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Hello and welcome to World Business Report from the BBC World Service.
I'm Roger Hearing, and on this edition, the latest from Wall Street as the relief over Wednesday's tariff pause begins to fade.
We'll also ask if high tariffs are going to bring an end to the globalized economy.
We've entered one of two alternatives, either what we call managed globalization light, or we've entered fragmentation.
But what I think is pretty clear to me is that we are at the end of the ever closer globalization.
Plus, Argentina faces mass disruption from a general strike against austerity policies, and how tariffs are affecting Colombia, the world's biggest cut flower supplier.
We have a special report from there.
But let's start with what's been happening in New York.
This week has been all about the share markets and their response to the imposition of the new tariffs by Donald Trump.
It was a continued dive until the President paused the tariffs on all except China on Wednesday.
Then, there was a huge resurgence on Wall Street.
Thursday looked more gloomy again as the reality of the remaining challenges set in.
So, how did it play out?
Our North America business correspondent Erin Delmore gave me the picture from Wall Street.
This is a rough ride on Wall Street today and I think maybe everybody felt a little bit too cosy after yesterday's massive gains on Wall Street.
I mean, we saw all three of the major US indexes.
is not in their biggest one -day game in years, but that sea of green is gone.
Everything is red today.
And the Dow, end of the day, down more than 1 ,000 points on a percentile basis.
That's down 2 .5%. The S &P down nearly 3 .5%.
The Nasdaq down over 4%.
And this is really investors coming to terms with the 145 % tariff on Chinese goods imported into the United States.
That is what everybody is focused on right now, as well as some comments by President Trump saying that there's going to be a cost to this transition, maybe even some transition problems that he saw in effect, in fact he said there will be transition problems. Those are the kind of words that make investors brace themselves, and we did in fact end the day in some negative territory.
And was it, did it lose everything that it gained in that very dramatic surge after he announced the pause?
Not everything, but a significant chunk.
At one point in the day it was half, end of the So doing that kind of math is a little tougher for me on the fly, but think of it as a big chunk erased, yeah.
And look, we tend to talk about the stock market in these day -to -day movements.
We talk about up, down, red, green, plus, minus.
What we should really do is look at a longer -term horizon here, and let's back that timeframe up to April 2.
That's the day that President Trump called Liberation Day, the day he announced tariffs on America's major trading partners.
Since that day, major U .S. indexes are down.
So look at the trend line.
Look at this as a big -picture hole.
Since Liberation Day, stocks have been broadly down.
And we shouldn't, I suppose, just look at stocks, and other things are in there of significance, not least, of course, the sovereign debt, the treasuries, big problems with them in the last couple of days, which may have been part of the reason why Donald Trump backed off.
How have they been doing, especially the long -term ones?
Yeah, so treasuries have a little bit of a different story, right?
And a knock there can really have more of a jittery effect.
It is, in fact, something that a lot of people are saying may have calculated caused the Trump administration to change their minds here.
I mean, usually, when we see stocks not performing so well, we see investors flock to treasuries, something that's seen as more of a safe haven.
That includes something like gold.
But in this instance, actually, we saw that treasuries were taking a hit.
And that speaks to this broader contagion effect in the US markets.
It's a bit more widespread.
I mean, the price of oil is down.
That's something that President Trump talks about as a win.
saying that American drivers could go to the pump and fill up their gas tank for cheaper but it actually speaks to a softening in demand that's projected ahead.
All of this economic activity, growth, industry, all of it takes energy and if the idea is that there's going to be less growth, well then there's an idea that there's going to be less energy needed to power it and then the demand for oil goes down and that price falls as well, so these things are tied together.
We really can't take any one of them in isolation but when you start to see a few different sections of the economic picture lighting up and looking like they're on shaky ground you really have to take notice and that's the moment that we find ourselves in.
And is it, Erin, I mean we often talk about animal spirits and all this and how that pushes what goes on on Wall Street but is this a moment where there's such uncertainty now that that's all gone that people don't really know where to jump?
Yeah and at some point it becomes a compounding effect.
