Hello and welcome to World Business Report from the BBC World Service.
I'm Sam Fenwick. Now, they used to say a week is a long time in politics, but now it feels like even a weekend can change everything.
Coming up on today's programme, we'll dissect the latest political developments and their economic fallout.
From how businesses are bracing for the impact of Trump's tariffs on Canadian, Mexican and Chinese imports, to a deal to extract critical minerals.
For investment to come into Ukraine, into its mining sector, exploration to happen, to see what its deposits hold, we really need to see stability in Ukraine.
And how might that stability be achieved?
If Europe is to be war ready within three or five years or something like that, then of course, we need to invest massively and we need to start investing almost yesterday.
So not today, but yesterday.
That's all coming up in the next 30 minutes.
But first, let's get started with the news that within a matter of hours, Canada, Mexico and China will be hit with US tariffs.
Earlier today, Monday, President Donald Trump confirmed in a press conference that he will impose 25 percent tariffs on import from Mexico and Canada at midnight Eastern time.
No room left for Mexico or for Canada.
No, the tariffs, you know, they're all set.
They go into effect tomorrow.
Vast amounts of fentanyl have poured into our country from Mexico and, as you know, also from China, where it goes to Mexico and goes to Canada.
And China also had an additional 10.
So it's 10 plus 10.
Let's get the very latest on this with our North America business correspondent Erin Delmore.
She joins us now live.
There's been a lot of anticipation for this confirmation, hasn't there?
These tariffs were initially displayed.
Delayed, rather. That's right, Sam.
Canada and Mexico reached a deal a month ago to delay these tariffs.
But hearing President Trump speak today, it sounds like the deadline has come.
There had, of course, been some suspicion that it might be delayed again, with administration members saying, wait and see what the president does.
And then today, as you heard, President Trump told reporters that they'll go into effect tomorrow.
So we're looking at that 25 % tariff on all imports from Canada and Mexico, a lower margin for Canadian energy, 10%.
And as he mentioned, a doubling of the tariff on China to 20%.
And how are businesses in the US reacting to the announcement?
You do see some concern on what the tariffs will mean for the wider economy.
You can see it both in the stock market today, where we saw a sell -off, two of the major indices down 2 % today.
And you also see it in conversations with business owners.
And that's what I spent my day doing at the Toy Association's big fair in Midtown Manhattan today.
So I was speaking with Greg Ahern.
He's the president and CEO of the Toy Association.
And I asked him what effect these tariffs would have on his section of the business.
We do know this, that tariffs will be inflationary for toys.
Raising toy prices is bad for small businesses.
It's bad for families that are budget conscious.
and it potentially even swings the door open for knockoffs and counterfeit toys that might not go through all the testing and that might seem like a cheap alternative to parents out there.
Well, as you say, Erin, you're at this toy fair in North America.
Many of the products on display, I'm sure, will come from China.
So how will tariffs affect the actual prices that people pay for those toys?
Yeah, the toy industry is so interesting because around 80 % of all of the toys that are sold here in the United States are made in China.
And when you think about one of the purposes that the administration has said is of these tariffs, it's to try to encourage businesses to move production out of countries like China.
In fact, to try to move that production back to the United States.
But in conversations with these business owners and manufacturers today, I heard a lot of things and they were talking about how ingrained their supply chains are, how we don't have the toy factories here in the United States, they say, to be able to do this production back at home.
And they say that not only do we not have the skilled workforce, but a manufacturer told me today we don't have the workers who will, say, sit painting the faces on dolls or putting the plush fur into toys and hand -stitching them.
So they say that it's very difficult to cope with these, and that's why we heard a little bit today from Jay Foreman.
He's the founder and CEO of the toy company Basic Fun about what effect it could ultimately have on consumers.
If you are shopping at the dollar store, things may be a dollar and a quarter if you're shopping at a five dollar store $5 .99 $20 item will be a $25 item and you know for an individual item that doesn't sound like a lot but when a parent is gathering a basket together of Christmas presents to put under the tree
it might cost them an extra $50, $100, $200 to buy those gifts for their children and of course you know I hope the administration would not want to be the Grinch who stole Christmas and raise prices on toys.
