant in the face of pressure from its southern neighbour.
Currently, it's dealing with a 35% tariff.
Let's hear about how the effect is. Joining me now is Baha Naimi, who's Chief Strategy Officer and co-founder at CanCorp, Canada Corrugated Industries.
They make corrugated cardboard sheets. His company exports a lot of packaging to the United States.
It does $60 million worth of trade to Washington state alone.
Also joining me is Catherine Fortin-Lefevre, who is Senior Vice President of the Canadian Chamber of Commerce.
Welcome both. Baha, let me come to you first.
How are you looking at this now? With 35% tariffs, Can your business keep going?
I would say we've been lucky in a sense that at least for now they've announced that the products under Kuzma will be exempt.
Just explain what Kuzma is there. Yes, the Canada, US and Mexico agreement that was reached in the previous Trump administration.
And our product, although our product does fall within those exceptions, however, even in the first round of tariff threats that was started a while ago, we did make a deliberate attempt to shift our focus to the Canadian market.
And we were quite successful in that. We used to have 70% reliance on Washington markets.
And now that has shifted to only about 40 percent.
And we believe this sentiment is shared within other industries as well.
So everyone has been preparing for the worst case scenario.
And we see that as good news. However, some industries obviously will have very dramatic effects.
Well, yes, those who have the 35%, of course.
Catherine, let me come on to you. How widespread is what Bahar's talking about happening there?
Basically, industries in Canada saying, well, at this kind of rate, and a lot of them, as he said, are not involved in this already existing agreement, they just can't do business with the U.S.?
? Well, like your guest is saying, you know, a lot of Canadian businesses, their goods are covered under the trade agreement, KUSMA.
So that's been a blessing. So when we talk about rates as we compare them to other jurisdictions, it's not a true comparison.
So the effective rate is probably closer to under 5%, if not a few percentage points, if we compare. look at the fact that over 90 percent of goods are going through tariff free.
The issue, though, is how long can that last?
That's under the Kuzma agreement. And our Kuzma agreement is set to be reviewed.
And now we're talking renegotiated, which is a step above that, July 1st, 2026.
So in less than a year and frankly, how things are going from day to day, who knows how long this exemption of Kuzma goods will live.
So that is the worry. But to answer your question in terms of how are Canadian businesses coping, we have our business data lab within the Canadian Chamber of Commerce, BDL, has surveyed Canadian businesses.
And in the last four months, we've observed quite a few significant changes.
So 28% of Canadian exporters are now moving their sales away from the U.S.
Now, that's a big shift in just a few months.
We're also seeing that 37% of Canadian exporters are diversifying their supply chains away from the US.
So like your guest, serious steps are being taken to try to mitigate the damage.
OK, well, Baha, let me come back to you, because what is interesting in this, and Catherine was saying that this is all coming up for review, the agreement, so things could get worse.
When you have a prime minister like Mark Carney, who is not really trying to be very concessionary towards Donald Trump, he's been quite defiant on a number of things.
Is that a good thing, do you think, that Canada should take a fairly defiant position, a bit like India and Brazil, when it comes to this arrangement?
I would say, as Catherine was mentioning, we have to, and I believe Mark Carney has approached this with quite a bit of strategic clarity.
And he's been deliberate in his responses while maintaining assertiveness.
So, yes, I do believe that there has to be a strong response.
There has to be reciprocative tariffs, even if this Kuzma agreement is renegotiated.
But obviously, that means that for us, we cannot count on long term investments and counting on the partnership we have with U.S.
So overall, I think he is in the right path.
And the business community, at least, is in full support of the message of, yes, there has to be a strong response.
OK, Catherine, let me put the same thing to you, because you represent or included in what you represent are a large number of businesses with all sorts of different arrangements.
Are they all happy that in this instance, Mark Carney is not, as I say, cozying up to Trump very much when in some cases, I suppose you might have countries like Japan and the UK perhaps have done much more and got a better deal?
Well, it's interesting that you would take that view because there's also the flip side that, you know, in some respects, he has given the Trump administration many concessions already.
So although he hasn't rolled over or given or signed a deal with high tariffs like other jurisdictions have done, the prime minister has given in or has eliminated the digital service tax, which was a major irritant for President Trump.
That happened in June. He also committed to increasing Canada's NATO spending to 2% and in the next couple of years to 5%, which is a major, major commitment with huge implications for our small economy.
And that was a big irritant for the Americans for decades.
So those are two big things. And there's a bunch of other examples, too, of how Canada has fallen in line with what the U.S. wants.
