This BBC podcast is supported by ads outside the UK.
You know, some people say that Odoo business management software is like fertilizer, the way it promotes growth and all, but other people say Odoo is like a magic beanstalk because it grows with your company and is also magically affordable, and there's some people who would even say Odoo's individual software programs come together to build the perfect suite like building blocks.
Well, Odoo is all of these things, fertilizer, magic beanstalk, building blocks for business.
So sign up now at odoo .com.
o -d -o -o .com. Hello, and welcome to World Business Report from the BBC World Service.
I'm Rahul Tandon. Plenty coming up on this edition.
We're going to take you to Canada because Canadians are into the polls on Monday, we'll hear from a laden Canadian businesswoman on the painful trade separation from the US.
It's been sad, it's kind of I feel almost like a grief, and a sense of loss because we were such good neighbors.
And this is a fascinating story.
We're going to find out how California has become the fourth largest economy in the world.
California has an economy of about US $4 trillion.
It is a remarkable place to do business.
That is a state that is doing well and we don't talk a lot at the moment, don't we, in negative terms about the impact of tariffs on many economies.
So how are Americans actually feeling?
We got an indication today from the Index of Consumer Sentiment.
It's a survey conducted by the University of Michigan, and Joanna Hsu is its director of the Survey of Thanks so much for joining us on the programme.
Joanne. Tell us exactly what you've seen here.
How much is that consumer sentiment and confidence sinking?
In today's release, we found that consumer sentiment sank about 8 % from March, and that continues now the fourth consecutive month of declines.
We are more than 30 % lower than where we were in January and that is the steepest percentage decline that we've seen since the 1990 recession.
So consumers' views of the economy have really soured over the course of this year.
Give us a sense over a time period.
How bad is it compared to maybe five years ago, a decade ago?
As I said, this three month decline that we've seen is the steepest since 1990 and usually sentiment might go down a little bit, up a little bit.
We have now four consecutive declines So it's unambiguously clear that consumers believe that the outlook for the economy has soured.
And we have seen this for multiple aspects of the economy, business conditions, inflation, personal finances, unemployment, the stock market people have broadly been telling us they are really quite worried about the future.
What is worrying them the most why they feeling like this?
One of the most common factors that we're hearing is is tariffs, about two thirds of consumers are spontaneously bringing up tariffs during the interview.
Well, we're not asking specifically about it.
These are unsolicited, spontaneous mentions, and consumers are just really worried about the fact that tariff policy is just unresolved.
It's changing on a daily basis, sometimes more than once in a day, and consumers are aware that that makes it really hard for businesses to plan, and likewise it makes it really hard for consumers to plan.
They're broadly expecting prices higher, this to pass through to consumers in the form of higher prices.
And they're also expecting unemployment rates to get worse.
Two thirds of consumers expect unemployment to rise in the year ahead.
That's more than double what we were seeing just six months ago.
So consumers are quite quite worried on on a number of different dimensions.
Joanne, stay with us want to bring in Chris Lowe, Chief Economist, FHN Financial based in New York, a lot of stats we got there that gave us a real insight into what's happening in the economy, is that what you're hearing as well Chris?
Oh absolutely, well look all of us in the financial markets watch the University of Michigan sentiment numbers closely anyway every month.
We're particularly interested now because the survey has a long track record and they survey inflation expectations both one year ahead and also five to ten years in the future.
Those numbers obviously have been very closely followed because of the tariffs and both of those measures are extraordinarily high right now.
They certainly are.
Both of you have a listen to this because I've been speaking to Danny Reynolds.
He's president of the fashion retailer and wedding specialist Stevenson's of Elkhart.
He's been telling me how people in Indiana are feeling.
We are seeing, I guess what I would call a bit of price awareness.
There is concern. So our town, Elkhart, Indiana, we happen to be the recreational vehicle, manufacturing capital of the world.
All the RV's, trailers, campers on the road, I think 90 plus percent of them are made in Elkhart, Indiana, sort of like wedding gowns in China, I guess.
And one of the largest companies, a $6 billion market cap company just announced large layoffs this past week.
So when something like that happens in our town, it has a bit of a ripple effect where even if your job wasn't affected, people are kind of on the alert.
So locally I think we're seeing some skepticism and concern.