So Erin, it sounds like Christmas could be a little bit more expensive for families in the US.
And China has retaliated with tariffs on agriculture products.
Does this suggest then that the trade war is really starting to intensify?
It suggests that countries are signaling that they will not allow these actions to go unmatched or unremarked upon, right?
We've also heard that Canada is preparing its own retaliatory tariffs.
And that's tens of billions of dollars of goods from the U .S.
that could be affected, even more reportedly to follow.
And next week, we anticipate hearing from President Trump on steel and aluminum.
I mean, there's many, many factors here and globally.
Erin Delmore, thank you very much for bringing us up to date with that.
Erin Delmore there reporting from the North America Toy Fair for us.
Well, as Erin was saying, one of the ways companies are trying to get around this and avoid tariffs is by investing in the US.
And President Donald Trump said on Monday that the chip making giant TSMC will invest at least 100 billion US dollars in the United States to build cutting edge chip manufacturing facilities in the US.
Peter Jankowskis can tell us more about this.
He is vice president of research and analysis at Arbor Financial Services.
So TSMC, they are going to invest, as Donald Trump was saying, $100 billion.
Where will that money be invested?
Where will these new facilities be?
I believe that they're targeting building the facilities in Arizona.
And, you know, we've seen this sort of effort before in the first Trump administration with plans to invest in Wisconsin by Foxconn, et cetera.
So it remains to have seen how much follow through actually occurs.
You sound skeptical.
Well, a little bit.
Certainly, companies are trying to court favour with the new administration, trying to find ways that they might get more favourable treatment under the tariffs regime.
So many of them are making these announcements and making these plans with that hope.
And it remains to be seen how much follow through there actually ends up being.
Last week, we heard that Apple said that they were going to spend more than 500 billion in the US over the next four years.
Is that new money? It didn't appear to be in terms of the analysis that I did myself, as well as stories that I read one in the Wall Street Journal, that basically said that that level of investment was in line with their investment over the prior four years.
So it doesn't appear to be much of a change from their regular policy.
Do you think that lots of different types of firms will start to invest in the U .S.
or will it just be these sort of tech firms?
Well, I think the tech firms are probably the ones that are most vulnerable in terms of the fact the global scale of their businesses, as well as they're being very profitable and ready targets for foreign firms to retaliate against.
So I think you'll continue to see a great dominance in plans being announced by those firms, but you'll probably see it in some other industries as well.
Peter Jankowskis, for the moment, thank you very much.
We will come and talk to you again a little later in the program.
You're listening to World Business Report from the BBC World Service with me, Sam Fenwick.
In the UK, European leaders have been discussing strategies to defend Ukraine from Russian aggression.
On Monday afternoon, the UK Prime Minister, Sir Keir Starmer, emphasised that Europe would need to take on the heavy lifting as part of any peace deal.
The UK is prepared to back this with boots on the ground and planes in the air.
Together with others Europe must do the heavy lifting but to support peace in our continent and to succeed this effort must have strong U .S.
backing. So what exactly does that heavy lifting entail well over the weekend we said didn't we it was a busy weekend Sir Keir Starmer announced a 1 .6 billion pound that's around two billion dollars missile deal for Ukraine he also revealed that a number of allies, including France's President Emmanuel
Macron, had committed to a coalition of the willing and were prepared to deploy troops to the Ukrainian front line in the event of a peace deal.
European leaders also agreed to increase defence spending.
And unsurprisingly, that news was welcomed by some of Europe's largest defence companies, which store their stock price rise on Monday.
Shares in Hreinmental, which is Germany's largest defence company, closed up nearly 14%.
Paris -listed TALIS rose 16 % and BAE Systems gained 15%.
Well, earlier I spoke to Yang P.
He's the Secretary -General of ASD, which represents the aerospace, defense and securities industries in Europe.
And he shared his reaction to the weekend's events.
What I've picked up over the weekend is that, first of all, it seems extremely evident these days that the US is about to pull out and that Europe needs to take care of its own security environment.
