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This is World Today.
Chinese Foreign Minister Wang Yi has embarked on an official visit to Europe with scheduled stops at the EU headquarters, Germany and France.
The U .S. economy shrank in the first quarter, the first contraction in three years, and Canada rescinds its digital services tax following Washington threats.
Welcome to Road Today, a news program with a different perspective.
I'm Ge 'Anna in Beijing.
To listen to this episode again or to catch up on previous episodes, you can download our podcast by searching Road Today.
We begin today's program with Chinese Foreign Minister Wang Yi's official visit to Europe, which includes scheduled stops at the European Union headquarters, Germany and France.
China's foreign ministry says the visit comes at a critical time, underscoring the need for closer China -EU cooperation and a shared commitment to multilateralism and free trade.
China and the European Union are marking 50 years of diplomatic relations this year.
Wang Yi's agenda in Europe includes high -level strategic dialogue and meetings focused on diplomacy, security, and people -to -people exchanges.
changes. So for more on this, joining us on the line is Dr. Wang Yiwei, Rongmenet Chair Professor of Renmin University of China and a Senior Fellow in the Taihe Institute.
Thanks for joining us, Professor.
Thank you for having me here.
Professor, this year marked the 50th anniversary of diplomatic relations between China and the European Union.
According to China's Foreign Ministry, one of the goals of Foreign Minister Wang Yi's visit this time is to review the experience of the past 50 years with his counterparts in the EU.
In your view, what key lessons or unique cooperation mottos have emerged in China -EU relations over the past five decades?
Well, indeed. So this is a very important year for China and European relations.
For the lessons, key lessons, I think one of the major ones is strategic autonomy.
So both sides quite need to structure your thinking about itself and about others and about the world and we make the decisions about each other on this strategy autonomy not you know impacted by the third factor either U .S or Russia or recently currently of the Ukraine issue so that's I think the most important lesson otherwise not to respect each other now some you mentioned about a cooperation I think China, US, European Union are the three major players of economic globalization.
US as innovation power.
Europe as a normative power.
China as a marketing power.
So this is a quite healthy and cooperative model to run the economic globalization.
However, in recent years the US is more you know highlights of the capital and the technology innovation driven China we say China's market economy with Chinese characteristics European Union we say the social market economy so China and the European Union pursue the market economy more focus on the people particularly for the users of the technology which is different The U .S. is more focused on the capital -driven for the innovator.
So I think this is very crucial for the world to come to more justice.
Professor, as you mentioned, we are today facing rising unilateralism and a growing instability on the global stage.
Multilateral cooperation faces increasing challenges.
So how can China and the EU leverage their strategic dialogue to reinforce their role as a stabilizing force in a turbulent world?
Well, last March, the two sessions, the press conference, Foreign Minister Wang Yi, I think, in two sentences to identify this significance of the China -EU cooperation.
I quote in his word, in today's world as long as China and Europe engage in mutually beneficial cooperation, no attempt to create a bloc confrontation will succeed.
As long as China and Europe stay committed to openness and win -win, deglobalization will not prevail.
End of the quote. So that means in the economic globalization and the multipolar world, the European Union is crucial for China's partnership.
Speaking of that, the European Union has recently signaled a more pragmatic approach toward China while Beijing continues to stress the importance of consolidating the partnership.
What might this shift in tone from the EU indicate for the future of China -EU relations?
Well, there are different perceptions of identification to each other.
As the European Union recently identified China as a three identities, economic or diplomatic partner, and also economic competitor, maybe technology competitor.
And then systematic rival, which criticized of course by Prime Minister Wang Yi said, if you are the driver, there are the red line, the green line and the yellow line, how you drive.
So, in Chinese we say that there is only one light – the green light.
It is good for driving the Chinese -European relations.
So, in recent years, I think the European Union identified China as a supply chain at the de -risk.
Actually, it is not a trusted partner anymore.
more and you know industrial chain they call is a systematic because the China is mostly completed the categories of the UN industrial assistant so this is called systematic and also in a global value chain the content of a identify China as a rival that means Chinese innovation technology cut but you know European Union even in some areas including AI will be a bypass of the the European Union.
So China and the European Union, their relationship is not complementary but also competitor even rival.
So that's a European Union to identify.
Recently I was very concerned about China's so -called rare earth because China we have our own expert of the control of the law and then European Union, very worried about that depends on China's market.
Actually during the the COVID, after the Ukraine -Russia conflict, this average of China's supply chains was more serious and then caused some troubles between China and the European mutual trust. Professor, as you earlier mentioned, the United States tries to tighten its economic alignment with Europe through the Inflation Reduction Act and the Chips and Science Act.
So do you think China and the EU can develop closer coordination in resisting economic coercion and technological containment?
