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Join for free today and get ready to save more Lowe's we help you save loyalty program subject to terms and conditions details of lowe's comm terms subject to change Hello and welcome to World Business Report on the BBC World Service I'm will being great as always to have your company on the program today then a 90 -day trade truce But the key question now.
Is this the beginning of the end for the trade tariff uncertainty?
Or just that just a pause, over the next half hour here on World Business Report, we're going to try and explore just that including a sigh of relief for some exporters.
For now, at least, looking further ahead, though, this is only a 90 day reprieve.
And I have no idea how things will shake out in 90 days.
Yeah, we'll have plenty more reaction from China and from the United States as well.
And we'll look at how it's impacting company shares and stock markets all around the world because that too is a big part of the stories we were hearing in the news headlines that Bill Blaine of shard capital in London standing by to walk us through all of that and tell us what we need to know.
But let's get straight to the US because in the past few minutes, President Trump has been speaking.
The talks in Geneva were very friendly, the relationship is very good.
We're not looking to hurt China, China was being hurt very badly.
they were closing up factories, they were having a lot of unrest, and they were very happy to be able to do something with us and the relationship is very very good.
I'll speak to president, she may be at the end of the week, we have some other things we're doing, but one of the biggest things that we're doing, and I don't know if people realise this but we made a great deal with China, great trade deal.
More on who's feeling the pain shortly because we're gonna hear from a Chinese exporter to the United States who's got views on exactly that but first of all our North American business correspondent Michelle Flurry is with us on yet another busy day Michelle let's come to the president's thoughts in a moment because I know you've been watching a little bit of that as you get set to speak to us but take us right back to the start of the day then the big reveal the grand reveal and oh my goodness as usual it had to be a complicated reveal, didn't it, about what's going on with these tariffs, try
and walk us through it.
Yeah, I mean, initially, we've got news that there was, you know, a huge agreement coming.
Then we're all waiting to find out exactly what that meant, because we've sort of been down this path before.
And everyone was very pleasantly surprised to hear that there was this 90 -day pause on tariffs, that the countries had slapped on each other, the US and China effectively acting as a trade embargo at these levels.
So to talk you through it, 145 % is what the U .S. had imposed on goods coming into the U .S. from China.
That will now go down to 30%.
These are the 20 % you had previously from fentanyl, there are also steel and aluminum tariffs and car tariffs that remain in place that are separate to this deal.
Going the other way round, U .S. goods that had been tariffed 125 % going into China will now be down to around 10%.
But as you just mentioned Donald Trump has been speaking and he was talking about the fact that he will speak later this week to the Chinese leader, said they had great relations.
The other thing that came out he also said that China had agreed to open itself up to American business that is something a bit different to what we've heard from the official statements from those involved in the trade talks, somewhat sort of a different line to What officials have been saying about what came out of those meetings in Europe?
Talk us through again what officials are saying, because that sort of came before all the announcement.
But that in of itself was interesting to Scott Besant, the Treasury Secretary who had been leading those talks that we were previewing here on the programme on Friday.
Yeah. So Treasury Secretary Scott Besant and US Trade Representative Jameson Greer were the sort of two figures on the US side, the key kind of figures.
And they basically came out and said that a deal had been struck with their Chinese counterparts to pause most tariffs and other trade barriers for 90 days.
This is to allow more time for talks to continue in the coming weeks.
So there is no sort of talk about any special access for any industries or anything other than as they apply to this kind of removal of tariffs.
And that's something that the American business community certainly had been pushing hard for, saying that at these levels, this was just a very serious event for them and one that wasn't sustainable.
And the president talking there in the clip that we we just played, as though this won't just be a pause.
What's the wider political mood music do you sense in Michelle?
Because that's kind of the important bit for next, isn't it, for what happens next?
Look. I mean, I think if you're hoping that all uncertainty has been removed.
Well, then, you're possibly in for disappointment there.
We know it's a 90 -day pause.
We know that talks are going to continue.
Depending on how they go, who knows what could happen?
And I think that's the thing to remember.
This is a de -escalation, but it's not a kind of complete walking away from the position.