And in doing so, we now have to pay the price for having underspent in decades in the past.
And we're really running behind Ukraine.
Now, it all depends on what scenario they see.
But if what we pick up is if Europe is to be war ready within three or five years or something like that, then of course, we need to invest massively.
And we need to start investing almost yesterday.
So not today, but yesterday.
What sort of figures do you think these countries should be pledging then?
Well depending on what kind of scenario one is looking at I think the 2 .5 percent of GDP that was only to cover the gap for the underspending in the decades in the past and now looking at the real -time war scenario I guess the planning would have to be coming from what kind of operations we could be
looking at and what kind of volumes what kind of systems etc but I would not be surprised if we speak about five percent or more.
What sort of delivery time then on that if you pledge now when can you be in delivery of this stuff?
We've seen an impressive ramp up so far on when it comes to ammunition delivery even though we are still running behind the train on that one as well but still I think it's very important to note that for example I take Rheinmetall as one example that 2022 they had an ammunition production of 70 000
rounds of the 155 millimeter artillery and now they are about to reach 1 .1 million in 2027 so that's a rather a massive ramp up.
And I think we've seen several other examples of that as well with net employment of people and the own investments of companies, etc.
But that's on the easy part.
That's on those low -hanging fruits.
Of course, if you go to systems and platforms, it will be more difficult.
It will take more time.
But I do believe, first of all, the industry is really wanting to be challenged to its maximum production capacity.
This is not the case today.
So first of all, we would really want to see that the orders are being placed.
And I think if the orders are being placed, I think you will see an increasing ramp up that will be rather impressive already the first year.
But then obviously, it will continue to grow over the years to come.
And most likely, it will take us between five to 10 years before we're up to full production capacity.
Where is capacity at at the moment?
How much headroom is there?
It's a tricky question to answer because in terms of facilities, skills, supply chains, All of that would have to be beefed up directly when you get the orders.
So it won't be a quick process.
You can't say that anyone is running at 70 percent of their capacity or something like that, and that there would be 30 percent that you could call for directly.
This is likely not the case.
But so more or less companies are adapted to the orders that they have today.
And therefore, everything kicks in when you start with placing and you put the money on the table and you start to increase the production.
If we assume the US is going to pull all their support away from Ukraine, what sort of kit needs to be on order now to make sure that the gap isn't too large?
I think that's a question that you should probably ask to the military planners, but I can certainly see that there's a number of platforms and systems that should be ordered directly because it all depends on what kind of war would we possibly foresee in the coming three or four or five years.
But battle tanks should be ordered, air shields should be ordered, system platforms, generally speaking, everything that is not easy production should be ordered now.
You've painted quite a bleak picture.
You've suggested that it could be five years before European countries are, in your terms, battle ready.
But there might be some that say you would say that, wouldn't you, because you are representing the defence industry across Europe?
Oh, I would absolutely not do that, actually, to be quite honest.
I think with all the drama that you see on the global scene today, there is no need to try to paint an even more bleached picture than reality already paints at us.
I think on the contrary, I think that Europe has more defence industrial capacities and capabilities that we can deploy rather quickly if we get from policy discussions and policy taking and making to actually placing the orders.
So I don't think that it's that bad from that perspective.
And I wouldn't call for, in the best case scenario, we wouldn't need this kind of equipment or material at all.
That was Jan P from the ASD, which represents Europe's defence industry.
US support for Ukraine relies on a highly anticipated deal which could grant the US access to Ukraine's valuable rare earth minerals.
These resources are essential not only for technological manufacturing but also for defence systems and green energy.
Despite Friday's intense exchange between US President Donald Trump and Ukrainian President Vladimir Zelensky at the White House, On Sunday, Mr Dzielensky told the BBC that he remains open to signing the deal.
The agreement on the minerals, the deal is ready.
It wasn't ready. There were many variants, but there is the last one.
It is ready and the ministers can sign it.
President Donald Trump said on Monday that he has no immediate plans to withdraw all his troops.
but unlocking Ukraine's mineral wealth will require more than a deal between the two countries as Henry Sanderson has been telling the commodities expert from RUSI which is an independent defense and security think tank based in London.
