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Hello, and welcome to World Business Report from the BBC World Service.
I'm Roger Hearing, and on this edition is a trade deal between the US and the EU now very close.
Also, the return of meme stocks on Wall Street, why children's films are driving Hollywood again, and how financial pressure is forcing game platforms to censor adult content.
But first, Donald Trump is basking in the glow of trade deals struck with many of the main US trade partners apparently vindicating his tactics of harsh and often changeable tariffs Well ahead of the August 1st deadline to avoid the harshest tariffs Japan has been the latest to sign up and now the Financial Times is reporting a deal with another of the biggest partners, the European Union is in its last stages That's also the impression being given by the German Chancellor Friedrich Merz, speaking ahead of talks today with the French president.
We will discuss some very current issues together, including the current trade policy, about which we are hearing in these minutes that there could possibly be decisions.
We'll also talk about our joint foreign and security policy.
We'll talk about the joint projects that we both discussed some time ago and on which intensive work is being done.
Friedrich Merz. Well, the Financial Times correspondent, Andrew Bounds, told me how close he thinks this US deal with the EU is.
I would say we're very, very close, probably 90%, but obviously, as we know, President Donald Trump is rather erratic, so you never really know until you see that post on Truth Social announcing, you know, a deal is done.
And the deal itself, I mean, we don't know the details, I guess, but what are you hearing in terms of what might be involved?
So what I've heard is it's quite similar to the one that the US did with Japan just yesterday, which basically means a 15 % across the board tariffs.
But in return for accepting that, the EU would get some, you know, what they call zero for zero.
So it'd be zero tariffs either way on things like aircraft, medical devices, and spirits, which are important to both sides.
and there might be some relief on some of the you know what they call the sectoral tariffs like steel and cars well i was going to ask about cars because that obviously is a key one but your understanding is that would be within the agreement well i think there's no way the eu would actually do a deal that didn't get some relief on cars the question is quite where that will land the japanese deal was 15 on cars i think that's what the eu would like uh i'm not here i'm I'm hearing that's not quite settled yet.
That's sort of one of the last outstanding issues.
But for Germany in particular, it's very important to get a deal on cars.
And I think if there wasn't something satisfactory they could accept, then we might be back into talk of retaliation and so on.
Indeed. And steel, of course, is another one.
Currently 50 % tariff on steel.
That would be in play as well?
Yeah, I think what they're looking for on steel is some sort of level of imports which would be tariff free or much lower tariff, probably in line with historic volumes, which the EU could could could accept.
And of course, that'd be helpful to the US because the kind of steel they import from the EU tends to be steel they don't make themselves.
So if you're putting tariffs on it, it's making your own industry, which needs that steel for advanced manufacturing, you know, less competitive.
But we're also hearing that the potential retaliatory measures by the EU are still very much available to it.
So is this both sides playing hardball, essentially?
I think the EU has really tried hard to get a deal.
They've tried not to respond.
They've tried not to get engaged in a tit -for -tat or a trade war.
And I think this is them saying, look, August 1st, we've pushed this deadline a few times.
We're paying 10 % tariffs on everything.
August 1st is really the date when we need a deal.
And if it's not a deal that we can accept and they're willing to accept you know what we call an asymmetric deal so more favorable to the US if it's not a deal that we can accept then we do have to retaliate.
And is the group of leaders that have given the go -ahead to do this are they fully behind it we know that uh for example Chancellor Merz seems to be suggesting things are on the way as well from comments he's made in the last few hours suggesting he at least backs it does the EU negotiating team have the full support of the EU behind them?
Well, what happened today was, you know, they sort of briefed this deal out to EU ambassadors who will talk to their capitals.
But the sense in the room was very much that this is just about acceptable.
You know, they could wear this.
Merz is obviously key because Germany is such a big key trading power.
He's meeting Macron tonight.
They will discuss this deal.
And if those two come to an agreement, Giorgio Maloney would certainly back them as well from Italy.
silly. And therefore, if you've got the sort of big three behind it, then that's pretty much a seal the deal.
And we're a week away from the deadline, August the 1st, just over.
It's going to be within that timeframe?
Are we talking hours?
Are we talking days?
That's a very good question.
I mean, I think we're probably talking not more than a couple of days.