And if you listen to Scott Besson, the Treasury Secretary, he has always kind of been pushing for a much more fundamental reset of trade relations.
But I don't think they anticipated that it would be quite as disorderly as it had been.
And so this is an attempt not to abandon that goal but to sort of try and achieve it in a more measured fashion.
And I think that is the danger of you just look at the market reaction.
People may get ahead of themselves in terms of the euphoria we're seeing right now from investors.
Yeah, really interesting thought.
We'll pick up that reset one later on.
We've got Frank Lavin standing by as well.
He's going to be on the program.
Frank, a former Undersecretary for international trade in the U .S. Commerce Department to pick up on that.
Michelle, thanks so much. Michelle Fleury there, our North America business correspondent live from New York.
Well, for a bit more on that market reaction, though, more immediately, as I say, Bill Blaine here in London, standing by from Shard Capital.
Bill, great to have you back on the program.
And great to be here.
Certainly, people are getting carried away in the market first of all today, aren't they?
Especially in the United States, stock markets up very sharply." Yeah, let's just run through the key takeaways from today.
First of all, you're absolutely right.
Markets are all about the short term and they are massively overreacting because they can see upside.
We have a market full of headlines that all the losses this year have now been resolved and so this is all working.
The reality, though, however, is that Trump blinked.
The reason that Trump blinked is because somebody managed to get across to him just how damaging the effect was going to be on the US economy of the effective end of trade with China.
I mean, we have stories emerging last couple of days that US ports on the west coast, Seattle, is empty.
There are no container ships in Seattle, 35 % reduction in the number of ships expected to come into Los Angeles this month.
Now that was going to create a cataclysmic recession, inflation, stagflation in the US economy.
They've managed to roll that back.
But the fact that the stock market is up does not mean that we're not still going to see a pretty significant impact on the US economy in the next couple of months because this will take months to roll back, just in terms of individual stocks and shares, Bill as well, just to expand on your point, I'm just looking at ones like nvidia, you know, the chipmaker, they could kind of barometers have that sort of sigh of relief, but a cautious sigh of relief, perhaps.
Yeah, but I think there's even a third thing for us to consider and what did what does it really tell us about the future is going to look like.
The fact is, this was going to be a trade war that America was going to lose whatever happened because the idea that you'd be able to suddenly repatriate all this production into America was a nonsense.
It just wasn't going to happen.
What we were going to see was China become more and more efficient and take more and more market share in advanced goods in areas like AI's they showed us with deep seek but also in things like electric vehicles where Chinese EVs are now massively outperforming anything that Tesla even imagined.
Now, if you open up the American market to Chinese EVs, I guarantee that the longer -range, faster -charging Chinese EVs will outsell Tesla in California in just a few months.
Now, I reckon this is the beginning of a fundamental switch that has been accelerated by Trump, There, we're going to start seeing Chinese advanced companies outperforming the old myth of American exceptionalism.
So there are a whole bunch of really bad things that came about as a result of today's surprisingly positive trade news.
Well, one of those who was in the kind of eye of exactly the storm that Bill was talking about was Tackay.
If you're with us on the programme, last week you'll know he's an exporter in Shenzhen, one of the great exporting hubs in China exports personal care appliances from China to the US that ultimately end up on the shelves of many of America's biggest retailers.
He told us about his fears and frustrations last week at those 145 % tariffs.
And also as Bill was saying, Tackay was also telling us about the impact he thought it would have on prices in America.
So we thought we'd get him back on the program today to talk through what he made of this pause.
30 % is still a substantial tariff.
It's going to mean a lot of my customers who are the importers of goods into the US, their margins are going to be wiped out if they don't pass the tariffs on to the customers.
That being said, it's still better than whatever it was, and 145 % would have been an extinction level event for a lot of my clients, unless we are able to help them move production out of China.
So for now, I believe this 90 -day window will allow most people to get some goods in.
It's still gonna be tariffed and it's still gonna raise prices at the end of the year, but at least people are able to make plans around it.
If people were with us on the programme last week, they'll have heard you really helpfully break this down for us.
Can you just sort of break it down now at the 30 % level, you know, who is sort of making what, losing what in that example?