You know we have said long before this April 2nd Liberation Day episode that the markets don't like uncertainty it's something I have said over and over again in my reporting well they have to live with it this is the name of the game right now because we do not know what policy is coming out of the White House and we're bound to find out on social media and that is the kind of thing that makes investors nervous and jittery as the president said yippy is his word for it but the uncertainty is going to be here to stay and the more that you see terrorists put onto countries and then peeled off how
many times can you really play that game chicken.
I mean you have a lot of business leaders who are really questioning where they host their operations, whether the countries that they use to make some of their component goods that they may then send to the United States to make finished American -made products will end up being safe from tariffs or not.
I mean when you don't have that kind of information it is hard to plan for your next six months or 12 months or three years whatever your time horizon is.
So the more that we see this back and forth the less reliability people feel they have in making business decisions." Erin Delmore there speaking to me from Wall Street.
So let's look at this in more detail.
Kerry Leahy joins me.
He's an economist and adjunct professor at New York's Columbia University.
Kerry, thanks for being with us once again.
Yippie, that was what Donald Trump thought was the atmosphere on Wall Street.
It seems a bit worse than that, doesn't it?
Unfortunately, yes.
So, the price action in the bond market between some esoteric trades that people are doing between the futures and cash markets and the addition that interest rates are still rising, particularly on the 10 -year, is suggested that people out there are worried that something may be breaking or is breaking.
And not only that, a lot of people who need cash are dashing for cash, like they did in 2020, and in some sense they're selling bonds so they can get something even more liquid within the bond, which it has to be a much shorter maturity note.
So the bond market is particularly upsetting.
I think that's why he got Trump to pause yesterday.
But in some sense, he may have to do it again.
But we're really now in flip -flops central.
Well, it's interesting about the bond market, isn't it?
I mean, treasuries in particular, sovereign bonds.
I mean, it's something where the 30 -year, which should be the most reliable thing on the planet virtually, they don't seem to feel it is that anymore.
And that's more than just a brief fling, you think?
No. Well the switch hadn't been moved from the 30 to the 10 year in the last 30 years I've been doing this for a living.
So the 10 year tends to get most of the action.
But the 30 year has been pricing even more violently than the 10 year and people are starting to latch on to that.
It's perhaps a better indicator of how the market is really feeling.
But these problems are just not going to go away.
But looking at it I suppose with a slightly more optimistic eye.
We did have some inflation figures out during the day in the U .S. and you know, it's on way down it's not perfect, it's not what the Fed demands, not the 2%, but it's not far off.
But I guess this is reflecting a pre -tariff moment.
Ira you're absolutely right.
It was a very good report that showed deceleration in just about every major category including rent and shelter costs.
And we had a very good job support last Friday, so the market was holding… the market isn't holding up well but the real economy is, but most people think that's kind of like a last hurrah because the soft economic evidence like business and consumer confidence is in the toilet and people are waiting for the hard data to reflect that, and it hasn't happened yet but they're afraid the shoe's just ready to drop.
Yeah, and the people sucking this data up, of course, are in the Fed where they're looking potentially for rate cuts.
We know that the chair of the Fed is not really, perhaps, in sync with what Donald Trump is just from things that have been said, but do you get a sense that the Fed is now, you know, you're seeing inflation coming down, perhaps they're going to take their foot off the rate cut accelerator?
I think that's probably true.
They do have some pretty good evidence that inflation is coming down a bit more.
It will pick up with tariffs, but is that a one -off kind of effect.
But the Fed is facing, in some sense, the most difficult stagflationary challenge, meaning They have forces that are raising the unemployment rate and also raising, potentially, inflation since the OPEC crisis of 1973.
And so it's not going to be an easy world for them, and they may have been doing a flip -flop just the way the Burns -led Fed did in 74 and 75.
Yeah, because you mentioned, obviously, about oil there.
Oil is interesting at the moment.
Oil's coming down quite a lot.
Brent crude really showing a bit of a drop, which I suppose will help the inflation figures, will help a lot of U .S. households.
Gold, you know, another haven in these circumstances, behaving interesting.
What are you reading into those things?
Well the gold is clearly the biggest, closest thing we can see easily to a real flight to safety.
Oil is reflecting the concern that the global economy is going to be weak.