And anecdotally when you're having conversations with people around you, are they saying, look, we are worried that things are going to get a bit more expensive, we're saving a little bit more or are they buying a bit more now because they think in a few months everything is going to cost a lot more?
A wedding is a very expensive proposition.
You've got, you know, we're just one part it.
You've got the reception and the flowers and, you know, all the other things that go along with having especially a large -scale wedding.
So, I think there's a lot of various expenses that people are having to take a look at.
And I'm not going to lie, if I were playing, my daughter got married a few years ago.
So I saw firsthand how expensive of a proposition that can be.
And it would be concerning for me to be looking that in the eye right now this year.
So, I feel for people who are and one of the things that we're kind of encouraging our customers, not from a pressure standpoint or tactic, but hey, if you think you're going to be ready to place an order, now may be the time to do it, because we don't know what's going to happen.
But we're pretty certain that prices aren't going to be going down in the near future on unimportant goods.
Joanne, that reinforces the point that you made about tariffs popping up into so many conversations in your Consumer Sentence Survey.
On the other hand, if that tariff policy was to change very quickly.
Does consumer sentiment come back very quickly?
If tariff policy becomes resolved, that would certainly lead to an improvement in sentiment.
But what we've seen over the last few months are high frequency changes, and sometimes full reversals or rotations of tariff policy.
So an individual change is in tariff policy is not necessarily going to lead to an improvement.
I will say that on April 9, when many of the reciprocal tariffs were put on pause for 90 days.
It did improve some of our daily reads of sentiment.
But at the end of the day, it's still worse than it was in March and the previous months, because consumers are fully aware that a pause is just a pause, a policy has not been resolved.
Chris, a lot of companies will look at the survey that Joanne puts out there, and we're already seeing in some of that guidance looking ahead exactly what Joanne is talking about.
They're saying, look, we're a bit worried about people spending a lot less over the next few months.
That's right. And I think, while the focus is very much on the inflationary effect, and certainly most of the news coverage, that's what they're looking at.
History tells you, and the Fed did a big study of the 2019 tariffs in the US, history tells you that actually the economic impact can be more severe than the price impact.
That if price increases are sudden and big enough, spending will drop and could drop significantly.
I think, you know, the risk of a severe economic slowdown, possibly even a recession is a real risk.
And Joanne, one of the points I thought was fascinating from the business only we heard from in Indiana was that example he gave where company it actually laid people off.
This isn't just about prices, is it people are worried that their jobs may go in the next few months.
This is the most alarming thing to come out of our survey is, you know, as I mentioned, a majority of people are expecting unemployment rates to go up in the year ahead, which might not be a big deal if you personally are not affected.
But when we ask people, do they expect to lose their jobs over the next five years?
What do they expect their income growth to be, we're seeing negative signals from both of them.
So not only are consumers expecting business conditions to worsen, labour markets to worsen, they are expecting to be personally affected.
And if that's the case, it's really hard to imagine how consumers are going to be willing to spend as robustly as they have in the past. Joanne, always a pleasure having you on our programme.
Speak to you next month.
Let's see what the survey says then.
Tariffs are going to touch many people and many industries, and one industry in particular that's going to have an out sized impact is Apera.
Something like 98 % of clothing sold in the US is imported from abroad.
That's according to the United States Fashion Industry Association.
The top supplier...you guessed it, it's China, which of course is getting the steepest tariffs of 145%.
Even companies that make their clothes there rely on imported fabrics and buttons.
marketplace's Kristin Schwab has more.
Andrew Chen's signature product is jeans, specialty pairs for denim nerds.
And one thing that makes them special is that they're put together in the US.
Early on in the brand when we were still learning how to make jeans, there was a lot of value that came with being able to visit the factory to understand and really get acquainted with that process.
Chen co -owns the menswear brand three 16.
His CS -100X jeans retail for $250, and he says his company pays a premium to have the garment assembled in San Francisco.
Note the word choice here, assemble, because the actual denim fabric is made in Japan.
We specified everything about it from the number of dips of indigo that the yarn gets to the hand feel that we want, to the way that it's supposed to look two or three years down the line after you've been wearing it faithfully.
Japan is known for salvaged denim, made on old school looms that give the fabric a finished edge.
The process is tedious and labor -intensive.
There's a long and storied, over a century's worth of history of textile development, of denim development, of indigo dyeing.
It's a part of their culture.
It is not a part of ours in the U .S., at least not anymore.
