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Hello and welcome to World Business Report here on the BBC World Service.
I'm Rahul Tandon. Thank you so much for joining us.
Tariffs are going to dominate the conversation of the programme.
Again, Donald Trump says they'll be good for American jobs.
We're going to to people involved in the auto industry to see if they agree.
We'll hear from a small business making parts in Detroit and the mayor of the Canadian city of Windsor, which is just over the river from Detroit.
And we'll look at why one of China's biggest companies Tencent is getting into bed with the French gaming giant Ubisoft. But let us begin the conversation about tariffs because once again, that word is dominating the global business headlines.
The Canadian Prime Minister Mark Mr. Ban Wong -Sani has now said that the United States is no longer a reliable partner and Canada will need to dramatically reduce its reliance on the U .S. He was speaking after President Trump of course announced those tariffs on all imports of cars and car parts which will hit Canada hard. He had this message for the U .S. I reject any attempts to weaken Canada, to wear us down, to break us so that America can own us.
That will never happen and our response to these latest tariffs is to fight is to protect and to build We will fight the US tariffs with retaliatory trade actions of our own That will have maximum impact in the United States and minimum impacts here in Canada We wanted to bring you the voice of somebody who knows Donald Trump Well, so here's Thomas Phillips and former chair of his council of economic advisors in his first term.
He says many countries are treating the U .S. unfairly.
This whole tariff negotiation, which I think is a short run phenomenon, and it's not going to go on forever, obviously, but the initial motivation was obviously that U .S. is not the criminal when it comes to trade negotiations.
They're the victim from past trade agreements.
And so we are treated a lot worse, not only in tariffs, but also non -tariff barriers abroad.
Our companies are treated a lot worse than we are treating them here.
That's the whole impetus which this is trying to correct.
And by necessity, when you have a correction to that, there's going to be a lot of uncertainty because people don't know how far the correction is going to go, if there will be a correction.
And that's what you're seeing in the capital markets, responding to that uncertainty.
I take that as a short -run phenomenon, hopefully, to get a better balance that doesn't disfavor the US as much compared to how we treat other countries.
When you say you think this is a short -term phenomenon, how long do you think it's going to last?
Are we talking months?
Are we talking a couple of years at the Donald Trump administration?
Well, I mean April 2 is going to come out, right.
And then we're going to see, first of all, what does the administration exactly mean by reciprocity?
Second, How will then countries respond to that reciprocity, which presumably will then have U .S. go up to the higher levels of tariff and non -tariff barriers to other countries?
And then the question becomes under how long a period and how much does that now get negotiated down?
Other countries can get free trade with the U .S. on the reciprocity if they want.
So they're screaming very loudly that this is, you know, a trade war.
But they can eliminate that trade war.
You're right on that.
But you know, not overall frame because there is so much uncertainty and it is, it could well be inflationary, having tariffs likely to be isn't it if you're honest about it.
So that period I'm interested in...
I don't believe it's inflationary at all.
I mean, no because you don't think now that you don't think US consumers will be paying more for the cars that they're going to buy?
No, that may happen but that's not inflationary.
way economists define it is the economy -wide increases in prices which we saw the last you know few years.
There's gonna be increases in some prices that are tariffed potentially.
It depends how competitive those industries are with the U .S. they can't just push on higher prices onto U .S. customers because they're gonna lose the customers if they're competitive industries with those cars in the U .S. essentially.
Yeah that's true, but it also depends on the scale of the tariffs.
If we see tariffs on a lot of products, that could well be inflationary, couldn't it?
Yeah, yeah, no, if it's economy -wide, yes.
But let's say, take Canada, which was the capital markets responded enormously to the Canada negotiations, that concern about $30 billion of trade in tariffs.
That's about one -tenth a one percent of the US GDP of $30 trillion.
This has been a lot of hysteria here, particularly that we're going to have inflation because of tariffs.
But if you look at domestic taxes, so tariffs are taxes on foreign firms. The whole proposal in the U .S. is to lower domestic taxes on domestic firms. And that's much more important to the U .S., because we're about 85 % trade within our borders, as opposed to 15 % roughly traded with other countries.
So the overall package of Trump is clearly deflationary with deregulation and reduced domestic corporate taxes, even though some taxes on foreign companies might go up.