Maybe overseas the demand will be even weaker than in the U .S. and with the price drops you're getting to a point now that the current price of oil is not much higher than the breakeven production of crude in Texas and so now we're worried that a number of major producers in in in Midland and other places in Texas may go under and so they're very very nervous in the current environment.
There's really I mean it's confidence on all sides, you talk about confidence on Wall Street sounds like much more widely people just don't know which way to jump or had a plan?
That's true as you mentioned it in the intro it's not just the hundred and forty percent tariff against China the focus on China it's the fact that you just don't know where the president's gonna put his head and his Twitter account on any given day.
Interesting times and somewhat challenging ones too.
Thanks so much for being with us Kerry.
Kerry Lehe, the economist and adjunct professor at New York's Columbia University, joining us here on World Business Report.
Well globalization is the process whereby after the end of the Cold War the world economy became integrated.
A car designed in Europe with parts from Malaysia could be assembled in China and shipped to the United States.
In theory it brought jobs and prosperity to some developing countries, and cheaper goods for consumers in the developed world.
But the lower wages for workers in poorer countries, then also damaged of course industry and the richer ones and became hugely unpopular there.
And that was in a world where trade barriers like tariffs were not impossibly high.
So, big question being asked on many sides at the moment is, that era of globalization now over?
And I put that question to Mohamed El -Erian, his former IMF deputy director, and now president of Queen's College, Cambridge.
I think we're definitely leaving behind this era of unfettered globalisation, where the objective and desire was for ever closer integration of people, of trade, and of finance.
We've entered one of two alternatives.
Either what we call managed globalisation light – it is managed, it involves a whole series of negotiations between countries, and is slight, it's not the extreme version of globalisation.
Or we've entered fragmentation, where the system develops a number of pipes, and there is no common theme to the global economy, and there's very little global cooperation.
But what I think is pretty clear to me is that we are at the end of the ever closer globalisation.
Well doesn't that sound, in a way, a bit drastic, what we've got in effect is a US President putting in place, perhaps temporarily, who knows, some extremely heavy tariffs but we know he might take them off in in tomorrow next week in a month's time.
Is it really the moment to sound the death now?
I think it is for a few reasons.
First, we've gotten to the point where because we didn't deal with the distributional effects of globalization, in particular segments of the populations that were alienated, marginalized, and became angry, you will not get democratic support for a return to the globalization era.
And I think that politically and socially is very important.
Second, it's well beyond economics now.
National security and geopolitics are driving the truck.
Economics is sitting in the backseat, And the minute you talk about national security, then the weaponization of tariffs and the weaponization of investment sanctions becomes an extremely attractive tool.
Now you mentioned two options.
Managed globalization and fragmentation.
Can you just get a sense of what that means?
Managed globalization would mean that the trade will still go on reasonably easily between the major economies, but not as easily as it did before.
Correct. The design would stay the same.
So, think of a system where the US is at the core.
The US provides the global reserve currency, the US financial markets are where countries outsource their savings.
And in response, the US plays a leading role in global policy coordination.
Think of that as the system.
Under managed globalization light, that system would have lots of negotiated outcomes and differentiated tariff rates, but it would still operate.
Fragmentation is a system whereby you build a whole set of pipes around the US.
You can't replace the US, there is no other currency that can be the reserve currency.
There is no other financial system that can step in, but countries start turning towards bilateral and regional partnerships and rely less and less on the US.
So that's the big difference between the two.
It's a difference of design.
But it's also a difference of implication.
I mean if you're saying lots of small pipes, if you like, from the US to the rest of the global economy, would that be based on bilateral deals essentially and not much more?
It has started. Let me give you three examples.
One is the creation of a new multilateral institutions a few years ago.
That doesn't include the US.
It was a China led Asian infrastructure investment bank.
Second, over 50 bilateral agreements between China and other countries that never involved dollar.
And then the final one, and the one that's getting a lot more attention than many realize, is Russia.
How has Russia managed to continue to trade while being thrown out of SWIFT, out of the dollar payment system?
And there's a lot of interest in this cluttered, inefficient system that has emerged.
And of course, the trouble with more countries being interested, is that they can take that system, which currently is very inefficient, to a more efficient destination.