Well, the China -European relations are always in a dilemma of the how to be, ought to be.
Of course facing Trump's trade war launched not to China but also to the European Union because it's two major players in the economic globalization.
So we need United united to uh support of the WTO and free trade right just principally we need to work together however the lack of mutual trust because of the security level uh the European Union is more depends on United States uh so the reason the NATO Summit the Europeans try the best to please President Trump even at the cost of the channel so that's a number one uh limitation limitation.
Number two, the European Union think about the China and the U .S. economic relations are quite different.
For the Europeans with the relations with the U .S., Europeans is a seller.
They have more trade surplus with United States.
With the relations with China, they are buyer.
They have their trade deficit from China.
So they think about even the both they're major trade partner for the European Union.
However U .S. and China there are different logic just unfortunately make our relations and not cooperate so well even some technology that do use so european union again is another structured autonomy in this regard then given what having said during his european tour minister wang yi will hold bilateral meetings in germany and france 2k partners in the region in your opinion what outcomes do you expect from these bilateral meetings?
Well, Germany and France, two major players of the European Union.
We think about the China -European relations need to both emphasize multilateral.
That means European unions, organizations, European Commission, European Council, European Parliament or whatever.
But at the same time, we need to pay more attention to the major power relations like China and France and China -Germany.
So that's Mr. Wang Yi's visit.
I think it's, of course, for strategic and security dialogue with France and Germany.
Of course, we'll talk about the Ukraine and the recent Middle East, Israel -Iran confrontation.
And originally, there's a very bad scenario that the Baltic countries, including also Poland and even Finland, The Quait -Ottawa Treaty, that's the anti -personal manners, that means if in the future the NATO can portrait more manners in those territories, the confrontation with Russia will be more casualty.
Speaking of that, what positions or constructive proposals might China put forward during this visit, as Wang Yi is expected to discuss a range of international issues with the EU EU leaders, including what you have just pointed out, the situations in Iran and Ukraine.
I think China and the European Union are the major supporters of the UN system, a multilateral world, and also multilateralism.
Firstly, we need UN nations to contain the illegal attack to the Iranian nuclear facilities, which are definitely violent of the Geneva Convention you cannot attack any nuclear facilities and this is the cause of a dangerous and also we also persuade Iran not created the mpt non -proliferation treaty then it is him with the IAEA to back to Iran and also think of the piece of talk like six plus one as the talks with Iran, nuclear issues will continue.
So that's a very important diplomatic solution.
Not any war or attack can never solve this problem.
And of course about Ukraine, you cannot go backward on the world.
The world after World War II, will make huge progress to lift the casualty, even the war, the more civilized confrontation.
But now it's more brutal, the confrontation, This is the strategy.
So China and the European Union should work together to make sure the UN system is still running.
Thanks, Professor. Truly appreciate the clarity and depth of your analysis.
That was Dr. Wang Yiwei, Jean Monnet Chair Professor of Renmed University of China and a senior fellow of Taihe Institute.
This is World Today.
Stay with us. The U .S. economy shrank in the first quarter, the first contraction in three years, according to the Commerce Department.
The country's GDP fell at an annual rate of 0 .5 percent, mainly due to weak consumer spending.
At the same time, a surge in imports reflected companies companies rushing to stock up ahead of Trump -era tariffs.
If this is a temporary dip or a sign of deeper trouble, and how is trade policy influencing business and consumer behavior?
For more on this, my colleague Zhao Yang spoke with Yan Liang, professor of economics at Willamette University.
So Yan, the U .S. economy shrank by 0 .5 percent in the first quarter of this year, and this is worse than earlier estimates.
So what do you think are the main factors behind this?
Well, for the first quarter I think there are two main factors that drive the U .S. economy.
One is the federal government spending.
It has gone down by over 5 percent.
And second is a surge in the imports.
So we know that in the first quarter the DOJ, which is the Department of Government Efficiency, has slashed many government programs and cut government contracts.
And so that reduced federal government spending, and so that dragged on the economy.
And second is that in anticipation of Trump's Liberation Day tariff, many importers front -load their imports, and so imports actually have gone up by 37 .9 % in the first quarter, and that also is a drag on the GDP growth.
And adding to that, I think consumer sentiment was quite low, and business investment, even though it was quite high, but it's largely due to the inventory increase due to the front -loading.
So all of this factor together, it contributed to the contraction of the GDP by 0 .5%, as you just mentioned.
And consumer spending also slowed sharply, expanding just 0 .5%.
So how do you explain this, you know, the U .S. consumer sentiment?
Well, I think the U .S. sentiment was basically weakened due to some of the policy uncertainties.