Most denim, whether it's specialty or mass -made, is produced abroad.
In fact, most textiles are made overseas, mostly in Asia, which is a big reason why a lot of clothing is also manufactured there, says Phyllis Savachko at Apparel Consulting Agency Stateless.
They're very good at what they do in apparel manufacturing there.
It's skilled labor.
They have all of those process steps nailed down.
Chinese manufacturers are especially skilled at something called vertical integration.
basically factories that do it all fabrics buttons trim in -house there's no calling one supplier over here to check on a shipment or calling another over there to make sure the thread will match sSHCO says this saves companies a lot of time and money but tariffs are changing the equation I've been working on costing for clients and I've seen it double and triple so some apparel makers are looking to leave China and move production to Vietnam or India or South Korea.
They are unlikely to come to the U .S. anytime soon.
For one, that's going to cost companies and in turn consumers a lot more, mostly because of labor.
Sonja Lipinski runs the fashion retail practice at Alex Partners.
You know, we've been trained that we can get goods at such affordable prices that it's going to be really hard for consumers to kind of swallow what it would take to afford locally produced product.
Even if consumers are willing to pay higher prices, it would take years to move production to the U .S. Brands have to buy equipment, train workers and open up factories specializing in fabric, zippers, buttons and sequins.
That takes a lot of capital.
And to get there, companies would need trade policy certainty.
And when there's this much uncertainty retailers are unlikely to make a significant capital investment until they are more sure about how things are going to sort out.
For Chen at $316, there's no way his small menswear company could afford to run its own fabric factory.
He has just 15 employees.
He says they're expert designers, not experts at turning cotton into denim fabric.
To open up our own manufacturing facility, that is its own skill set.
We wouldn't know where to begin or how to do it.
So, he says he'll keep importing from Japan.
And inevitably, the price of his jeans will have to go up.
Christine Schwab there with that report go back to you Chris Lowe on this.
I was interested when you talked about the impact of tariffs at the start of the programme and that they could be bigger than people expected and beyond those inflationary aspects.
It's another problem now with tariffs we win a much more coordinated global supply chain so you may think you're trying to help your country but actually as we're hearing there from any US businesses you're a lot of damage to them as well.
Oh absolutely, I as an economist, I travel all over the country and have met manufacturers, who you know, the typical story is that at least half of the inputs they use, the raw materials are coming from, mostly from China but certainly from overseas.
And then don't forget too Raul, that they're competing with international companies as well.
So one, for example, clothing manufacturer said his closest competitor is located in Canada.
They're getting the same fabric from China, but they're not paying a tariff on that fabric.
So it makes it very difficult to compete, even in the U .S., with that Canadian supplier.
But I suppose one point that people may agree with Donald Trump on in particular is there's been an overreliance on China.
People need to move away from it.
You can't really just have one country supplying almost all of some types of goods.
Yes. And I think most economists certainly agree on that.
And certainly a lot of political strategists as well.
This is, to some extent, a national security question.
If you cannot manufacture, you know, how can you possibly fight a war, for example, if your international suppliers are cut off?
So these are questions I think we've been grappling with for a decade.
The issue is, is this necessarily the best way to address it?
And I think in particular, putting the tariffs on and then changing the rules on an almost daily basis makes it much more difficult.
Yep. Volatility is a word that we're hearing a lot, seems to be the word of 2025 so far.
a trunk full of groceries, and no one to help him.
Oh, that's tough, Jim.
Looks like a five trip load, at least. He grabs the first bag.
The second. Bob, it looks like he's trying to do it all on one trip.
He shimmies the door open, steps over the dog.
Oh, and he stumbles.
Oh, right into the kitchen without missing a beat!
Jim, now that's a man who eats his protein packed oikos.
With 15 grams of complete protein in each cup, oikos triple zero can help build strength for every day.
Oikos, stronger makes everything better.
Hey everybody, so when you get asked what is Odoo, what comes to mind?
Well, I'll tell you, Odoo is a bit of everything.
Odoo is a suite of business management software that some people say is like fertilizer because the way it promotes growth, but you know, some people also say that Odoo is like a magic beanstalk because it grows with your company and is also magically affordable.
Oh, but then again you could look at Odoo in terms of how its individual software programs are a lot like building blocks.
Whatever your business needs, manufacturing, accounting, HR programs, you can build a custom software suite that's perfect for your company.