But who knows? We're certainly talking before August the 1st, because I think if nothing's done by August the 1st, then the EU does start to activate its retaliation.
And I think the the Americans, although Trump is very, you know, very tough and hard negotiator, I don't think he wants to see big scale retaliation from the EU, which could get us back to the position the markets were in in early April, if you remember when he did those Liberation Day tariffs on everybody, and suddenly the market started crashing, and the dollar started falling, and, you know, he had to row back.
So I think, you know, he's probably, or at least the people around them are probably aware that if they push this too hard, and force the EU to retaliate, that's not great for the US economy or for the markets.
Andrew Bounds of the Financial Times.
Well, Tuesday's deal with Japan was hailed by Donald Trump as a big triumph for Washington.
And on the surface, it looked that way.
Still substantial 15 % tariffs on Japanese goods and massive investment by Tokyo in the US.
But Japanese shares rose markedly on the news, perhaps because investors there realised the deal was actually beneficial to them.
One man who's very sceptical that the U .S. has got the best of the deal is Spencer Hakimian, who's the founder of Tolu Capital Management in New York.
Japan, without a doubt, 100%, not even a question.
And it's not just my opinion.
It's validated by the market price.
Look how much the automakers in Japan rallied yesterday, particularly Toyota, versus look how flat Ford, GM, even Tesla is on a day like today it's not even a question if you ask me who got the better deal but it's 15 on japanese cars i mean that seems a lot yes i agree with you roger it does seem like a lot but we have to take it into the full context right and again we have to go off the premise that whatever tariffs are in place are going to stay in place and if they're not then they change but as it currently stands GM, Ford, Chrysler, they have to pay 50 % for steel, 50 % for aluminum, 50 %
for copper, 25 % for any Canadian or Mexican part that is not USMCA compliant, 55 % for any Chinese part.
I mean, look at those numbers and then you consider the fact that, well, Japanese companies only have to pay 15%.
And critically, and this is very important if you were to ask me, at the start when all of these trade negotiations started, the White House kept saying that they really wanted to do something about the weakening yen.
It seems like nothing's in the deal.
So Japan didn't even have to give up anything in terms of the yen.
Maybe there could have been a plausible accord where they would have had to strengthen their currency.
No, not at all. In fact, that is actually Toyota's biggest advantage at the moment.
It said the yen has fallen 30, 40 percent in the last couple of years versus all the other majors, the pound, the Swiss franc, the dollar, the euro, you name it.
They didn't even have to fix any of that.
I don't even think it's a remote question who got the better deal.
OK, I take on board your point about the American automakers having to bring in parts and materials.
But isn't the whole point of what President Trump is trying to do to make American automakers source those in America?
Yeah, well, if he's trying to source it in America, why would you make the input costs more expensive?
You should be subsidizing steel.
You should be, as an example, copper, a 50 % tariff on copper.
EVs are the future of cars, and that looks like it's the trend around the whole world.
why would you put a 50 % tariff on copper?
And mind you, Roger, copper is not something where you can just magically pop up a mine tomorrow morning.
Copper mines are where they are in this world.
Even if you want to open up some isle mines in the United States, you're looking at a decade plus.
Why in the interim would you make it more expensive to import copper?
And this is not just about Japan.
As an example, China is going to continue buying copper from chile and peru at a zero percent tariff if tesla and the united states has to buy the 50 percent tariff who do you think is going to be more expensive between tesla and byd to me it's self -explanatory okay what about japanese car makers producing in the us i mean are they getting are they going to be better off to bringing cars in from the japan factories or or making them in the us using imported parts look i mean that is such a fascinating question you bring up really Really, it's an interesting point, Roger.
Literally, like Honda, most of its production that they sell in the United States is made in the United States.
But right now, they have to pay 50 percent on all of those imports.
And by the way, don't mistake.
They must import a lot of these things from Canada and Mexico.
Yes, even if they are producing it in the United States, a lot of the parts, a lot of the transmissions, a lot of the input raw commodities, they do not come from the United States.
if those are being taxed at 50 percent, and I call it a tax, because that's really what it is.
And if they go back to Tokyo and make it there, and if they only get taxed over there at 15, one five percent, are they literally better off moving some production that last year was in New York, moving that back to Tokyo?
It's such a mind boggling concept.