For investment to come into Ukraine into its mining sector exploration to happen to see what its deposits hold we really need to see stability in Ukraine so obviously we need to see what a peace deal potential peace deal looks like but then also a security guarantee for Ukraine going forward.
Because no investor is really going to come into the country in a big way if Russia could potentially invade again or if Ukraine's under threat.
So we really need to see Ukraine's security guaranteed in the future.
And under this deal, the US and Ukraine have provisionally agreed.
It doesn't say probably enough about the security of Ukraine going forward to really attract the investment that's needed.
It just says that with the US, you know, being economically involved in Ukraine, that will add a sort of guarantee, but I don't think that would be enough.
What sort of minerals are we talking about?
What does Ukraine have that the world needs?
Yes, so Ukraine is minimal rich, and we need more exploration and surveys because a lot of the data that we have is probably outdated.
But it does contain, you know, minerals we call critical minerals or minerals that are on lists by the US and the European Union as being critical.
And this is things like lithium, which is used in batteries for electric vehicles, you know, some rare earth elements that are used in magnets for wind turbines and electric vehicles.
And then titanium, which is used in aerospace and a graphite, which is used in lithium ion batteries.
But the issue is we really need to have more.
They're at a very early stage, right?
We just know that there are these deposits, some of them, Most of them are unlicensed.
And a lot of them, especially with rare earth elements, are actually behind, you know, in Russian controlled territory at the moment.
And your research has suggested that it will cost at least a billion dollars to develop the lithium and graphite that have already been discovered in Ukraine.
That's a lot of money, isn't it?
Yeah, that's right.
So, you know, for something like graphite, Ukraine's actually already been producing graphite, But you need more investment to produce material that can actually be used in electric vehicle batteries.
So you need to process this material into a form that can actually be used both for lithium and graphite.
And this is, you know, we're going to need to see hundreds of millions of dollars in investment to get to that stage.
And this brings up a really important point, which is critical minerals are not useful of themselves.
You know, they need to actually be processed to turn into usable form.
and at the moment China dominates that processing step of the supply chain so even if the US can secure these deposits in Ukraine we need to see investment in the mines but then we also need to see investment in processing either in Europe or the US.
And who might fund that then?
We're talking about private companies there.
Yeah so this I think is the crux of the whole issue which is yes the US wants to secure critical minerals in Ukraine in Greenland and other places but it actually really needs to attract the private sector to invest in these sectors in order to build supply chains that are competitive with China or independent
of China. And this is something President Biden tried to do when he was in power, which is try to incentivize private sector to invest in these supply chains through tax credits.
But the issue is that Trump has come in and he said he wants to scrap all of Biden's tax credits and subsidies.
He calls it a green news scam.
So a lot of the minerals Ukraine has, we talked about lithium and graphite, They're used for electric vehicles, clean energy.
And this is a very sector that Trump has, you know, not supported publicly.
And he's even gone against the wind sector in the US, which uses, you know, rare earth elements.
So it raises a question of how he will actually get the private sector to invest in these minerals and the supply chains they need without the subsidiary of the Biden era.
That was Henry Sanderson talking to me earlier from Lucy.
Well, as we've been saying, it's been a very busy couple of days for the US President Donald Trump.
And on Sunday, he announced plans to create a US cryptocurrency reserve.
This reserve would include major cryptocurrencies like Bitcoin and Ethereum, as well as some smaller tokens.
So what's behind this?
Well, earlier I spoke to Kristin Smith.
She's the CEO of the Blockchain Association.
The crypto industry was certainly excited to hear the news and appreciates the enthusiasm that President Trump has brought towards the crypto industry.
I do think, however, there are a lot of questions how this crypto reserve would work.
There have been a lot of discussions in the past around Bitcoin and whether that would be a stockpile or a reserve.
But this is something that I think is going to need a lot more investigation going forward because there isn't really a framework or authority in place for the government to do it.
But what I do think it indicates is that crypto is a very important part of the US economic strategy.