So as I mentioned earlier, the doge that has been cutting government programs and reducing government jobs, all of this would have impacts on the broader economy.
And I think on top of that, there is a lot of uncertainties when it comes to trade situations, as you remember that Trump announced the liberation day, the so -called reciprocal tariffs.
And after that, there are many rounds of pause and negotiations.
And so there's a lot of uncertainties on businesses.
And so what that means is that business sentiment is being weakened and they reduce their expansion, reduce their job creation.
And so all of this would then drag down the consumer sentiment.
Not to mention, I think this idea of high import tariffs could add to cost of imports and therefore cost of living.
And so that again would incentivize consumers to cut their spending.
So we have seen, you know, many, for example, the Michigan University's consumer sentiment survey and other consumer surveys.
And all of these surveys show that consumer sentiment was down quite drastically.
And so I think that is not conducive to the U .S. economy because the U .S. economy is so much rely on reliant on consumer spending growth.
And the U .S. GDP shrunk by half a percent.
This is worse than estimated and also largely over consumer spending.
But we also look at the stock market, the NASDAQ and S &P chasing record highs.
So why is there such a big divergence?
Right. So I think the stock market performance in some ways is detached from the broader economy.
And one of the reasons is we know that the U .S. has achieved certain technological innovations, especially in the AI and the related industries.
And as we know, the so -called magnificent seven, the seven top tech companies, they account for over one third of the S &P 500 market capitalization.
So that means when there is a technological push, these companies are investing, their stock performance is doing well, and that really boosts the entire market.
But that said, I think there are some concerns.
One is that whether or not this whole AI wave is overhipped or not.
I think that is an open question because we know that China has been a very strong competitor in the AI space.
So whether or not the U .S. companies can keep the lead role is an open question.
But then also whether or not the AI can be really adopted and widely used and boost the economic growth, that is a separate question.
So, there's always the question about whether or not the stock market performance of the Magnificent 7 is overestimated.
And also, the U .S.'s, right now, the forward P .E.
ratio is very high, and so that also poses a question about whether or not the stock market performance can be sustainable.
But I think the second important question is also, given the fact that ten percent of of the wealthiest Americans own over 90 % of the stock market shares.
And so what that means is that a booming stock market doesn't necessarily provide widespread benefits for the great majority of Americans.
So you see this interesting and very concerning bifurcation that on the one hand you have a booming stock market.
And yet on the other hand the real economy shrank as you just mentioned the first quarter and consumer sentiment is low, unemployment is looking, it's worsening.
So all of these, I think, is really showing that a booming stock market, the financial sector, doesn't necessarily benefit the great majority of the real economy.
And the Federal Reserve Chairman, Jerome Powell, said the business built inventories early to cushion the impact of the tariffs.
So how effective do you think this strategy has been?
And could the short -term boost from the pre -tariff imports actually mask the long -term risks to, you know, supply chains and price instability?
Well, I think this is really just a short -term makeshift. You're right that, you know, we're not seeing very high inflation rate in the U .S. We're not seeing too much of a disruption in the supply chain just yet, but I think these things will trickle into the economy.
We see that in May of 2025, just last month, the headline CPI is the annual increase of 2 .4%, a month -to -month increase by 0 .1%.
So it is, you know, in a way, it's not a desirable direction because it's an increase rather than a decrease.
You know, that means the Fed is not quite achieving its 2%, you know, inflation target yet, and I think that would pose some pressure for the Fed to lower the rate.
Some of the, you know, the Fed's internal debate is whether or not the Fed will start to lower the interest rate in July.
But now I think it's increasingly uncertain and unclear.
So yes, we, you know, we see that the businesses are, you know, front -loading imports to build up inventory to cushion, you know, the supply chain disruptions and the tariff impacts.
We're also seeing some of the companies are willing to take on some hit on their profits to not to pass you know the higher tariff cost onto prices simply because right now the tariff situation is very fluid.
We still don't know whether or not the tariff pause will be resumed or you know what it's going to come out after the pause period.
So I think business is still holding up for the moment.
Try not to disrupt too much of the prices.
And last but not the least we're also seeing you know companies taking taking advantage of some of the rupals um and trying to you know load their goods into some of the uh bonded warehouses instead of directly putting the market for the moment to avoid you know extra tariffs so the effective tariff rate right now in the us is only about 10 percent rather than the 15 percent um as the statutory uh the the rate indicates um but all of this again are just may shifts um you know once the tariff situation uh if it's not resolved after the pause then it's likely the tariff rate is going to go up and so that is going
to disrupt the supply chain as businesses would want to you know find alternative suppliers um you know the higher tariff costs would also be factored into prices and so eventually this could affect uh prices and inflation um for you know for later of this year and joe powell basically saying that starting in summer were likely to see price to go up And what do you think are the potential risks for the U .S. economy for the rest of the year?