Thomas Philipson there who knows Donald Trump very well.
Let's bring in Kerry Leahy, economist at Columbia University.
Familiar voice on the programme.
Kerry how have the markets reacted to this continuing domination of tariffs of the headlines?
In the aggregate, it's been very difficult for the marketplace and the investors, but today, the market held on pretty well and was roughly down a bit, but I think there resigned to the fact that they really aren't going to know anything until the supposedly magic date of April the 2nd.
They don't want to be on April 1st obviously because April fools but maybe all made fools on the second but the markets thinking they're going to get clarity.
I'm not as confident as the market is on that but clearly people are just sitting on the edges of their chairs waiting for the April 2 to arrive.
We heard Thomas Phillipson there say at times he didn't, you know, it wasn't necessary that tariffs would lead to inflation.
There are some who think that.
Does the market take a different view?
Yes, they do. I think they believe that effectively you are going to see higher inflation.
Anywhere from probably a quarter to three quarters of a percentage point this year.
That may cut into growth.
So it's a stagflationary kind of development.
Most people think that net net, what's going on right now on tariffs is going to be mildly or moderately inflationary.
Yeah, inflation rising prices, inflation of course, when those prices are going up, but there's no growth at the same time.
Stay with us Carrie.
Let us hear from some business voices from inside the car industry now because we've all had time to digest it.
How have they digested it?
Lynne Calder is the CEO of Inyess Automotive.
Most of its vehicles are exported to the US, they're made in France.
So would they now consider moving production?
Well, look, I think it's something that we were looking at anyway, I mean, in manufacturing you fill one plant first. So we have a plant in France which, you know, is very important to us and we should fill first. But as we look at our growing business in the US and it is growing significantly, and how much of our businesses in the US, it would be remiss of us not to be thinking about US production.
But that's, you know, not something we can do in a month or two, at our size, we need some time.
Donald Trump of course wants to see more global manufacturers moving their production to the US.
Lynne Calder is frustrated that with the EU she says they should have done more to tackle the tariff imbalance that Donald Trump has been talking about.
For American cars coming into the EU it's 10 % tariff and the other way around cars from the EU going into the US is two and a half percent.
I think what President Trump signaled very early on this year was he wanted reciprocity which could have meant two and a half percent or 10 % or anywhere in between.
But with a lack of negotiation with a lack of discussion on this point, we've ended up at 25 % and that's why I'm so frustrated.
Let's hear from another voice within the industry.
Jennifer Safavin is president and CEO of Autos Drive America.
That is an organization that represents international auto brands with operations in the US including Nissan, BMW, and Toyota, some of the world's biggest car companies.
I asked it if Donald Trump's tariffs will ultimately lead to those companies building more factories and creating more jobs in the US.
That's really hard to say because of course for you know auto manufacturers it takes years to plan their investment efforts certainly years to plan any restructuring that they might you know these are not decisions that they make lightly, nor can they make them overnight.
So there's a lot of time and planning that goes into decisions that they make with regard to investments.
I will say that we have done some modeling.
The modeling showed that it would decrease sales, U .S. sales, and decrease production in the U .S. So, it would take a number of years before we actually started to see an uptick in production.
So I'm not sure that the initiation of these tariffs are going to have the immediate impact that is desired.
Do they feel they've been unfairly treated here, do you think, some of these companies, because they have, as you said, invested heavily, huge amounts of money in the US.
They've created lots of jobs in the US, and now do they feel they're being targeted?
I would not say that they feel they're being targeted.
But I will say certainly that the my members are just the perfect example of what the president is asking for.
More manufacturing in the United States and more auto manufacturing in the United States.
And that's exactly what my members have done.
And they have been doing it for 60 years, right?
They chose to come into the United States to invest heavily 109 billion so far and counting, right?
There's more coming, right?
but they have been doing this for a good number of years.
They have been supporting their communities and of course their workforce.
That was always their intention and that's certainly what they've been doing.
Kerry Leahy, who you're still with, is listening to you.
Jennifer, it's a complicated situation.
I'm sure where you are, you look around and you'll see many different types of cars, some foreign, some U .S. and it's hard sometimes to know where they're made, isn't it?