Now, one of the things people would say about globalization is it had many issues but one of them was it brought a capacity for people in developing poorer countries to earn.
It brought jobs and that that has changed dramatically the nature of the modern world.
Will that come to an end as well?
The notion which played out in many, many countries was a simple one.
You can use the global economy, global markets, global production, global supply chains to turbocharge your own domestic efforts.
China did that very well, Korea did this very well.
Country after country managed to use the global system as an accelerator of their own development process.
That is no longer going to be available.
Similarly, in the old days, if you had a choice, you wanted to be a small, open economy.
Singapore was the example, where you were very agile, and you didn't really need much internal resilience in terms of raw materials and everything else, because cross border supply chains work very well.
In the new world you want to be a Brazil, you want to be an India.
Very large domestic markets, resources, and relatively closed.
So we're seeing fundamental changes, not only in what are the most attractive attributes, but also in the ability to use an external engine to accelerate your own domestic engine.
Mohammed El Arian speaking to me earlier.
Your With World Business Report from the BBC World Service.
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Terms apply. Now, there's been a general strike in Argentina on Thursday called by powerful union confederations.
It's against public spending cuts put in place by President Javier Millet, who took office at the end of 2023.
All domestic flights have been cancelled, trains and metro services suspended, many shops closed.
Isabel Dobre is an Associated Press journalist in Buenos Aires and I got her to give me a picture of the day.
It's a bit of a mixed outcome from this general strike that was called by the main union, this cross section of Argentine workers.
I woke up today and the first thing I noticed was a pile of trash outside my house because garbage collectors did not come.
And then I noticed I couldn't take the subway because subways were canceled and then trains were canceled and hundreds of flights were called off.
Some hospitals weren't taking appointments because they were only available for urgent cases.
Some schools were closed.
So, we really saw that ultimately the country's main union confederations called CGT was able to get a large number of workers and union members to walk out of work.
But at the same time, as the government was very keen to point out, there were some movements.
There were taxis actually that were operating even though the taxi union didn't want them to.
There were buses crucially that were operating because the bus union decided not to join strike and actually cafes and bars and clothing stores were all open.
So that wasn't the case in past strikes.
So I would say that, you know, the union leaders are calling it a success.
The government is calling it a failure, and the truth is usually somewhere in the middle.
Yeah, and this isn't the first time that President Millet has faced a general strike, isn't it?
No, it's actually the third since he took office in December 2023.
And there has been, the past two strikes were pretty big in the sense that they always cost the government a substantial amount of money.
I think today the government said that it was a 880 million already lost just within the first hours of the strike, mostly because of the airports being closed.
So they are the sign that even though the trade unions are in the political opposition now, they do retain power, they do have the ability to turn the economy on and off with a switch. But the again was keen to point out that this is a sign the fact that we didn't see the level of engagement that we saw in past strikes was a sign that they are losing influence.
And what is it the unions are trying to do?
What are they protesting about?
They're protesting pretty generally about this austerity that Argentina is going through.
It's truly the most radical austerity in its modern history.
President Millay, in order to reverse the fiscal deficit, turn it into a surplus.
he's initiated a sweeping program of spending cuts that have really hit the education sector, the health sector.
They've stopped basically raising pensions and wages in line with inflation, which has been very high.
And so we have seen people struggling to get by.
We've seen that the poverty numbers have actually recently declined after an initial major surge.
And that's because Malay, through all this austerity, has managed to cool inflation.
but that's not to say that life in Argentina is getting any easier, it is very hard for a lot of people, and they're protesting that.
So they're not giving him much credit for exactly what you said about the poverty numbers going down, and indeed inflation going down, which is quite remarkable in in Argentinian history, of course, as we know, but they're not giving him credit for that?
No, and their argument, which is a bit complex in the sense that inflation is hard to calculate.
It's something that has been calculated by this government agency from a long time the same way.
And what they're arguing is that it doesn't account for a lot of the increases that private health care, you know, insurance plans have seen that hasn't accounted for the increases in electricity bills to the extent that it should be accounted for.
And that goes down to some calculation issues that they are quibbling over.
But at the end of the day, the lay is saying, look, I am reducing inflation when you look at the numbers And a lot of people on the ground are saying, yes, that looks excellent.