Sure. Using the same example, you know, for a goods that let's hypothetically say $10 that we sell as manufacturing price, the importer, the company who's bringing these goods in, selling under their own brand and marketing the product, they would have to pay $3 in tariffs.
Now, I know most of them work on somewhere between 20 to 30 % gross margin.
So after accounting for all the costs of import, shipping, advertising, and warehousing, hopefully they'll have enough margins to make a profit.
Well this three dollars is probably going to wipe out most of their operating margins.
Unless they're able to pass it on to either the retailer, in this case it could be a Wal -Mart or a Target, they would have to take a loss, or at least they would have to sell it at a loss just to keep the business.
And if they are able to pass some of that down, it would mean that Wal -Mart and Target would have to add to their margins as well.
So a 30 % tariffs on our products would still represent you know $5 to $6 in actual price increases in the retail space.
So this isn't solved?
I don't think it's solved.
I mean right now we're still at 30%, which is 20 % on the fentanyl related tariffs and then 10%, which is part of what I believe the administration wants to apply to everybody.
So, 30 % is still not nothing.
And I think a lot of small to medium enterprises that we service are still going to be under tremendous strain.
What about at the other end of the trade as well?
What about home in China?
What does it mean in terms of those operating margins for you and your colleagues exporting from big hubs like Shenzhen?
So, in the short term, it means that we're able to start moving some of the goods that been stuck in our warehouse for the past month and a half, which is good news because a lot of our customers are also anxious for goods.
They will still have to pay the terror of spending, at least we're able to have positive cash flow.
I think that is the most important thing.
Looking further ahead though, this is only a 90 -day reprieve and I have no idea how things will shake out in 90 days.
And, you know, it could very well be a path to a more normalized trade relationship under the new realities, or it could be just a 90 -day ceasefire, and afterwards, or even before the 90 days is up, we're right back to the same level of insanity that we've experienced in the past month.
Right now, there's very low confidence that things will actually be stable in the long run.
And I think that is, from a planning and investment perspective, that is the big concern.
Chinese export attack Kayla speaking to us from Shenzhen you're with well business report on the BBC World Survey 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 got to be a cfp find your cfp professional at let's make a plan dot org So you want to start a business?
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What next then is that kind of the key question, isn't it?
We're going to explore that not just for the US and China, but of course, for all the rest of us listening all around the world about what it means for the global economy and Frank lavin as I mentioned is with us Frank's former undersecretary for international trade at the US Department of Commerce and Ashley dude are in it.
founder of the China focused research company.
Chow Zan is also with us.
Welcome both to the programme, Frank first of all just give us a top line thought I suppose about where we are today.
Well the good news is that the markets are reacting positively because both sides have agreed to move away from it all friction directed activity to sitting down at a table so the good news might just be symbolic but at least it is a step in the right direction but we don't know substantively we don't know what the ultimate outcome is going to be It's just the very first stages of talk so we don't know if 90 days from now there'll be anything to celebrate it not.
And we're still at a worse point in terms of tariffs being applied to Chinese goods from the US or US tariffs, Chinese tariffs, we're still at a worse point than we were last year.
So we're going to see depressive economic effect, and I think we're going to see a pause in capital expenditure and business decision making.
Yeah, can you try and put your former kind of hat on?
What do you think if you were sat in that American trade team now on the plane, perhaps back from Geneva or back at home?
Where do you think you've got to so far and what are you hoping are the next steps from that perspective?
Well, I think the US is going to look for several elements.
One, historically over the last 10 or 20 years, Chinese tariffs have been higher against US goods than the other way around, meaning Chinese tariffs, average weighted tariffs are in the order four or five percent against U .S. goods, U .S. tariffs around two.
So one thing Trump is looking for is some equality in that space.
So that's that's a key goal.
Second goal from Trump is purchase agreements.
He tried this in Trump.
One, he got some kind of commitment from China for purchase agreements, but there's a widespread view in the United States, that China really fell short of that commitment, didn't really honor fully as expected from the U .S. And third, as I think your correspondent mentioned a minute ago, fentanyl to get some kind of commitment on the precursor drugs and better policing of the knowledge.