Well, absolutely. Virtually – I mean, there is no car even including anyone I can think of that isn't – at least some of the parts come from – that and will be tariffed.
So virtually, the cost of virtually every car made anywhere sold in the United States is going to be higher in price, presumably the ones that have less international content are going to increase less of domestic – but net net, all cars are going to be a little more expensive.
That's one of the reasons why people were worried that the industry would be a little smaller and sales will be weaker over the next year and a half.
They don't have to be though, do they Kerry?
Because the companies could decide hey, margins may not be too bad.
We'll take the hit ourselves?
That's true and they probably will do that at least initially, but the hit that is going to hit these companies with potentially 20 -25 % increases in prices.
They can absorb some of it, but I don't think they can absorb all of it.
Okay let's stay on the industry theme and hear from somebody else who's involved in Chuck Tardis is the President and CEO of Aftha USA which applies car parts to its US automakers for Stellantis and GM.
He joins us from Detroit.
Chuck, thanks so much for being on the program.
This is designed tariffs to help people like you, manufacturers, will it help you?
No, it's not going to help us because it's an additional tax.
The products that we're bringing in, we're paying the tariff.
When it crosses the border for us from Canada, and we go through our import broker, we are paying that.
It's not being paid on the other side.
So this is, in our case, a dramatic increase in our material costs.
How much, because you use Canadian steel, there's tariffs on that.
Do you use Canadian auto parts on that?
So, are you facing even more tariffs now?
Well, we bring in fasteners from Canada, which are considered steel, so when the tariffs first came in, our parts were subject to the 25 % tariff.
But then, when the steel tariffs came in on March 12th, by definition, nuts fasteners are considered a derivative of steel, therefore they're subject to the 25 % tariff as well.
So, by April 2nd, we could very well be looking at 50 % tariffs because of the way that they stack.
And how do you deal with that?
Do you pass that on to your customers?
I presume you don't have the margins to cover it.
No, and I mean we're a very loyal supplier to the traditional big three.
They're going to be working with us I'm sure, but if these go on for a long period of time it's an existential threat to companies our size.
We're not that big and there's a lot of us out here as well.
Can you not use US steel rather than Canadian steel?
Wouldn't that solve some of the problem?
Well some of our suppliers, they buy steel from the US and Canada.
One supplier I can think of buys a lot of Canadian steel that they make our parts out of.
But the US industry doesn't have the capacity to take on a large additional load of the steel that's used in nuts and bolts.
So they will get hit with the steel tariffs but then depending on how the USMCA is applied to our parts, they could get another 25 % on April 2nd so they could too be at 50%.
For us to pivot to another company in the United States, we can do that but it takes time.
We've got quality requirements we have to go through, the prices will be elevated but probably not subject to tariff.
You said you're a small company and I know your workers are really important to you.
30 seconds if you don't mind.
Sorry to give you such a small amount of time.
Will you have to lay some of them off?
Is that a thought? Eventually that could happen because production could be curtailed by our customers.
That could happen. We work very hard to avoid that but that could be an eventuality.
Chuck thanks so much for joining us.
And Kerry briefly as well if you don't mind that is threat that faces many small businesses isn't it?
Oh absolutely the difficulty you have is that virtually every car sold in the United States has some foreign component to it and those costs are going to go up very dramatically and some of them will be absorbed by the manufacturer but ultimately the end user meaning you and you and me at the dealer lot are gonna have to pay a heck of a lot more to buy a car and if that people do other things and buy new cars and, and the like.
It's gonna really hurt the downstream producers and they may have to consider layoffs to deal with the added cost structure.
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Let's take you to the heart of the Canadian car industry now.
Those are the sounds from a car factory in Windsor.
There are fears that tariffs could lead to job losses in that city.
I've been speaking to its Mayor Drew Wilkins.
So Windsor is the closest metropolitan area to another metropolitan area between the United States and Canada.
We're literally separated by the Detroit River, which is about one kilometre in width.
And so because of that proximity to the United States, our regional economy has been built up to be highly integrated and linked with United States, specifically Michigan and the city of Detroit.
The city of Windsor is about 250 ,000 people.
The broader region's about half a million and we are Canada's automotive capital.