And we've seen that the U .S. economy shrank by 0 .5 percent in the first quarter, while China's first quarter GDP was up 5 .4 percent.
So how do you explain that?
Well, I think for the U .S., the major risks have to do with, again, the tariff situation, but also it has to do with some of Trump's policies.
Again, he has been very unpredictable He has been rolling out very erratic policies.
And right now, this one big, beautiful bill, a major budget plan is being passed, and that would also have tremendous impact on the economy.
On the one hand, I think the tax cut may help to stimulate the economy to some degree, but at the same time, a lot of spending cuts, especially on some of the central public services like Medicaid, that is going to, again, reduce a lot of the growth momentum.
Not to mention I think there's a lot of concerns also about the implication on the U .S. national debt that is likely to grow by $3 trillion by 2035 due to this bill.
So those are really the major uncertainties.
But, at the same time, I think we also see that the U .S. is being affected by its own tariff.
In May, the U .S.'s exports had gone down by 5 .1%.
So, you know, that on top of the sluggish consumer spending and also business uncertainties, all these are going to weigh on the U .S. economy, even though now there are some, you know, for example, Atlanta Fed has forecasted the second quarter of the U .S. growth rate is going to be higher.
But that situation is still very fluid.
For example, they just forecasted that as of June 27 that they say the US annual growth rate for the second quarter is going to be 2 .9 percent, which is a downgrade of their earlier – on June 18th, when they estimated the growth rate would be 3 .4 percent.
So again, things are still very fluid.
And I think for China, we see the resilience of the economy, largely thanks to I think a lot of policy support, but also very strong still export growth.
You know, the export to the US has gone down, but export to other parts of the world, to the Southeast Asian economies, to Africa, to Latin America, to Europe, have gone up to offset the decline in trade to the US.
So I think it just shows that the Chinese economy is well, you know, is quite resilient, supported by a lot of policy stimulus, but also still quite strong export performance.
That was Yan Liang, professor of economics at Willamette University.
You're listening to Road Today.
We'll be back after a short break.
You've been listening to Road Today with Meaga Anna in Beijing.
We begin the second half with a look at Trump's latest economic pitch, the big beautiful bill that stirred a sharp debate on Capitol Hill.
U .S. Senate Republicans have narrowly advanced President Donald Trump's sweeping tax and spending proposal, also known as the One Big Beautiful Bill.
The over -900 -page package extends nearly $4 trillion in Trump -era tax cut, adds new exemptions and increases funding for broader enforcement.
But it also includes controversial cuts to Medicaid, food stamps and green energy subsidies.
Critics warn it would deepen the U .S. deficit and hurt vulnerable communities.
A final Senate vote is expected soon.
So to delve into this, let's have Professor Chu Qiang, fellow of the Belt and Road Research Center at Minzu University of China.
Professor, the big and beautiful act is described as a continuation and upgrade of the tax cuts from Trump's first term.
But the bill also proposes major cuts to So who do you think will ultimately benefit from this combination of tax cuts and reduced welfare spending?
And what long -term effects might it have on income inequality and stability of the U .S. social safety net?
Well, I think this is very obvious.
If you understand what's happening about 60 years ago, well, according to Chinese philosophy, every 60 years is one jiazi.
And one Jadza means one circle of human society, and also 60 years ago, we've been seeing very similar background like Reaganism, like the Satchelism, and this has been happening.
So this is just another version after 60 years about the Reaganism, the liberalized fiscal policies to so -called release the vitality of the whole society.
So, if you're talking about the beneficiaries, about the BBB, well, I'm going to say the high -income group and the bigger enterprises will be the major beneficiaries.
According to the analyze about major think tanks, well, in America, if your annual income is more than $1 million, and you're probably going to enjoy more than 25 % of the tax cut.
And basically over 68 % of the tax favorable conditions will flow into the income groups who is going to earn more than a quarter million a year.
So basically the cost would be the health care, the health aid or like the food kitchen, that kind of the social program will be directly cut.
So, yes, the loser will be low - and middle -income groups.
They are going to face lots and lots of problems in their food, in their education, in their health care.
So basically, the Obamacare and that kind of a period of time, the social relief packages will be major – we're going to be the major victims and be cutted.
So I think in the long run, we're going to see this kind of the combination by BBB is going to increase the social income gap and make the equality and the social fairness is going to be much more compromised.
So it's going to be a instability situation happening.
happening. Professor, another key feature of this bill is rollback of Biden administration's green subsidies and a sharp increase in the debt ceiling by $5 trillion.
Moves that have drawn criticism of many.
Elon Musk has warned that such a move could bankrupt America.