So it's very much a mixed message, if you like, I suppose, coming from the prime minister.
It's interesting. We'll see how it all works up, as you say, towards the renegotiation of that agreements coming down the line.
My thanks to both of you, Baha and also Catherine there, giving us a sense of what the mood is in Canada right now.
Well, let me turn to Kerry Leahy, economist at Columbia University in New York, who joins us now.
Kerry, so, I mean, what a lot of people thought could happen was that these tariffs would upset the markets when they finally came into play.
That hasn't happened, has it? No, it hasn't.
It's clearly, while there have been effects of some significance, they haven't been as significant as portrayed in part because there was some buying in advance and their inventories are built up to deal with the prices that are making some of the price increases.
But I'd still argue that the growth rate so far this year of one and a half percent is probably a half a percentage point lower than people thought it would have been before Trump became president.
And inflation is probably at least a half a percent higher.
So there are impacts, but the overall numbers aren't that we have rip-roaring inflation or really slow growth.
We have sluggish growth and we have modestly rising inflation.
But we also have very low levels at the moment, low trading levels because of the time of year.
I mean, this could all just be delayed, couldn't it?
Well, that's what the typical economist like yours truly would argue is that not only do you have to take some time to let the dust settle and if no more changes are made, come back to me in six months and we'll see if the absorption of these tariff increases actually can happen.
And I don't think they will. OK, well, let's turn our thoughts to the French economy.
I mean, France is an interesting case because obviously it's tied up with the EU deal on all this.
But France has an issue with its economy in the terms of export data generally, because the latest suggestion is things are not good in terms of the balance of trade.
And a country like France, a major economy showing that situation, perhaps is suggesting some of the damage is coming from tariffs.
You certainly would think so. This is an economy that has big business.
About half the GDP comes from a relatively small number of large firms, and it's probably showing some difficulties being competitive with this increase in tariffs, particularly in the automobile sector.
Yeah, and I mean, the French economy has all kinds of weaknesses anyway, I think.
Perhaps many of them endemic to the EU generally, when you have to look to their neighbour, Germany, as well.
Things that still don't seem to add up in terms of getting any kind of growth.
That's right. I mean, people like me have been saying this for decades, that you have to open up markets and open up the labor markets and be allowed to hire and fire people more easily than you are currently.
Those are the structural changes that the IMF loves to talk about and have countries do.
And France and Germany and many other countries still have to do it.
Yeah. Kerry, thanks so much for being with us.
Kerry Leahy there of Economist at Columbia University, joining us on the line from New York.
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You're with World Business Report from the BBC World Service.
Now, cutting the amount of greenhouse gases being released into the atmosphere is a priority for many governments around the world.
The global steel industry is a significant contributor to greenhouse gas emissions, accounting for roughly 8% of total global emissions due to the use of coal in its production.
Now, scientists and engineers around the world have been trying to change the metal's reputation by using hydrogen instead of coal to make it.
Adrian Murray has been to northern Sweden to see the technology in action.
Sparks fly in, temperatures soar, above 1,400 degrees inside the fiery heart of a huge plant run by Swedish steel giant SSAB.
In traditional steelmaking, super hot blast furnaces like this one are used to extract iron from ore.
But it's a process that also creates large amounts of greenhouse gases.
From cars to infrastructure, steel is an important and widely used material.
Making steel accounts for more than 7% of global emissions.
Here in Sweden, steelmaking is the cause of a tenth of the country's carbon footprint.
Eva Pettersson is head of research and innovation at SSAB.
The chemical reaction that happens here, using coal to reduce the iron ore, makes it emit a lot of carbon dioxide.
And that is what we want to change. Close by, a pilot plant is producing low-emission iron for new, greener steelmaking.
And three companies are involved. Among them is Swedish energy firm Vattenfall, and Mikkel Nordländer is head of industry decarbonisation.
This is the first plant in the world that has managed to prove that you can use fossil-free energy instead of coal in the ironmaking.
Coal has been swapped out entirely and replaced by a process called hybrid, meaning hydrogen breakthrough ironmaking technology.
This is where we make the hydrogen. This is really the centrepiece of what's new to this technology.
Inside here are electrolysers, equipment where green electricity is used to split water into hydrogen and oxygen.
Special iron ore pellets are also needed, as Jenny Grayberg, the vice president of technology at mining company LKAB, another partner in the project, explains.
From the mine, we extract the rock, we make a concentrate out of it, and then we make a pellet out of it, this DR pellet.
Those pellets meet the hydrogen inside a towering reactor and are transformed into pure iron.