So what is Odoo? Well, Odoo is a bit of everything.
Odoo is a fertilizer, magic beanstalk, building blocks for business.
Yeah, that's it. Which means that Odoo is exactly what every business needs.
Learn more and sign up now at odoo .com.
That's O -D -O -O .com.
You're with World Business Report from the BBC World Service.
We heard Chris talking about Canada there.
We're going to head there ourselves now because Canadians will head to the polls on Monday, and tariffs, and this man will be a key part of the election.
I really don't want cars from Canada.
So when I put tariffs on Canada, they're paying 25%.
But that could go up in terms of cars.
We don't really want Canada to make cars for us, to put it bluntly.
We want to make our own cars.
I have to be honest as a state.
It works great as a nation.
Considering the fact that most of the nation, you know, 95 % of Canada, what they do is they buy from us.
And they sell to us.
They didn't have us.
And if we didn't spend that money, as Trudeau told me, they would cease to exist. Now if you didn't who that was, we will remind you, it was of course President Donald Trump speaking in the White House on Thursday.
Arlene Dickinson is one of the leading business leaders in Canada.
I asked her what she thought.
First of the comments coming from across the boarder.
I honestly never thought I would hear anything remotely like this coming across the border and it's been sad.
It's, kind of, I feel almost like a grief and a sense of loss, because we were such good neighbours.
There was so much, not just trade between us, but friendship and relationship and everything.
We travelled the borders regularly.
We thought about them as our friends and that has really shifted.
And so it's very sad.
It's a sense of loss.
You talked about trade there.
Last year, $762 billion of trade between the US and Canada.
Has this been a lesson for Canada that you can't rely so much on one partner?
For certain. You know, we got complacent with our trade relationship with the U .S., thinking it was always going to be there.
And we didn't do as good a job as we should have over the course of many, many decades of trying to figure out where else we can trade in the world.
And you know, we have great relationships around the world.
Canada is a nation that is rich in resources has a lot of what the world needs.
And we have not been as effective in creating better and deeper trade relationships with other nations, which is evolving very quickly.
I can tell you, Raghu, we've spent a lot of time on that very point right now, because it's so important.
Yeah, it seems like we're having a complete evolution of global trade, new relationships been formed, elections on Monday, whoever the next government is, what sort of stance should they be taking with Donald Trump and specifically on the issue of tariffs?
Is it negotiations?
Is it a hard stance?
What would you like to see?
You know, I would like to see a stand for our values and for what matters to this nation and to protecting the workers in Canada and the industry in Canada.
I think there is a line that has to be drawn at some point where we will try and negotiate as best we can to the benefit of both nations and do what's right there.
But that does not mean that we are going to give in or not bow to the pressure of any tariffs that are imposed on us.
What is the mood within Canadian businesses?
What's happening with investments?
Are they on hold at the moment because the whole outlook is so unclear?
I think what started out as fear and uncertainty is turning into strategy around, you know, What are the opportunities and what are the options?
And so, businesses are not going to sit idly by and wait to see what happens next because who knows what's going to happen next.
He's so unpredictable as to what he's going to do, which means that we have to take control ourselves.
So you're seeing businesses being more forward thinking.
They're thinking about, again, trade with other nations.
How can they control what's going on in their own backyard as well as how do they think about what they can do as investing in their businesses?
You're seeing interprovincial trade barriers start to come down, which means that we can negotiate more effectively across our own country, which has also been something that we should have done many years ago, but I do think there's a lot of uncertainty, but there is a steely resolve that we're going to do what's best for the nation, and we're going to invest as best we can.
And you can hear a lot more from Arlene Dickinson in Business Matters in a couple of hours time.
Chris, the problem for Canada here is that this relationship, they're much more reliant on the US than the US is on Canada.
That's exactly right.
And the current stance is that the tariffs, some of them have been put on hold, but they're set to go significantly higher.
And Canada has already indicated there would be retaliatory tariffs.
I'm afraid that both the U .S. tariffs and the retaliatory tariffs will hit the Canadian economy harder than the US.
And we could be looking at the kind of recession where the unemployment rate rises quite significantly.
So I think if there is any possibility of a deal, it would certainly benefit Canada significantly.
Thanks for that Chris.
Stay with us. The man accused of shooting dead, a health insurance executive in New York last year has pleaded guilty to all federal charges against him Luigi Mangione appeared in a Manhattan court.