So how do you interpret this critic in light of the bill's shift in energy policy and fiscal direction?
action. Does the legislation reflect a political logic that prioritizes short -term gains over long -term sustainability?
Well, a lot of people are saying that, yes, indeed.
First of all, I would like to say this comment is very, very true, because as one of the largest oil guzzlers or energy guzzlers, the average per capita energy consumption in the highest nation which is the united states of america if they decided not to go green i mean the whole world progress in a green development and climate change you know will be compromised that's for sure because if i use most of the energy and i decided to go dirty on traditional energy come on how many emerging market how many at least a developing nation need to save their energy to come to you know compared to this kind
of a loss uh like when american try to quit the green group so this is going to be a very very huge disaster towards those uh you know green development but i think that is just one you know bad consequences of this kind of policy a lot of people probably missed a very important part of this picture that is why trump decided not go go green a lot of people are saying okay because trump want to you know uh reignite american traditional energy sector uh drill drill and a drill uh try to release the wealth and energy in the traditional energy sectors because america has shell gas american has lots
of the oil reserve well i don't think they they really catch the point the point is you have to understand And traditional energy sectors means more centralized power because if you can drill the oil and the gas or translating into more of the money, more of the fiscal power by only incorporating with the son of the tycoons or son of the chavos in this area, then you don't need democracy.
But green energy is a totally different sector, even though green energy and traditional energy are both energy sectors.
but green energy means technology means collaboration with many parties it means this is a manufacturing this is a technology sector but traditional energy sector is basically monopoly you don't need need to work with many people you don't need to use people's brain power you just need to you know hoard some of the drilling sites some of the mining site and then then you can earn the money.
So no demographic, there's no democracy process what we get involved in.
Thanks, Professor, for the clarity.
Professor, please help us understand here.
According to estimates, the bill proposes 4 trillion U .S. dollar in tax cuts over the next decade alongside a comparable increase in federal debt.
Meanwhile, the U .S. economy has already recorded an active growth in the first quarter.
In this context, is there an inherent contradiction in the economic logic behind this policy mix?
And how might it impact everyday Americans in areas such as employment, inflation, or access to public services?
Well, you know, the key point of Reaganism or the liberalism is basically everybody on their own.
You, well, the government will Well, step back, and the government will stop spending a large lump sum of money, and then you earn your own money, and then we don't tax you, and then you have more money back in your own pocket.
You decided where to spend it and how you spend it.
It looks like a very fair and a reasonable arrangement for sure.
Well, in the classic economics, well, like 100 years ago, yeah, it does work.
It did work. But in the current economics or in a current technology slash social conditions, it's probably not the same case because the whole growth model can be very, very different, which means certain very large companies like the oil companies, like the technology companies, they will have so much of the favorable conditions.
a normal daily American families no matter how hard you work you cannot you know become the you know you cannot become like them you cannot that easily to change your own living standard so even though tax cut can put back more of the cash back into your pocket but what's the cost you have to ask the same question the cost is that american government right now are cutting down many budget in many social welfare projects for example you're cutting uh you're cutting the health care you're cutting the supplementary nutrition assistant to program the snap you're cutting uh you know the health care or the obama care for at least
7 .6 million of people letting alone this deal is also cutting Cutting down the student mortgage subsidization program and also the IRA, the Inflation Reduction Act, are also being canceled as well as for the green energy is also – this kind of the subsidy are also being compromised as well.
And more than that, I think something Trump really paid attention to like the border control, like the defense spending are also being compromised as well.
Meanwhile, more of the budget ceiling has been raised.
For example, $4 trillion debt ceiling will be raised, which means the federal government will take over more of the debt and the fiscal health for the federal government will be further worsened.
Professor, amid growing tensions, the Democratic Party has resorted to procedural tactics, such as forcing a full rating of the 940 -page bill to delay its passage.
What does this say about the current state of partisan confrontation in U .S. politics?
And how has this kind of opposition, for the sake of opposition, eroded the effectiveness of American governance today?
Well, I think right now American politics is basically in the mess.
This big, beautiful bill and their confrontation on this bill is basically, well, something decent.
And talking about indecent confrontations, if I take a look at the lawsuit going on recently, the lawsuits against the birthright, lawsuit against immigrants, so -called illegal immigrants, the lawsuit against the federalization of the state troopers and all this.
And all this is going on for quite a while in a federal judge level, in a state judge level, in local DA level.
There are so many lawsuits going on between the two parties.
It looks like they're doing a legal thing, but basically they're just a bipartisan conflict in the disguise of the lawsuit.
So I think the Democratic Party right now are losing their dynamics.
Well, if I take a look at the Democratic Party, who is the real deal leaders?