And just on the other side of the border in Detroit, it's the Motor City, the auto capital of the United States.
And so we have built a very tightly integrated, robust automotive industry and parts sector on both sides of the border that has been you know really running in harmony for over 100 years but really integrated since the 1960s.
You I'm sure have spent the day talking to lots of people in Windsor.
Give us a sense of some of the conversations that you've had because people now must be worried about their jobs.
Oh there's lots of concern, lots of fear and it's all driven by the uncertainty.
None of this makes sense on the face of it because contrary to what the president has said where Canada has stolen the auto industry from the United States, it's just not true.
We have built that auto industry together.
So we're not buying, you know, the narrative that's being put out.
When you say you're not buying the narrative but it is his job isn't it to look after Americans and to look after American manufacturing.
So do you understand in any way his desire to have more of it back in the US?
As a politician I can certainly understand how that narrative would be well received by a domestic audience.
But the fact of the matter here is you're talking about unscrambling an egg.
This auto industry in the parts sector is so tightly integrated that it's really hard to say that when a vehicle rolls off the finish line in either Windsor or in Detroit, that it was actually made in either country because the parts that go into that vehicle before it rolls off the assembly line have crossed the border between Canada, Mexico and the United States on average of six times.
The thought that the executive order issued yesterday, where the US Customs is going to have to determine the origin of 30 ,000 -40 ,000 different parts and components that would intimate the manufacture of a single vehicle, it's almost impossible to get your mind around how that would actually happen.
It's going to take a lot of time for them to figure that out.
coming back to to Windsor as you eloquently described that the car industry really central to Windsor's prosperity that prosperity hangs in the balance now doesn't it because if people think they're going to lose their jobs they're not going to spend so much are they?
No they're already saving the uncertainty that's been out in the economy for the past couple of months has caused people to to save and wait for the rainy day and we're a community that knows about the cyclical nature of manufacturing and automotive we're used to seeing rainy days every once in a while.
And so people here are used to that, they're saving their money, they're waiting for that rainy day, all driven by uncertainty.
And it's more than just the people, it's businesses who are parking their capital on the sidelines, not making investments, waiting to have a clearer picture of how this is going to end.
Because all of the smart people and sensible people who are looking at this are saying there's just no way to practically do this.
And we're not willing to risk the money by making investments, if they had it today, not knowing where this is going to land.
At some point, he's going to have to land the plane.
We're hopeful that it will land in a place that respects the relationship that we've built.
Do you support Mark Carney's very strong stance that he's taken when it comes to Donald Trump?
Is that the right stance that the Canadian prime minister should be taking?
It's early days of this Prime Minister.
He was not elected by the people.
That we're in the middle of an election right now, and the people will ultimately decide, and the ballot question that has been formed at this particular point is who's going to save Canada from Donald Trump.
At the end of the day, I would have preferred that my Prime Minister make his first order of business to reach out to our largest trading partner and our closest friend and ally, and that is the United States.
Our Prime Minister chose to go to France and to the UK and have conversations there.
And so he must have had good and sound reasons for doing that, but we can't take for granted the relationship that we need necessarily to have with the United States seen that flail over the last 10 years.
And we certainly need to spend a lot of time and effort to make sure that we are providing our biggest trading partner the comfort they need that we're a good ally with them and that we're willing to work with them on a pathway forward. Fascinating there to hear from from the mayor of the city of the heart of Canada's car industry, Kerry Lee, he is still with us, economist at Columbia University.
Very interesting headline in the Financial Times that the EU may hit back in US services and that would be an escalation of this, wouldn't it?
Because we've been talking about manufacturing, which is important, but most economies are service based now, so if the US service industry was targeted, that could take this to a different level, Kerry.
Unfortunately, you're absolutely right.
The old expression referring to this kind of gamesmanship is a race to the bottom.
And if I raise my tariffs and then you raise your tariffs, you go back and forth and you end up racing to the bottom and costs of all products go up and the economy contracts and people become uncertain about the future and the cost of everything has gone up, virtually speaking, and you really are in a mess.
That's why many people think the Great Depression was made far, far worse by the kind of competitive tariff situation that happened in the early 1930s.
Yeah, that is a good point that you make.
Stay with us, Kerry.
