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Hello and welcome to World Business Report here on the BBC World Service.
I'm Rahul Tandon. Plenty coming up on this edition.
We'll look at why defeat for one of the world's most popular football clubs in the world could be dire for its bank balance, why it's game over for those looking to block one of the biggest ever mergers in the gaming sector, but we are going to start the program by talking about President Trump's tax cutting plan, which was of course passed by the House of Representatives on Thursday morning.
It will now of course be debated in the Senate, which also has a republic majority.
And that may decide to amend some of the elements of the bill.
But what's in it at the moment?
Erin Delmore is our North America business correspondent.
It's a huge moment for Republicans, right, but at the same time now it heads to the Senate where surely it will be marked up again and changed again.
President Trump is trying to use all of this momentum right now urging senators to get this bill onto his desk so he can sign it as soon as possible.
Remember, this is the big hulking 1 ,000 plus page bill that he's calling one big beautiful bill.
And it wraps up so many of his priorities that he campaigned on, whether that's tax cuts or border security, or in order to win over hardline conservatives who wanted to see spending cut down, it does make cuts to programs that largely benefit the lowest income Americans, like Medicaid and food stamps.
President Trump says that this bill will help grow the economy by 5 .2 % in the short term.
Jeff Braben is the vice president of federal government relations at the National Federation of Independent Businesses.
I think for small business, it's a great bill.
The scary thing for about 33 million U .S. small businesses was that at the end of the year, if this bill doesn't become long, Congress doesn't do anything.
they're looking at significant tax increase.
And the reason is, is that the marginal rates, those are all scheduled to go up next year.
I would say in this bill, Congress is certainly tilting it in the favour of small business.
If there are general tax cuts in society, particularly to income, that can mean that people have more money to spend.
Are you hoping that will lead to more growth in the US economy then?
Yeah, absolutely. Generally speaking, we're gonna see significant growth in in GDP and in jobs in the small business sector it makes up almost half of the economy in terms of employment and GDP so those are things we certainly anticipate there's other ways to to juice economic growth another provision that's we think important in the bill that's called section 179 expensing and you know what that that just sounds like letters and numbers basically what that means is if you're a small business and you purchase a piece of equipment that means you could write the whole thing off in the first year
and when you have that they're going to increase the 179 expensing from one and a quarter million to two and a half million dollars.
So any equipment worth less two and a half million dollars you could write off in year one is a great thing for small business owners.
And it's something where it's going to encourage them to expand their footprint as a business.
And when they buy that piece of equipment, they're usually going to buy it from another business.
And it has a significant effect throughout the whole small business economy.
Are you worried? Of course, the next stage is getting it through the Senate, that this bill may be watered down a lot to get through the Senate, it only just managed to get through the first stage.
It'll be interesting what happens in the Senate, I like to think on business tax provisions, the House and Senate are fairly close.
I wouldn't anticipate the Senate going after any significant small business changes.
Just because I don't expect it to happen doesn't mean it won't happen that we're going to be vigilant about this.
If there's one thing I know about the US Senate, it does not like being rolled by the US House.
There are some people who fear that because of this bill, the deficit, the amount of money, the debt that the US has is going to increase and that is eventually going to tip the economy into recession?
Yeah, we hear those folks.
I can tell you small business owners just asking to keep a few more extra dollars of their own.
The alternative is that almost every wage earner in America was going to see a significant tax hike next year.
So most small business owners will tell you that they are taxed enough right now and increasing their taxes isn't to help the deficits if we don't do anything on the spending side.
So I think most small business organizations I represent are very concerned about the deficits, but they don't believe that just increasing business taxes year over year is going to solve that issue.
Geoff Braben there, let's bring in Kerry Leahy, economist at Columbia University, they like that budget that if it goes through, but many others are going to look at this and say, this is going to be bad for the economy in the long term, because that debt is just getting bigger and bigger and bigger.
Well, that's right, and interest on the public debt Debt is already one out of every $7 in the federal budget and is expected to increase dramatically and double over the next 20 to 30 years, so we're now spending more money to pay off the debt than we are on national defense, which is certainly another key program out there.
So, the numbers are not favorable.