And I think the White House is thinking about how to incorporate not just Bitcoin, but a broad range of crypto assets into their thinking in the United States.
So certainly bullish, but I do think it leaves us more questions and answers at this time.
There are five cryptocurrencies that will be part of this reserve.
Tell us a little bit about them and why they've been chosen.
Yeah, well, I think that the president highlighted a couple of tokens that have larger market caps and some of which have founding teams who are located in the United States.
But I would emphasize that this does not mean that these are the only coins that would be considered in such a reserve.
I do think, though, you know, we're going to need to see some authorizing legislation or some more details out of the White House.
You know, I don't think this is something that they can just simply immediately implement.
I think we're going to have to have a lot more thought.
Because there have been some concerns raised, haven't there, about the five different currencies that have been included, why they've been included.
Some of people are suggesting that it's because they contributed to Donald Trump's presidential campaign.
Yeah, well, I think that there is a lot of debate going on within the crypto industry and with those outside of the crypto industry as to whether or not a reserve like this is needed.
And do you think that there is a potential for a conflict of interest?
You know, I think that's an interesting question.
I think that, you know, I think that the way that this came about was very unexpected by those in the crypto industries.
I think there are a lot of people that are trying to piece together how we came to, you know, where they were at.
But we're focused on our main priorities, and that is advancing regulatory framework through Congress and also working with the SEC here to help answer some of the questions that they've put out to the public.
It sounds like we don't know very much at all, really, at this moment.
No, I mean, I think that this really caught a lot of folk off guard when this tweet happened on Sunday morning.
But I do think, you know, it does indicate that Trump is very excited about crypto.
I know later this week, he's going to be holding a summit with leaders in the crypto industry at the White House.
This is the first meeting of its kind.
And so, you know, there's a lot of enthusiasm about making the US the crypto capital of the world.
I think we just need to make sure that we're thoughtful in how we approach the policies that we put into place so that, you know, it's something where, you know, these assets are valuable because of the intrinsic characteristics of the networks that they are part of, and not necessarily because, you
know, the government is being a purchaser of those coins.
It's very different, isn't it, Donald Trump's position on crypto compared to his predecessor, Joe Biden, who actually oversaw a crackdown on crypto due to his concerns about fraud and money laundering?
It's about as different of an approach as a person could take.
It is complete and total enthusiasm and interest, which is very different than what we had before.
And so, you know, most of that is very positive.
Every once in a while there's a surprise announcement that has people scratching their heads.
But I think, you know, the spirit and the intention is there.
And we would welcome this approach any day compared to being boxed in the corner like we were under the Biden administration.
That was Kristin Smith, the CEO of the Blockchain Association.
Peter Jankowskis, Vice President of Research and Analysis at Arbor Financial Services, is still with us.
Donald Trump said, didn't he, the first week of taking office that the policy of my administration is to support the responsible growth and use of digital assets across all sectors of the economy.
He is very pro -crypto.
Are you, as pro -crypto, I know traditional investors are or have been in the past quite concerned about the risk associated with cryptocurrencies.
I personally remain very concerned about it and I really don't plan to add it to any of our portfolios for our clients.
There are a number of concerns certainly related to the ability to secure the crypto assets, the ability to actually be able to trade them when you need to, even down to, you know, if you're holding them at an exchange, what is their legal status if the exchange goes bankrupt?
So certainly that, in my opinion, could change if regulation comes about and resolves some of those issues.
But at this point, it remains too speculative for me to approach.
And Kristen Smith, obviously, you sounded very surprised at the announcement that came, I think, via social media on Sunday, but also kind of reiterating the fact that, you know, it does need to have some robust regulation around it.
Indeed, indeed. And, you know, to a degree, the Biden administration was, you know, shying away.
There were some turf battles between various agencies as to who was going to regulate it.
So there is a need to move forward with a regulation to make it grow.
I'm not sure that the announcement of reserve currency or establishment of a reserve fund is the way to go about it.
Peter Jankowskis, it has been a very busy weekend.
It's been a very busy Monday.
Thank you very much for joining us on the programme and thank you to you for listening.
Okay, time.