And certainly the International Monetary Fund and Wall Street and the Trump administration is very pleased about that.
But at the same time, they're not necessarily seeing that in grocery stores on a daily basis.
Isabel, de Brey there in Buenos Aires.
Now, one of the first countries to be threatened with US tariffs was Colombia.
Back in January, Donald Trump said he'd hit the South American nation with 50 percent penalties in a spat over migration.
Columbia's exporters were thrown into panic none more so than those in the cut flower industry Cazco Cumbia is the second biggest exporter of flowers in the world and most of them go to the US the BBC's Gideon longs been to Columbia to take a look at the industry I'm traveling out to a flower farm just outside the capital Bogota and I'm going to talk to a man who knows a thing or two about the Colombian flower industry John von, pioneer of the flower business in Colombia.
And you just celebrated your birthday John.
Tell us how old you are.
Ninety years old. Ninety, so you have really been in this industry from the start in Colombia?
Absolutely, as I said, I was a pioneer and we had to open all these markets.
We have accomplished a great thing, a miracle in just 55 years.
We are the second largest exporter in the world of cut flowers in just 55 years.
I call that a miracle.
We grow especially roses, 56 varieties of all the colors.
Every country is different.
Some countries dislike yellow roses because it's a flower of the dead.
Other countries like Brazil, for example, because of their football team I think, they want yellow all the time.
So it's quite a complicated business, but it's very, very satisfying.
And what has this industry brought to the local community here on the Savanna of Bogota?
Oh my goodness, constant work, dignity.
John, can you explain to me where we are and exactly what we're looking at here?
We bring the flowers from the fields on these machines, those lines that we saw, and then we grade here.
So all the women that we see here working here and men as well?
They're grading them.
Grading them? Here they're grading them.
Right. Would you like to see a bunch?
Hmm. So there's maybe 12 flowers?
12 flowers. Yeah. There are 12 cut in the same way, the same size, each one, she grades them according to length, according to the amount of leaves that they have. Right.
See what length they are.
Eighties, seventies, sixties, forties.
Right. I spoke to the head of the Colombian flower exporters association, Augusta Solano. I think the most important benefit for the country is the social impact because the other agricultural activities, they generate three jobs per hectare.
We generate on average 15 and these are formal jobs.
I mention that because, unfortunately, in Colombia, in agriculture, in the rural areas, over 80 % is informal.
We've come into the packing room now.
It's a warehouse around 100 meters long, roughly the size of a football pitch, and there are around 200 or 300 workers in here.
Most of them women, but not all.
Some of the workers are taking the freshly cut flowers, which have just come in from the greenhouses, and they're stripping the lower stems of leaves.
And other workers are packing the flowers, ready for export.
So they're wrapping them in plastic or in some cases putting them in cardboard boxes ready for export.
Sustainability – 92 % of Colombia's flowers are exported by air.
The industry must have an enormous carbon footprint.
Well we've been working very hard on that.
If we're looking at the carbon footprint, Again we cannot look just at the transport part, sending flowers by air as a lower carbon footprint than producing flowers in Europe under greenhouses because of the heating and many other things.
So we have to look at the whole cycle, not just transportation.
And as you'll know there are some people in the United States in Europe and elsewhere who every year when Valentine's Day or Mother's Day comes around they say we shouldn't be buying cut flowers we shouldn't be flying flowers halfway around the world what do you say to those people to those criticism?
Well they are they are wrong maybe they don't know the social impact this has everywhere and thousands thousands of people depend on this.
That report from Gideon Long in Colombia, you can hear his full report on BBC Sounds, just search for business daily or you can find it wherever you get your podcast and just before we go, a reminder of what did happen on the markets.
Dow Jones ended the day down 2 .5%.
Oil price was down by nearly 4 % in the aftermath, of course, of Donald Trump's sanctions on and now sanctions off at least for 90 days.
But that's pretty much it from World Business Report from me and from the rest of the team.
Bye bye, and thanks for listening.
Asking the right questions can greatly impact your future, especially when it comes to your finances.
So, if you're looking for a financial advisor you can trust, certified financial planner professionals are committed to acting in your best interest. That's why it's gotta be a CFP.
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