What is it that the the US is hoping China buys more of it, is agricultural products the obvious area there, because we hear analysts like yourself, Frank say that a lot.
But there's not a lot of, as we've heard, you know, this kind of epicenter of this story, right is that American manufacturing has shifted massively in the last 30 years.
What is it that the US is hoping to sell more off to China?
Well, first of all, on agriculture, I would argue that it's the US trade friction that has pushed China away from the US market towards countries like Brazil, yeah, exactly.
Right. Exactly. So in fact, we've kind of taken a step backwards on agriculture, if you will, I think.
There's, again, two, two components of this one is just getting the tariff rates down a bit.
And two, there were purchase agreements last time.
It was machinery, it was automobiles, it was airplanes.
So it was tended to be industrial goods, US does well in the consumer sector and hospitality sector, but in the heavy industrial goods is where China has more nationalistic industrial policy and it isn't tougher for the American to make...
The issue there is the one that Bill Blaine was talking about isn't it that China has excelled it's something to lead the world in one of those areas.
Yes it is it is a challenging market but by the way I would turn that argument around I'd say China is very strong in those areas but that's all the more reason that China can now afford to lower its tariffs it's its traditional argument for higher tariffs was always that infant industry argument.
You've got to give us breathing space to we mature bit.
All right, fellas, you're there.
Let's try to play fair now.
It's not a bad counter argument.
Well, Ashley, that seems a good place to bring you in as well as you to draw neck of cho Zan.
Same question. I guess I asked a Frank at the start actually, where do you think the Chinese negotiating team, perhaps on they're playing back from Geneva now think they got to at this point?
I think they are quite cool.
The reaction is a lot cooler because we see the markets are obviously very excited and commodity prices are starting to trend up and all that.
And we hear all these messages from President Trump.
But when we talk to Chinese manufacturers, Chinese importers, Chinese general public let's say on social media or even the government announcements, they are a lot more cool and in reality, I do not think that people really believe that this is the end of the problem.
They believe that this is some breathing space and a lot of Chinese people actually feel that they understand President Trump quite a bit.
They know that something that's said today can change tomorrow.
So they factor that in and they just keep on doing what needs to be done and ultimately what needs to be done is there are three things supply chain restructuring, there's speeding up this diversification away from the US, domestic market expansion, etc. So all these things keep on being top of people's agenda.
That's supply chain restructuring, we heard from Tackay, there didn't we as well.
And when he was with us on the programme last week was illustrating this more clearly, trying to do that, trying to refocus, but with the tariffs potentially coming in, in lots of other different areas in East Asia for example as well he's not sure about where to put that investment because it might be the wrong place at the end of it there's still all those sort of very awkward questions for people like that aren't there?
Absolutely but we also need to understand that for the Chinese let's say manufacturers this tariff war has not started a month ago the tariff war itself maybe did but the trade war has been there for a few years.
So many of them have actually started moving out their manufacturing to Cambodia and Vietnam and India and right now as everybody is affected, they still want to restructure and see what they can do on a more global scale, not only for the US but also for the future.
And when it comes to diversification away from the US, this is just kind of happening faster and in fact they are both countries are going to continuously reduce dependency on each other when it comes to high tech or any other areas of business.
While that journey is happening though, Ashley, I mean we focus a lot on the potential impact in the US but there's no question is there I mean everybody on both sides have said this all along there are no winners in a situation like this there is still going to be even at this 30 percent as we were hearing from TackK paying at home job losses you know as that restructuring happens.
Absolutely. And in China, I think what's very interesting is that as China went to defend what they call national dignity, with the government messaging, saying that, you know what, we will not be bullied into this, we will protect the free trade, we will be that voice, actually, a lot of Chinese, including the ordinary people and businesses, they felt a bit of that pride.
So, right now, they are kind of all in this together.
That's one. Number two, of course, there's pains.
Some of our, let's say, friends across Guangdong, Guangdong is one of the biggest manufacturing hubs in the world, had to let their teams, the whole manufacturing floor go home for two weeks or three weeks.