If I take a look at the national comedy, you see the chairman is not leading the Democratic Party.
But also if you go to the federal, sorry, if you go to state level, is Newsom the leader?
Is the mayor of New York the leader?
The mayor of Boston the leader?
no nobody is really leading the democratic party uh or the popular list like the uh the bernie sanders if like aoc are they the leader no they're not representing the democratic party and no one actually have enough of the voting for their platform in the future so right now i would like to say democratic party is like the box of the sand it looks like just one pile but they're not forming like a rock -solid heart.
That was Professor Chu Qiang from Minzu University of China.
Canada is shelving its proposed digital services tax in a bid to restart trade talks with the United States.
The move comes after U .S. President Donald Trump halted all trade negotiations and threatened new tariffs in response to the plan.
The proposed tax would have cost American tech giants an estimated $2 billion annually.
Canada Finance Ministry says both sides now aim to resume talks and reach a deal within the next three weeks.
So for more on this, let's have Andy Mock, tech analyst and senior research fellow at the Center for China and Globalization.
Thanks for joining us, Andy.
My pleasure as always, Guyana.
Andy, Canada had long insisted on implementing a digital services tax, but recently reversed the course and announced its cancellation.
Do you believe this policy shift was primarily driven by U .S. pressure, especially the threat to terminate all trade discussions, or were there other factors at play?
Well, you may regret asking me this question because taxes are one of the most complex, but also for most people, very boring questions.
But let me start off by saying from a political perspective, the simplistic answer, which is not completely incorrect, is that absolutely the U .S. was able to pressure, able to bully Canada into knuckling under and abandoning its digital services tax.
And why is this possible?
So Canada is about one -tenth of the economic size of the United States, 40 million population compared to more than 300 million in the US, extremely dependent on the American market for exports.
And not to speak of, you know, there's no comparison militarily as well.
So clearly, the U .S. was able to coerce Canada into backing down.
And to me, this is the classic example of Thucydides saying that the powerful do what they can and the weak suffer what they must. And here in this situation, I think Canada is the weaker party and had to back down.
Now, what does this sudden reversal from Canada tell us about the current state of US -Canada relations?
Well, so here it gets a little bit more complicated.
I hate to do this to you in our audience, but I think it's important to understand this.
So this digital services tax is a 3 % tax on the revenue of big tech. And it also is happening in parallel with what the OECD is doing with its so -called Pillar One deal that essentially is just a way to allocate tax revenues of the biggest corporations in the world more equitably amongst different countries.
So from the U .S. perspective, they see Canada violating an agreement that they made with the OECD to not implement a digital services tax while negotiations were going on with this so -called Pillar One effort to tax corporations more equitably.
So the U .S. feels very justified in doing this.
And so from a U .S.-Canada relationship perspective, I think the U .S. believes it is acting proportionately, even reasonably, to protect the interests of its businesses.
Of course, most of these big tech companies are American, but also to act as a kind of an enforcer to prevent this kind of behavior.
Now, I think the Canadians might see it differently and clearly the way this was done in a very heavy handed and I think also a coercive way, certainly I don't think has gone down well with the Canadians and certainly I think causes concern among other countries around the world, particularly those in Europe.
Andy, could you please elaborate more on this?
If implemented, what impact would the tax have had on major U .S. tech companies such as Amazon, Apple, Google, META, etc., both in terms of operations and broader U .S.-Canada economic relations?
Well, here's the thing.
You know, it would have minimal impact.
I did a quick calculation, and I think the revenue that this represents for these big tech companies alphabet meta amazon apple etc is less than 0 .1 percent so i think it's something like what 7 billion canadian uh which is you know a retroactive tax so in absolute terms it may sound like a big number um but as a percentage of revenues to uh these tech companies it really is minuscule so i think again from the u .s perspective um you know they might argue it's It's the principle of the matter, but they're also setting an example.
So in Chinese, there's a saying you kill the chicken to scare the monkeys.
Right. And I think the U .S. might be concerned that if Canada could get away with this, maybe other countries would try something similar.
So I don't think it has a very big direct impact on these tech companies.
And if we look at the digital services tax from its initial proposal in 2020 to its formal passage in 2024, and now to its cancellation, Canada's digital services tax has gone through a series of twists and turns.
How have political parties and industry groups within Canada shifted their stance on the DST during this process?
And how did those evolving positions influence the final policy decision?
And is the future trade talk with the United States?
Well, I think, again, here what we can see are some of the structural weaknesses of Western democracies, Guyana.
So, you know, so the principle of it, you know, seems very reasonable.
So companies should pay their fair share.
So these big tech companies are generating revenue in Canada.
They should pay some taxes in Canada.
But I think what happened and, you know, here people can get carried away is that this, of course, I think garnered enormous popular support.