Now, it is true that people have been worried about this for as long as I've been a practicing economists but you are now at rates of GDP where sovereign debt is so high one cannot ignore it and it's just a question of when the bond market will for more than just one day.
Well you've led us on beautifully there, Karen, you've been an economist for a long time to the next bit of this story.
Martha Gimbel is executive director and co -founder of the budget lab at Yale, a think -tank which analyses the impact of federal policy on the US economy.
The numbers don't make sense.
And you know what, you can make up whatever numbers you want, you can have me on, you can have other people on.
But you cannot fool the bond market.
And if you look at how the bond market is responding to this, the bond market is flashing red, and telling people that they have to contemplate less in deficit spending, because they are not happy about this.
Let's hear now from one of the world's leading bond experts, Edwin Jardani is president of Yardini Research. The bond market is extremely important to the U .S. economy.
Mortgage rates are also determined by what happens in the treasury bond market.
And of course, there's been a lot of concern about the credit rating of the U .S. government.
We've seen Moody's reduce the credit rating of the U .S. Because bonds are a way in which governments can raise money, and if there's uncertainty, if there's concern, then the yields, the amount of interest that's going to be paid is going to get higher and higher, isn't it?
One of the big problems we have in the United States now is we have so much debt, something like $36 trillion and something like $29 trillion is held by the public.
Interest has to be paid on that.
There's no discretion on that, it must be paid.
And the more debt we have, the more interest that we have to pay.
So outlays on just our net interest alone are almost $1 trillion on a 12 -month basis and that's obviously very disturbing and makes it harder for the government to spend in other areas.
You know the bond market as well as anybody.
Donald Trump called it a big and a beautiful budget.
What does the bond market think of it?
Well, the bond market isn't quite sure yet.
It's a process in Washington.
A big, beautiful bill has gone through the House.
I think the bond market is still trying to make up its mind whether it's big and beautiful or big and ugly.
We'll see how it does in the Senate and see what actually comes out of the Senate, which may be quite different from what we're seeing right now coming out of the House.
But it's hard to imagine that the bond market is going to give much of a vote of confidence to this big, beautiful bill since it adds another $3 to $7 trillion to the debt over the next 10 years.
It's conceivable that over the next 10 years, we'll be seeing another $20 to $25 trillion in debt.
That would be including this big, beautiful bill, which obviously doesn't make it so beautiful, after all.
It's not just Donald Trump who's been increasing the deficit, it's something that every single government seems to have increased.
Could it be the bond market that forces somebody to actually address that problem, finally?
Well look, I don't think we'll ever get to a situation where investors say, I don't want to buy any US Treasury bonds.
What they will say is, we'll buy them but going to need a higher yield than we're getting in the market right now, so we're going to go on strike and wait until we get the yields we need to give us some protection.
And so that's that's the risk here, is that rates will go up even higher.
Edward Yardeni, they carried, do you think it's going to be big and beautiful or big and ugly for the bond market in the long term?
I tend to agree with Ed and think it'll probably be more likely to be big and ugly, but he did bring up the possibility that the Senate can come up with a bill that's more palatable to the marketplace.
But I think that is spot on saying that people are going to demand higher rates to absorb whatever debt we're going to get and we're clearly going to get some more debt.
It's just a question of how much more.
Yeah. And if those rates do go up a little bit higher, that is going to cause problems for the U .S. economy.
Big tech news in the last hour, with seemingly a green light given to a huge merger in the gaming world, the U .S. Federal Trade Commission has dropped a case that was trying to block Microsoft's $69 billion purchase of the Call of Duty maker, Activision Blizzard. Brian Merchant is an American technology journalist and author.
It was absolutely crucial, not just for the gaming world, but for tech in general.
It's been called the biggest challenge that Microsoft has faced in two decades.
It has and because Activision, of course, made Call of Duty, which was such a popular game, surprised by the decision in the U .S. to drop the case?
I mean, things have been trending in this direction for a while, you know, after initially losing the case and then losing the appeal, the FTC had already seen sort of some of its options running out.
And it's no longer helmed by Leena Khan, who was the crusading antitrust minded, the FTC chief under the Biden administration and was kicked out as soon as Trump took office.