Because there are other stories in the business world away from tariffs.
China's biggest company Tencent Holdings has made more than a billion dollar investment in a new spinoff company of the French gaming giant, Ubisoft. Ubisoft is known for some massive franchises such as Tom Clancy's Rainbow Six and this very famous series.
Where do we begin? If you're wondering what that is, that is Assassin's Creed the latest of which Assassin's Creed shadows came out this week those franchises will become part of this new subsidiary which Tencent will take a 25 % stake in but will be 100 % controlled by Ubisoft. Shannon Liao is a video games journalist and the editor of Inverse .com.
Thank you so much for joining us, Shannon.
Tencent's such a big company, it has a presence in games, so why such a big investment here?
Yeah, of course, thank you for having me.
Yeah, so, Tencent actually has its hands in a lot of gaming companies all around the world and titles that you might not expect.
So what it's doing now is actually quite understandable, that Ubisoft, as you mentioned, has all these great games like Assassin's Creed that it's known for, that recently haven't delivered so much for fans.
The recent entry, Assassin's Creed Shadows, was a bit disappointing.
The reviews came in and our viewer gave it a 7 out of 10.
And so they're the reasons for why that business is now up for grabs and for 10 cents it's an opportunity for them to really kind of cash in on these franchises that are so beloved that have so much street cred with gamers out there.
Tencent, China's biggest company, moving into the games market.
Are we seeing other companies doing this as well?
Companies outside China, big companies in the US?
Yes, so I think we actually see maybe Saudi Arabia, through savvy games buying up some of these companies, but in terms of American companies, I think you can definitely think about Microsoft buying Activision Blizzard, you know, just over a year ago and that deal closing very large, almost 69 billion dollars, US dollars, so that was one that was quite notable as well.
You talked there about Assassin's Creed, you know, very popular franchise not doing as well recently what why is that is it people moving to new franchises which are the the growth areas that is seeing the investment in the games industry great yeah so there's actually been reports and studies on this saying that people are oftentimes playing the same old games like fortnight roblox minecraft maybe call of duty and just keep revisiting the same Games, League of Legends is another one that Tencent actually owns and so instead of playing like the newest Assassin's Creed they would be going back
to the older games that are like around six years old and at the same time like these live service games that keep getting updated so there's a lot of investments in the gaming industry in those segments and a lot of companies trying to copy them and you know make more live games and more sandboxes for to people to play in and as a result Assassin's Creed is kind of like you know fans love it but they just haven't, not enough people have picked up the new one.
Is it a very franchise dominated industry, is it hard to get a new game to become popular when you describe many of them there are so many existing franchises that people seem reluctant to move away from?
Yeah, I just attended a talk in San Francisco and Civilization 7 developers were saying, oh, our biggest competitor is Civilization 6.
People are still playing the last one, and they can't seem to get onto the new one.
So yeah, it definitely seems like, even if you talk to any average gamer, usually they are revisiting the older titles that they are fond memories of, nostalgia, and not as interested in?
What is the newest game, even though you haven't even heard of it?
What are you playing?
Yeah, I've been playing, you know as a games journalist have to play the newest stuff, so I was playing split fiction which is like this couch co -op game, and then now I'm playing the South Korean Sims -like game called Enzoi, which is made with generative AI, a very very odd game, but I'm writing a story coming out tomorrow about that.
Well, enjoy Shannon.
Thanks so much for is Kary.
I've got 20 seconds.
Are you a board game man or a video game?
I guess I'm an old fashioned board game guy, I actually know what Monopoly is and what it looks like.
Well, listen, you're in the business world.
So you know Monopoly is a good place to play when you've been playing the markets.
Kary, thanks for guiding us through further conversations on Taris.
We'll be back with Business Matters.
This is Ashley Echinete from The Ben and Ashley I almost say this podcast. If you could lose 10 .4 pounds in one month, would Did you try?
Well, with Future Health you can.
Find out if weight loss meds are right for you in just three minutes at TryFH .com.
That is TryFH .com. TryFH .com.
Results may vary based on start weight and adherence to diet, exercise, and program goals.
Data based on independent studies sponsored by Future Health.
Future Health is not a healthcare services provider.
Meds are prescribed at providers discretion.