And this is, I think, what drove a lot of this, which, again, led to this collision between Canada and the U .S. And then I think, again, unfortunately resulted in a very public display of Canada being the weaker party here.
So, you know, I think we see, again, you know, reasonable motivations, but again, maybe politicians in Western democracies sometimes getting carried away by populist sentiment.
And, you know, this may be one example.
the pool. Andy, Canada's decision to cancel the DST is widely seen as an effort to move trade negotiations with the United States forward. So looking ahead, beyond the digital services tax issue, what other key topics do you expect to dominate U .S.-Canada trade talks?
And do you think Canada will maintain a tough stance on certain issues to protect its domestic industries?
Well, let me start with the last part of your question.
I think it's going to be extremely difficult, if not impossible, for Canada to maintain a tough stance against the United States.
Again, we look at just the difference in economic size, population.
We look at the dependence of Canada on the U .S. market as an export market.
So it's going to be very, very difficult.
You know, I think that, you know, some of the issues.
So the US looks to Canada for oil imports, some rare earth elements as well.
I think what the US has been unhappy with is market access in Canada.
And so we have to see.
And, you know, obviously, there's a political overlay here as well in that, you know, Trump multiple times, sometimes jokingly, sometimes seemingly seriously says that Canada should become a part of the United States.
And even in some planning documents, you know, there's been some talk of how this could happen, you know, if there were a referendum in Alberta, etc. etc. So I think, again, this is going to be a difficult situation for the Canadians.
And it's hard to see how they will have the the ability to stand firm against any demands that the U .S. might have. And here I think it's important to point out the U .S. just overwhelms Canada economically, militarily.
But at the same time, it will pay a diplomatic cost, even a domestic political cost and an economic cost if it goes too far.
So I think this is perhaps one constraint on the ability of the U .S. to press its overwhelming superiority in too aggressive a fashion.
Thanks, Andy. Really appreciate your thoughtful analysis.
That was Andy Mock, tech analyst and senior research fellow at the Center for China and Globalization.
A prominent British entrepreneur says his first -ever visit to China has been a catalyst for building global trust and dialogue.
blog. Daniel Sakhani, named by Business Insider as one of the 100 most influential people shaping UK tech, shares his impressions of China and his mission to promote international cooperation.
Speaking with my colleague Xue Awen, Sakhani says he sees strong alignment between his newly launched non -profit, Abraham House, and China's value of harmony and mutual to respect.
This is your first visit to China and also your first time in Tianjin, right?
So how has your overall experience been so far?
Yeah, I have to say genuinely that China truly humbled me.
From the moment I arrived, I've been struck not only by the scale and sophistication of the cities you have, but also by the grace and warmth of the hospitality of the people.
Tianjin in particular particular, has left a deep imprint on me.
It's a city of vision, but also of heart, is what I would say.
About the exchange with the mayor of Tianjin, it wasn't just diplomatic, it was deeply human.
We spoke not as East and West, but as two people committed to a more inclusive and harmonious future.
I think that's really important.
And we discussed the idea that access to dialogue is the foundation to peace.
And it really resonated with what the Premier also said in his address to the World Economic Forum.
That conversation for me reaffirmed everything I believe, that despite what divides us geopolitically, face -to -face, we ultimately want the same things.
We want dignity, we want opportunity in life, and a better life for the next generation.
So how it summarized that in a world where often is polarized by headlines, I have found something that transcends politics and that's shared values.
Well, it seems like you had a very positive and personal experience in China so far, which contrasts with how the country is sometimes portrayed in some Western media.
So how important is it for people like yourself to experience China firsthand and then share those impressions with others who had never set foot in the country and only know about it through their media?
Look, I think the question you're asking is extremely important.
It's a question that should be asked of any country when people are nervous or they're not sure, right?
So if you think that the truth cannot always be frankly translated through pixels and paragraphs you read in the media, it must be felt, it must be lived, and it must be real time.
And this is why for me coming to China, actually seeing it, actually listening and being present is not just important, and I think it's essential for anyone.
I also would say that if we want a world less defined by suspicion and more shaped by understanding.
We need to be more storytellers.
We need to tell stories.
And we have walked the streets, we've shared a meal with each other, we've looked each other in the eyes, and we've called each other.
I think that empathy spreads and that's how trust begins.
I often say to my colleagues, my workforce, and the teams that data informs, but presence transforms. This is important, and China of experience is not only one aspect of how the Western narratives paint it.
It is a vibrant, curious, ambitious, and country -filled world striving for harmony and innovation.
And this is what I would say to your listeners and to the broader global community.
Let's turn to Abraham House, the initiative you launched at the World Economic Forum not long ago in January this year.