So no, it's not really a surprise that the FTC is throwing in the towel here.
The FTC, of course, the Federal Trade Commission.
And what was their objection, what was her objection to this deal, which of course went through in 2023?
Well, it was at the time the largest acquisition of any video game company.
It would and now has turned Microsoft into the largest video game company in the United States and I believe the third largest in the world.
And the concern was the same that has sort of hovered around each of the tech giants as they've consolidated and concentrated their power in the last 10 to 20 years.
And that's just that they could use this power to stifle innovation, to further keep titles on their platform and restrict consumer choice.
We've seen other parts of the world object to this deal.
So, it's going through now in the US.
Does that mean that this is done and dusted?
It sure looks like it's done and dusted at least for the time being.
There was a lot of speculation over whether and how the Trump administration would sort of recalibrate its FTC and I think it has surprised some people the extent to which it's willing to pursue antitrust cases against the likes of Meta.
But in this case here, it does feel like the story is played out, the case has been tried, and that a conclusion has been reached and it's, you know, fallen well into Microsoft's favor.
Brian Merchant, then Microsoft's President.
Brad Smith has said he's grateful to the FDC for today's announcement carry?
Lena Khan no longer the Federal Trade Commission.
Do you think we may see some deals like this one now going through that had been blocked for some time?
Oh, I think that's true.
I think you have a more conservative turn at the FTC and other regulatory bodies and so probably have more cases dropped, or the cases that go through will be less concerned about threats to competition.
And if you reduce your competitive threat, you have an opportunity to raised prices which is always a sweet news to any business, particularly large ones like Microsoft. Let's talk about a football match that could cost the losers.
Manchester United, one of the most popular sports teams in the world.
Quite a lot of money.
Their defeat by Tottenham in the Europa League final, well, that is going to have a significant impact on their immediate financial future.
Let's hear firstly from some of their fans.
It's a bit of an humbling experience, it's bad, but next year we go again.
It's in our DNA, we'll be back, it's Man United.
We've won everything.
It's just one of them nights.
But we'll be back next season.
Keep your heads up, Reds.
Well at least there's room for improvement I guess.
There's definitely nothing big happening in the next year or so.
There we go, haven't won something for quite a while Andy Mittens is a football journalist and editor of the Manchester United fansing.
He was there at the game in Spain And he is the editor of United We Stand.
Let's hear from him now.
Manchester United won't get incomes from playing in the Champions League, the commercial revenue, the television broadcast revenue, the fact that there won't be any European football at Old Trafford, the fact that it will be more difficult to attract players to Old Trafford. Manchester United has been losing money for the last four or five years, they needed that Champions League qualification.
So Jim Radcliffe, who of course plays such a big role in the club, has talked about making Manchester United the most profitable club in the world, that looks like a distant dream now doesn't it?
Manchester United is a huge football club, it's one of the three biggest clubs in the world along with Barcelona and Real Madrid and at the moment they're not coming close to punching their way, it's scarcely believable that United are 16th in the Premier League so the idea of Manchester United within the Premier League within three years which is what such a miraculous state publicly, it just appears fanciful.
It's interesting that what you were saying about them being one of those three big clubs globally.
I lived in India for a long time and whenever I used to go anywhere I would see a lot of Manchester United shirts.
If they're not going to be successful on the pitch eventually there's a danger of losing that global fan base isn't there?
Manchester United are huge not just in India.
I was working for Indian television last night, there was a demand there to watch me talking about Manchester United.
I would get correspondence on a daily basis from supporters in Nigeria, across Africa.
I've seen Manchester United playing 46 different countries.
I've been to Pakistan and met Manchester United fans in Islamabad and I've asked these people in the mid -30s, why does you support Manchester United?
And you get responses back like David Beckham, Manchester United next week will play in Kuala Lumpur and Hong Kong.
and despite being truly awful at the moment by their own standards, we'll be watched by huge crowds.
The United States is a regular destination for pre -season tours.
Interest in the club is global, but part of the reason of that is the success.
And, you know, it's still really, really big, but if the team wasn't going to win trophies for the next 10 or 20 years, then interest would definitely recede.
You talked there about players, David Beckham, the danger is, if you're not bringing in enough money from being in the likes of the Champions League.