He will now face trial with government prosecutors seeking the death penalty because that was a story that we covered extensively at the time.
Do you know which is the world's largest fourth largest economy it was came as a big surprise to me this one California's economy now has that position because it has overtaken the country of Japan.
Governor Gavin Newsom touted new data from the International Monetary Fund and the US Bureau of Economic Analysis, which showed California's continued growth.
I've been getting more on this from Leo Haney and he's a professor of economics at UCLA in Los Angeles.
I asked him to give us a sense of the scale of the Californian economy.
California has an economy of about four trillion US dollars.
If it was his own economy, that would make it about the fourth largest economy in the world behind just the rest of the United States and China and Germany.
So it is a remarkable place to do business.
Is a lot of that growth down to the tech sector in Silicon Valley?
Yeah, the tech sector is very important in the state.
It has replaced the aerospace and defense industries, which were important growth drivers back in the 1950s, 60s, 70s, and 80s, those jobs went away primarily after the fall of the Soviet Union in the early 1990s.
That was the period of time that was known as the peace dividend in the United States because we no longer had to spend quite so much on military expenditures.
But that was a bad time for California because California was home to an enormous amount of military contracting and aerospace So technology really has taken the place of that and it's been a very important driver of California growth Because California has been so successful that drives up wages Makes property more expensive.
Are we seeing some of those?
High -tech industries moving to cheaper parts of the u .s. Could that be a problem for California?
Yeah, California is at some level a victim of its success.
The median priced home in California is about 800 ,000 U .S. dollars.
And people, remarkably talented tech engineers and executives can afford those homes.
But many California households can't.
So we are losing some businesses to other states.
Apple is opening up campuses in other tech hubs, such as Austin, Texas, We are losing some potential unicorn, rapidly growing smaller tech businesses that are being born in Silicon Valley but then move elsewhere.
So a lack of affordability for many California households is a real problem and that's one reason why some businesses are moving outside of California.
Californians think big, gone past Japan, could go past Germany, could be there in the number three spot behind the US and China zone.
Well, California could overtake Germany, but India will most likely overtake California before that happens.
So, while California is presently number four, it could fall back to number five within the next year or two, because India is growing very, very fast, much faster than California.
Chris Lowe is still with us.
Chris, this is an incredible sign of the success of the Californian economy.
It's pretty stunning.
You know it's a great place to live.
The climate is wonderful they've always been the hub of innovation and industry and you know certainly Silicon Valley still absolutely thriving.
It does attracts the best and the brightest in the world.
I wonder because they're in the service sector we're seeing global trade changing in the manufacturing sector is Is it likely that California won't be hit too badly if we do see a global trade war and tariffs continuing for some time?
Yeah, I think that's right.
You know, intellectual property is going to emerge as being extremely valuable.
And if you think about some of the big West Coast, even the ones that do sell hardware like Apple, they also are software developments, software and intellectual property a big part of the devices they sell, which means that the tariff impact is relatively smaller than something that's lower -tech. And inside the US and lots of Texans feel that they can rival California, get close to them.
Is that possible? It is.
You know, in fact, some of the biggest tech companies from California are moving in that direction.
And the population in general, California has lost a million or so in population in recent years.
A lot of those people ending up in Texas and Florida.
And that's got a lot to do with the fact that they're easier regulatory environments.
If you want to build a factory, or set up a business, it's easier to do that in Texas than it is in California now.
Chris, it's always a pleasure having you on the programme, I know it's been another busy week on the mark, it's lots to follow for people like Chris who are keeping a close eye on it, so have a good weekend and get a good rest there, we are going to be back with business matters in a couple of hours time, I'm going to be spending a lot of time hearing a little bit more from Arlene Dickinson and having a real close look at the Canadian elections and some of the other issues besides tariffs that are dominating the thoughts of voters.
But that's it from World Business Report.
write social posts for you and even set you up with a social media calendar.
How cool is that? Well, listen to this.
For a limited time you can get Aero All Access for just a dollar a week for twelve weeks.
We're talking all the AI power of GoDaddy Aero, plus a domain, e -commerce store, payments, professional email, a unified inbox.
All for less money than I spend on deep tanning lotion while sunbathing off the Amalfi Coast. You know what that sounds like?
A plan. Get started at GoDaddy .com.
Terms apply.