It aims to promote global dialogue, as you also just touched upon, and also connect changemakers.
occurs. So tell us what inspired you to launch this organization.
It's an interesting question and been through ups and downs with myself and my co -founder, Jennifer Broglie started this initiative.
I wrote to at the time, Klaus Schwab, the founder of the World Aquatic Forum, I set out his vision for creating Abraham House and he very kindly responded and supported and endorsed the idea.
And that's where I started on this journey.
Abraham House was born of a very simple but urgent truth.
And that is the world is too divided, my friend, yet the solutions we seek truly must be created together.
And so we launched the World Economic Forum, as you say, in January 2025, as a global platform to unite leaders, but people, purpose and peace above politics and profit.
And so I see a powerful alignment between the spirit of Abraham House and the Chinese values.
Why? Because particularly this idea of shared values for mankind.
In your culture, you have very specific sayings, you know, about harmony.
And I hear what echoes of what we call in Abraham House, independence with dignity.
For me, this is really important.
So our work is about human flourishing, financial, emotional, spiritual.
We build systems and importantly, we build trust. Trust is one of the biggest things we found at Harvard is lacking in the world today.
And so China and I found with my visit here, not only an appetite to innovation, but also a soul level yearning to contribute to global balance and shared prosperity.
And that was actually the title of our summit, Shared Prosperity and Peace and Prosperity.
When you have opportunity in life, you give people opportunity in life.
They have hope. When you have purpose, you want to get up in the morning and I think that's the most important thing for the next generation and every other human being on this planet and I think sadly where we are today is in a very fragmented world where there's no dialogue so we create a safe space for that dialogue and dialogue is the only way we're going to resolve things and I think the premier spoke to this so articulately in the stage where he talked about we don't force people to do things but we share trusted values and that's how we build great relationships business should be done
because it's enjoyable and two people want to work together and so I see the opportunity between China and the rest of the world if you you look at what happens in the US, you put what happens in China, that's 90 % of what's going to happen on the globe in many respects from an economical perspective, right?
So this is like having a single parent.
You can't have one without the other.
China needs the US, US needs the China.
This is a critical bit I want to get across to the viewers today.
You speak about opportunities.
So how do you see maybe some opportunities for your organization to collaborate with Chinese institutions?
If so, in which areas or sectors?
Yeah, it's a great question.
We actually actually focusing on many things from education.
How do you inspire the next generation?
Because education is a fundamental aspect today in the world.
So to the problems we're seeing today, if we educate the next generation now, we're actually preparing ourselves for the next generation.
And famously, Warren Buffett says, you plant a tree today because you want to sit in the shade in 30, 40 years time, right?
So this is a really important point.
So I want to go back to the point about what Abraham House is doing.
It's education, financial dignity.
I created a a company called Salary Finance.
I co -founded it with Ashish and Dan Cobley, who ran Google UK.
We took it into America, and it's been tremendously successful, but it's given people financial dignity.
And so that's a really important thing, giving people access to financial dignity, the right tools to be able to make informed decisions, can make as much as $1 .6 million impact on their lifetime earnings, making the wrong financial decisions.
And this is what I spoke about as a new champion at the World Economic Forum.
And so this goes back to the principle of what are the biggest things and themes that we can address in the world today, that will have scalable impact, measurable impact and sustainable as initiatives.
And that's effectively what we've been doing across the various programs we've been running.
So when nations stop talking, the world stops healing, my friend.
And platforms like Summer Davos are not just policy stages, actually they're bridges for trust. And in this area of AI, climate destruction and widening inequality, trust is the new global currency.
So what works best in my experience, and this is what Abram House is trying to do, and this is why I was so excited to come here for the first time.
And if it wasn't for the WEF, I would never have come here.
In my experience, it's not just about panels and speeches, but intentional spaces where people can meet without fear of judgment.
So my concluding comment there would be, believe strongly in what I call trust exchanges.
You know, faith in dialogue as opposed to faith in terms of religious belief is critical, because as faith can divide us or it brings us together.
But what we know is the critical factor that leads to successful relationships in business or personal is the values.
And the values of the Chinese people are very much about respect, being thoughtful, how you engage, you know, the way that people present themselves is extremely important.
So this is what we're creating spaces where China, the US, Africa, Europe and the Middle East can share not just strategies and stories, but there's real diplomacy happens and how peace is built ultimately in the the world is not through noise, but through listening with the intent to understand both sides.
Right. And so this is why I'm so excited to be here.
I believe the future can be bright, but it's only as bright as the people who are partaking in making it happen.
That was Daniel Shahani speaking with my colleague, Xu Yaowen.
That's all the time for this edition of World Today with Mika Anna in Beijing.
Bye for now.