Manchester United will have to sell their best players the likes of a Bruno Fernandes.
The train I'm on, which is full of Manchester United supporters from around the world, so I'm sat with a group of gentlemen from Wales, there are people from everywhere, has just started moving.
That's where the, that's the first time I've heard United fans cheer, following that defeat, against Tottenham Hotspur in Europa League final last night.
As we started this conversation, the financial situation is extremely challenging.
It is likely that Manchester United have got to sell some of their best players even this summer.
They will have money to buy but this is because the recruitment has been so poor that Manchester United have been put into this situation.
Manchester United are still paying off players who've underachieved at the club and have been sold on.
This is a contradictory factor as to how United have got to where they are.
And they're on that train heading back to Old Trafford which is not very far from And where we are broadcasting from at this moment that defeat could cost Manchester United 80 to 150 million dollars.
Because they won't make it into the Champions League.
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You are with World Business Report from the BBC World Service.
Let's move to another important story now, The Trump administration has halted Harvard University's ability to enroll international students, the Homeland Security Secretary, Kirsty Noem, said the aim was to root out anti Americanism and anti semitism on campus.
Sarah Davis is the president of the Harvard in Harvard, Australia, New Zealand Student Society, and herself a graduate student of the university from Australia.
So for many of us, we actually rely on Harvard sponsoring our working rights after we graduate from the university.
So those of us who are about to graduate in five days, are currently in limbo about whether or not we'd be able to accept our jobs that we've all got lined up for after graduation, but also obviously the current Australia and New Zealand students are also very unsure about whether or not they'll be able to keep studying at Harvard next year when they return after summer.
This is an important story.
Let's bring in Janet Lawrence, who is the Higher Education Finance reporter for Bloomberg.
There are a lot of foreign students at Harvard. So let's start with the financial implications for Harvard. And also, what must be shivers going through other major universities in the US about whether this policy could be extended to them.
Well, the Department of Homeland Security said just that it could be extended to other universities, so people are watching this very carefully.
They are. And foreign students coming into the US for the likes of Harvard, how important are they for its finances?
Well, there are about a million international students in the US now.
At Harvard, it's close to 7 ,000.
It's 27 percent of their entire student body, and international students typically pay the full price, although perhaps not if you're a Ph .D. science student.
But they certainly contribute to the bottom line at universities.
Harvard does give full -need financial aid for international and U .S. students, so the undergraduates may not be impacted quite as much. Janet, we know there's been a lot of tension, hasn't there, between the likes of Harvard and President Trump.
Is there anything they can do about this?
Are they likely to go to the courts to appeal against this decision?
I would think they would.
However, the Homeland Security Secretary said she would give them 72 hours to comply with her demands.
she sent a letter in April asking for certain information which she said Harvard did not provide and we'll see what happens within 72 hours.
Stay with us I want to bring Kerry Leahy into this conversation because Kerry you're at Columbia University another you know elite university there in the US a lot of foreign students coming in there as well will this send shivers down your University as well if this policy is extended?
Oh, absolutely. It's got to be particularly worrisome, particularly in the area of science where Columbia feels it has a particularly strong edge, at least in the past. So yes, that's a very real concern.
It's not even just a question of short -term finances, but if you think of what the things that America's doing, which is probably not in their best long -term interest, cutting back on spending on what is broadly defined as human capital, meaning education, training, and the like.
Is this not a way if you want your economy to grow well over the next 10, 20, and 30 years, and this in some ways might be the most stressing economic thing we're doing and it's not getting the kind of headlines that tariffs get?
And Kerry, do you see around you at Columbia University each year an increasing number of foreign students?
You know I used to live in India and it was the dream of most students to get somewhere decent in the US.
It's extraordinary the diversity of people you see on campus and it's truly a glittering mosaic at a place like Columbia.
But it's also glittering mosaic a lot of places you don't think it's a glittering mosaic, but clearly a school like Columbia's embraced taking in what they think are the best and the brightest from around the world.
And Janet, one of the other consequences of this would be that some of those students who are looking to graduate soon, it's gonna be difficult for them to get into the job market now, isn't it?
Because their visas are tied into being students.