But look, the math might literally pencil out for them that way.
Spencer Hakimian there of Tulu Capital Management in New New York.
Now, do you remember meme stocks?
Well, back in 2021, Wall Street was thrown into confusion when unloved, unregarded stocks suddenly boomed in value.
It was down to small investors, often individuals, buying tiny amounts and piling into certain shares, often driven by social media pylons.
And the result was something close to panic among big institutional investors, investors, whose computer programs then automatically bought into these now wildly popular stocks, distorting the market.
Well, it could be happening again.
Companies like the donut maker Krispy Kreme and the action camera maker GoPro have seen their shares surge this week by as much as 50 percent.
Well, I've been talking about all this to Anastasia Bouskaya, a behavioral scientist specializing in financial decision making and research professor at HEC see paris a mean stock well first of all it's a stock so it's a publicly traded equity that for some unexplained reason suddenly experiences a lot of price moves typically price increases and typically unrelated to any fundamental differences in financial performance or the company's fundamentals so we think about this as being a function of some sort of internet hype and we've we've had these sort of weird boosts in in fairly unknown stocks
or unexpected stocks stocks before.
Is it driven by social media?
I mean, certainly was, I think, the last time we were talking about this.
Yes, I think that's right.
I think the last big hype and maybe one meme stock was coined was 2021.
So this was the trading frenzy with GameStop and AMC.
And of course, you just have to remember where we were in January of 2021, which was at home, bored out of our minds, missing any sort of social connection, and probably sitting on a little bit of disposable income because we haven't been able to go out and spend it at the shops and restaurants.
So I think it created the sort of perfect storms for this meme stock craze.
So this time, where we're obviously not stuck at home in the same way, why, for example, Krispy Kreme, GoPro, why are their shares being boosted?
What's going on? That's a great question.
I think if you look at stock market valuations, they're at all -time highs.
And so retail investors are looking for sort of idiosyncratic names that they can invest in, that maybe they can get an edge around.
And of course, it is summertime.
So there may be a little bit of that COVID boredom happening again this time around.
Is it herd behaviour?
Is it, you know, someone says, oh, so -and -so is doing this.
Oh, lots of people are doing this.
I'd better do it. I think so.
I think in general, investing has become much more social.
So if you're invested through a mobile app as increasingly, especially young people are today, so Robinhood or eToro, you can follow other people on the app.
You can look at leaderboards.
A lot of people now participate on online forums like the Wall Street Bets Forum and Reddit.
And so because it's become much more social, I think herding, which, of course, has always existed in markets, just occurs much faster today.
And clearly, you know, there's a bit of narrative and emotion going on about this sort of thing, because people have to overcome a certain risk feeling, I suppose, that they could lose all their money.
Yeah, no, I think that's exactly right.
And of course, you know, traditional economic theory would say investors sit there very carefully studying the fundamentals and only invest if they think that, you know, the company is not fairly priced.
But we know that we're all humans.
And so in addition to doing some sort of rational analysis, I think many people tell them stories, a story about the firm.
And a really nice story is that the firm has been undervalued or that it's not properly understood by professional investors.
And I do think that brings people together in a really interesting way that makes that investment much more emotional, perhaps.
And I suppose also it's the fact that little bits of piece of tech that we all have in our pockets or our hands or our handbags.
It's awfully easy to do, isn't it?
You can do it straight away.
Oh, my gosh, absolutely.
I mean, there used to be so much friction to setting up an investment account, you had to go to a physical branch, you had to bring paperwork, there were all these costs, of course, there were transaction costs every time you traded.
And now a lot of those things have gone away completely, you can download an app, within a couple minutes, you can start trading within a couple minutes, and trading costs have gone away.
So, you know, technology has made it easier.
But of course, as every good economist knows, there's no free lunch. So if it's free to trade, then those platforms must be making money differently.
And one of the ways in which they make money is through order flow, which means that the more that you trade, the better off they are.
So meme stocks, you reckon, with all their risks and everything else, they're here to stay just because of the way people look at these things?
I think so. I think we'll see new investment platforms and new social media forums. but i would predict that we continue to see these occasional spikes in individual stock names that are difficult to explain by any fundamental analysis anastasia buscaya there hey everyone this is carrie champion the host of naked sports when you sit behind the wheel of the all -new 2025 nissan armada pro 4x you'll feel like the entire world is your playground and you'd be be right, because this unshakable fortress of a vehicle is built to take you on your next adventure.