But at the same time, right now, many of them are back.
They have focused on the domestic market for three, four weeks.
They have got some success there.
They have also tried to reach D2C, direct to consumer kind of programs and run them.
And even in the US it was at times successful because American consumers are also interested to explore Chinese platforms. From Douyin to Red Note, to right now they go to platforms that allow them to purchase directly from Chinese manufacturers.
So they have done a lot of things, and at this stage, there's no very big anxiety because the Chinese, I would say, nation, government, public, and businesses feel that this is a long -term shift, this is going to continue.
Whether it's 90 days, whether it's 30%, or it's 145%, of course 30 % is a lot better.
But ultimately, directionally, nothing changes.
They will have to fight for their place at the not just table, but also in the room.
And they are prepared to do so.
Really interesting.
Frank, round us out here with the most unenviable question of the lot, because as all of you have said, guessing and second guessing President Trump, not an easy thing to do.
But what's your sense?
Is this too fragile to hold beyond the 90s?
Or do we get to the end of the 90 days in this position And sort of it's about what happens next from there.
I'm a little cynical here because I think Trump sort of misplaced his hand over the weekend by declaring this was a major victory and a major reset meaning by doing that by already declaring victory when he has nothing really on the table.
He's kind of letting China off the hook.
China can now underperform China can now come in with minimalist commitments and Trump has already said it was a great day for America.
So, so I think if we get something out of it, it will be quite modest, quite incremental.
And if the Chinese are smart, I think they're very smart.
They play this out over a year or two, there's no sense putting all of their offer up front in 90 days.
But in fact, what they ought to do, if you're trying to string Trump along is put out a minimalist offer that keeps him in the game, but it's sort of a grudging, you know, nickel and dime kind of response.
So I think we get very little out of it in terms of improvement of trade.
But Trump is not known for understatement.
Yeah, sounds like from what you're saying, Frank, we're gonna have you and Ashley back on again in the in the not too distant future.
Frank Levin, former Undersecretary for international trade at the US Department of Commerce, and Ashley do Darinok from the founder of the China focus research company chow Xan.
Thanks so much for your time.
Bill, give us a quick thought on what you heard that and then I want to get you to broaden it out for all of us listening outside the US and China and what you think it means means for the rest of us listening around the rest of the world.
Sure. Well, I think the guys really put their finger on the number of the problem.
If you are an international business and you are worried about your future, you are gonna say in the short term that, oh, yes, I'm gonna build lots of factories in the states and yeah, we're gonna invest loads and then you're gonna do nothing because you're gonna spend your time looking for real investments in stable and certain economies where you know there isn't going to be constant polarized politics threatening to unravel your trade position.
You talk to businesses every day about that kind of stuff.
Can you see potential winners from that countries already where you're always talking to CEOs aren't you, are there places that people are seeing, you know.
Yeah here's this very simple view over half the world's population lives in Southeast Asia.
That's the area of the world that is expanding in terms of wealth fastest. That's where people want to buy things.
That's where people are going to want to deal.
That doesn't just mean China, it means India, possibly even Pakistan but Korea, Vietnam, all these economies.
That's where the world is getting interesting and they are now looking for new places to export their goods and I think ultimately Europe's gonna be the beneficiary.
From what you've said Bill, you tend to agree by the sound of things.
The trade is just completely rewired now, nothing will ever go back to being the same again, a bit like Mark Carney.
Yeah and this is why I don't think the 90 days is significant at all, because at the end of 90 days there is no way that Trump is going to go back to the kind of threats he's made.
Within 90 days we're going to see some serious friction in the US economy, possibly rising unemployment and certainly some inflation, and that's going to make it impossible for him to go back to these trade threats.
He's going to be forced to continue what you tried to do with the UK last week, which is this paper Massey type of trade deal that he did with us.
Yeah, that isn't really a deal, it's sort of beginnings of talks and all that kind of stuff as well.
Going to be fascinating bill been really great to get your insight.
Thanks, as always for talking us through it.
Sounds like it is going to be something we're going to discuss again on the program.
As I say get in touch with us with your thoughts on it.
And thanks so much for listening to World Business Report.
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