And Greg Berg shows me the result. This is the material that then will go into the next phase to actually create steel in the electric arc furnace.
This method slashes the carbon footprint by over 90%.
In the next few years, hybrid will be scaled up, while SSAB will invest in electric furnaces powered by green energy to process the steel.
However, firing up a new green steel industry in Sweden and elsewhere in Europe has faced hurdles with delays, financial setbacks and cheaper competition.
Nicole Voigt is managing director and partner at Boston Consulting Group.
It's not only the steel industry which needs to transform, but it's also the energy industry.
So you need green electricity. You need the electrolyzer technology.
You need also on the mining side because you need more DRI pallets.
And of course, if you have multiple stakeholders, multiple parties involved, all need to move at the same speed to make it happen.
And that's the challenge. Little over half an hour away, a mega construction site is rising up outside the town of Boden.
Run by another firm, startup Stegra, this will be Europe's first large-scale green steel plant.
While green steel sounds like a no-brainer, the process is more costly.
But CEO Henrik Henriksen says his customers are willing to pay.
Already by 2030, the legislator in Europe has put a price on carbon and they have also started to charge that cost of the pollution on the dirty brown steel.
We have sold half of our production already of the green steel here in our plant.
There is customers that are coming in from the automotive industry, building and construction material, home appliances, and they are willing to buy the green steel already today.
Green steel may be a drop in the ocean for now, but here in Sweden, it's hoped it could revolutionise a dirty industry.
Adrienne Murray reporting on steelmaking in northern Sweden.
Now, you may have escaped so far embracing the arrival of artificial intelligence, but you're in the minority and it's developing fast and becoming an essential tool for many parts of the global economy.
Well, now the pioneer AI app ChatGPT has produced its fifth iteration in just three years, GPT-5, in fact. and OpenAI, the company that makes it, says it can provide PhD-level expertise.
OpenAI co-founder and chief executive Sam Altman is not a man known for his false modesty, and he says the development would be pretty much unimaginable at any previous time in human history.
But AI is a crowded field. In the last few hours, Elon Musk has announced that Grok, his AI, will be Grok 5 by the end of the year.
Let's talk about all this with Lily Jamali, our North America tech correspondent.
Lily, I mean, first of all, GPT-5, I don't know if you had a chance to have a look at it.
What's it like? I have played with it a little bit.
It's interesting the way they're pitching this.
Sam Altman, as you mentioned, wants to frame this as PhD level expertise in your pocket across subjects, math, physics, writing.
I didn't give it any physics problems, but I did ask it, should I break up with my boyfriend?
And the reason is... I'm happily married, no problems, don't worry.
But the reason I ask that is because they're also picturing it as being more human, but less personal.
So when you ask it questions like that, Unlike before when OpenAI has gotten into trouble on this issue, it doesn't give you advice.
It just gives you bullet points and sort of sidesteps a question like that and says, here are some thoughts on that, but doesn't really guide you one way or the other.
I thought that was pretty interesting. Yeah.
Yeah, but is it a game changer? I mean, because so much is built into this idea that it will, I mean, as I was saying, in the global economy be hugely important, government, education, all sorts of areas.
I mean, is this something that is going to make a big difference?
And is GPT-5 an advance in that direction?
Well, I wouldn't call GPT-5 revolutionary.
The consensus view seems to be that this iteration is a smaller leap than what we have seen from this company in the past, going into ChatGPT-4, for example. fundamentally, this doesn't change the way that we use these chatbots, if you are among the people using them.
In most cases, we're still doing what we've always done.
We're asking it questions, typing those questions into a box, getting back answers.
And so in that sense, it's not really changing the paradigm.
It's just doing what it's done better than it did, you know, before this iteration was released.
Yeah. And what about Grok 5, which Elon Musk, and I was sure it's coming down the line.
I mean, it's one amongst many, we should say.
Is this becoming a competition which really works?
Because ChatGPT was out ahead of them all to start with.
Yes. I mean, there is absolutely a lot of ego involved in here.
I don't think it's editorializing to say that Elon Musk and Sam Altman are duking it out in the courts down the road from me in Oakland, California, because they actually both started the company behind ChatGPT, OpenAI.
They started it together. Musk funded it.
And I think he was not happy with the way that this took more of a commercial turn.
Yeah. So I do expect Grok will plod along, but you've got to say that ChatGPT has been the winner so far.
All right. Well, we'll see what happens.
Thanks so much, Lily. Lily Jamali there talking about ChatGPT 5.