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You're with World Business Report from the BBC World Service.
Now let's catch up on what's been going on the markets with Susan Schmidt, Portfolio Manager of Exchange Capital Resources in Chicago.
Susan, thanks for being with us.
A Tesla, I suppose, is the great eye -catcher because, well, we know things have not been going well for the EV firm, but the latest earnings suggest they're not improving either.
ever? They're not improving.
And so a disappointment to the market, although the market had a hint that this was coming because Tesla did release the auto sales a couple of weeks ago.
So we saw auto revenue down 16 % year over year.
That's really not what investors want to see.
There's still worry in the market that Elon Musk is focused on other things rather than Tesla and getting back back to business.
And we're not seeing that pickup in demand for EVs. And so, the Tesla product itself just isn't gaining traction in the market as investors had hoped.
Well, one company that has reason to be a little happier is Alphabet, of course, the Google parent.
Their earnings released.
They beat estimates, didn't they?
They did. So, the counter to this is a very good report for Alphabet.
Google did very well in the quarter.
They beat estimates.
But importantly, Certainly in their release, they talked about increasing their CapEx, that capital expenditure plan, for the rest of 2025, increasing it by another $10 billion.
So it's now at $85 billion.
They'd already increased it the last time management spoke to us in February to $75 billion.
And analysts came in the year thinking it was $60 billion.
That's all on AI spend.
Extraordinary, isn't it, how that's working?
Thanks so much, Susan.
Susan Schmidt there.
now films for children and young adults are giving a major boost to cinemas the recent a minecraft movie smash records making 301 million dollars globally in its opening weekend the biggest ever for a video game adaptation in 2024 inside out 2 led the global box office earning 1 .69 billion followed by despicable me 4 and kung fu panda well now film studios are following these trends fast -tracking sequels, producing more animations and adapting popular video games into stories geared towards family audiences.
Megan Lawton has more.
Where else would we start but here at the cinema?
Here to meet me is Ken Mont who looks after 25 venues in Canada's British Columbia for major cinema chain Cineplex. He tells me about the year in movies so far.
Big hits of course have been Minecraft which just came out at the beginning of April which we expected to be big, but it was a lot bigger than we had anticipated and we just had sellout upon sellout upon sellout.
But the kids' movie hits haven't stopped there.
Nisa, the Chinese language film, came out in early part of the year and that just blew the doors off, especially here in BC where we've got a large population of people who will frequent those films. As well as Moana 2 and Mufasa, The Lion King.
The king will never accept a stray.
I'm not a stray. I'm just lost. It's a trend we saw playing out on the big screen last year when the second Inside Out film led the global box office with US $1 .69 billion in takings, followed by Despicable Me 4 and Kung Fu Panda 4.
The success of these films is measured by how many people come through the cinema doors and sit in these auditorium chairs.
And they're people the film industry has been working hard to attract.
Hollywood has got much better at marketing to the younger audience.
Bruce Nash runs The Numbers, an industry website focused on analysing box office data, which they feed to film studios and cinemas.
For me, this started with the Sonic the Hedgehog movie, where the initial trailer for that film was a miss as far as the audience was concerned.
Everybody hated the design of Sonic.
Everybody went online and said, no, this sucks.
What the... The filmmakers, instead of saying, well, this is our vision for the film and we know better, they took that on board and they said, OK, we'll redesign the character.
We think we've missed our goals here.
We'll go back and rethink even how we make the film because we value our relationship with the audience and we want to make a film that really works.
But what about the cost of making a kids' film?
It's not cheap, according to Ryan Fordner, who's a senior editor with the LA Times Hollywood.
Those films can cost anywhere between $125 million and $150 million to produce and that's quite expensive.
The recent A Minecraft Movie surpassed $720 million US dollars in ticket sales globally.
Currently, it is the second highest ever grossing movie based on a video game.
These are properties that young people today, Gen Z, Gen Alpha, they're very familiar with these characters and these games.
That's how they spend their time.
So if you can make a movie that is compelling and put that on the big screen, that's the kind of thing that young people today are going to want to go see.