Yes, and the information provided by the Homeland Security Department today said that if they were no longer students, they would have to and they didn't have the visa at Harvard. They would have to transfer somewhere else.
And that Janet, could have implications because you know, when you talk about Harvard, it's one of the top universities in the world.
A lot of those students who graduate want to stay on in the US and they bring a huge amount of skills into that job market.
Yes, no, it could have widespread implications.
And especially if you're a student and you were deciding to go to Harvard next year, what do you do if things are so uncertain?
As we saw during COVID and uncertainty you know students postponed coming, undergrads you know took a gap year, and we could see that as well.
Janice, thanks so much for for joining us here on the program and Kerry briefly, if you don't mind, that's a concern for the likes of Columbia.
Foreign students think hey we're not welcome in the US, they'll go somewhere else.
Absolutely, you'd think that you know one of the biggest winners is in the UK with Cambridge Oxford and the Redbrick University should be picking up a lot of that slack, because why put up with that and we've already seen in France the Macron saying please come see us we are open borders that sounds like what the US used to be but certainly is not today.
Kerry, gonna get your final thoughts in a second on this Redbrick universities, they're some of the top universities here in the UK.
We've heard so many stories from right across Europe haven't we about the pressures on housing caused by rising rental costs.
Well Spain in particular has been badly affected that is because of the high levels of tourism that can exacerbate the problem at this time of year.
Guy Hedgeko has been looking into the housing crisis in Madrid.
Blanca Castro has to wash her dishes in the bathtub that's because her kitchen is dangerous and unusable with a large hole in the ceiling which leaks water from above.
Blanca believes that the company which owns her flat and others in the building has deliberately halted all maintenance work in order to encourage the tenants to leave. The current rental bubble is encouraging a lot of big owners to do what they're doing here, which is to get rid of the tenants who have been here a long time in order to have short -term tourist flats, or simply to hike up the rent.
Blanco is one of millions of Spaniards who are worried about the cost of housing.
Over the last decade salaries in Spain have increased by around 20%.
But during the same period the cost of an average rental has doubled.
Juan Bien of property firm Idialista says this rental crisis has one main cause.
Well the current problem is huge imbalance between supply and demand.
Demand is very good, the economy is growing a lot but supplies is dwindling very fast. The big problem is that we need to build more properties and on the rental side we need more people willing to rent the properties, or willing to buy properties, refurbish them and put them in the rental market.
I'm next to a group of workmen and some cranes where a block of flats is being built just on the outskirts of Madrid.
This kind of site is much less common now than in 2007, at the height of Spain's property boom, when more than 600 ,000 homes were built in just one year.
Last year, by contrast, only a sixth of that number of homes were completed.
High building costs, lack of available land, and a shortage of manpower have all been factors in restricting construction in recent years.
The socialist prime minister, Pedro Sánchez, says he is now making it easier for cheap housing to be built.
His coalition government is also taking more interventionist measures.
Spaniards want the housing market to operate according to the law of reason, of social justice, not the law of the jungle.
They want us to ensure that vulture funds and speculators are not doing whatever they like.
The government has introduced a housing law which puts a cap on rentals in some urban areas.
So far it's only been implemented in a handful of regions such as Catalonia and the Basque Country.
The government has also proposed a tax of up to a hundred percent on the purchase of property by non -residents from outside the EU, which could affect British buyers in particular.
Critics say this kind of interventionism scares owners and investors, causing properties to be taken off the rental market, and making the situation worse.
However, lower income Spaniards are calling for more drastic measures to be taken, as anger over the housing crisis builds.
Guy Hedgeco reporting there.
Kerry, final thoughts.
I mean, that's a global problem, isn't it, people being priced out of the housing market?
You took the words right out of my mouth.
It's the whole business about nimbyism.
we don't want a new development, but we don't want it next door to us is applying in there.
And then there's also the concern about who actually owns the properties and pricing them fairly if a large institutional investor like BlackRock or others have large slices of the new and available revamped housing.
So it's there are lots of places to look for.
But the biggest place you need to fix is supply side, not the demand side.
Gary, as always, thank you so much for joining us on the program, Kerry from Columbia University we'll be back with Business Matters in a couple of hours.
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