The rise of gaming adaptations means animation studios are busy.
Chris Pronowski co -founded Titmouse, an Emmy Award winning animation studio that's worked with Sony to help sequences in Spider -Man Across the Spider -Verse and Universal to produce the 2D animation for a scene in 2023's Trolls Band Together.
As a fan of games, I'm personally interested that Nintendo is finally, or again, making movies out of their properties.
Obviously Mario did really good and there's talk about other ones out there.
Error. And that report by Megan Lawton on changes in the cinema business.
Well the gaming industry is a huge business too, worth globally over 300 billion dollars more in fact than the movies.
It's increasingly seeing itself as an art form as well as entertainment and just as cinema can be.
So should it have the same freedom to deal with controversial, even offensive subjects?
Well the reason the question's being asked is that Steam, one of the largest PC game platforms, has begun gone to prohibit games that violate the rules and standards of its payment processes and banks.
It's a move which many consider a form of censorship, predominantly affecting adult games.
None of the material is illegal, but anti -porn campaigners have put pressure on companies like PayPal, Visa, and Mastercard, who Steam depend on as payment processors.
And now there's been pushback on all this from the gamers themselves.
Isi van Velder of Gamesradar told me about it.
steam is a pc gaming platform and it recently introduced new rules banning certain kinds of adult content and in statements given to press steam said that it was notified by its payment processors and their related card networks and banks and that's why it's decided to pull these games that violate the apparent rules of their payment processors so what sort of adult content to be talking about these are games you imagine there can't be it's not porn or anything particularly uh you'd be surprised you know as with all art some of it is more extreme or depicts things that a lot of people may not agree
with there are also just games that are quite explicitly pornographic in nature because that's what people enjoy with this it seems like a lot of the games that have been removed have been games to do with incest or games that are just heavily about sex or are quite pornographic in nature but the worry with a lot of gamers is that right now it's incest games and soon it will be games that have queer themes or games that just have gay sex in them or you know games that have a political slant that a payment processor doesn't like so it's the worry of that slippery slope and that overreach from payment
processors that's really kind of bubbling to the surface right now and has there been a lot of pushback on this uh yeah Yeah, players seem upset about it online.
Whether they'll actually go to a different PC gaming platform like the Epic Games Store or GOG still kind of remains to be seen.
But yeah, generally speaking, gamers are never happy when there's any form of censorship in their games or to do with their games.
They want to be able to play what they want when they want, and they don't like people telling them.
As with anyone, no one likes being told what to do.
But I mean, you mentioned Epic.
big I mean I guess other platforms like this also operate with the main card providers the financial people so they'll have to adhere to the same thing won't they I know with steam specifically a group called collective shout has claimed responsibility for this they're sort of broadly speaking they seem just like an anti -porn group and they actually ran a campaign to encourage people to email payment processes and to specifically tell them to stop selling these games on Steam.
So that might be why Steam has done this.
And we haven't heard Epic or GOG doing this at this time.
But it could spread to those, I guess, if the pressure is the same.
100%. Yeah. So what's going to be the effect overall, then?
I mean, is it just something where the the power of the financial people in this will effectively make it impossible to have certain games on there i mean some people say that's a good thing because this kind of content is not desirable but i think the question there becomes who decides what content is and isn't desirable right now it's things like incest rape which i think broadly speaking most people would agree is not great to have but again when you're talking about art it's very difficult to say what should and shouldn't be allowed to be shown to people and it still just leaves this slippery
free slope of okay today it's these games tomorrow is it games that have certain people is it games that are in support of palestine is it games that are in support of queer people is it games that are in support of certain politics that you know the ceo of a payment provider doesn't like anymore so i think that's the worry and i mean what i wrote about regarding this issue was the near which is a video game the near creator yoko taro saying that foreign payment companies being able to assert this kind of leverage over big international gaming platforms means that you know the exact quote is you
can even censor another country's free speech so that i think is a worry that people in the industry have is if a credit card company or a bank can say hey we don't want you to put this kind of stuff on your platform anymore then where do artists put that stuff you know steam is i think the biggest pc gaming platform in the world so if you can't put your game on steam you're severely limited in what you can do with it.
Issy van der Velde of GamesRadar speaking to me earlier.
That's it from World Business Report.
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