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Hello and welcome to the World Business Report.
I'm Bissi Adebayo. Is President Trump starting to get what he wants as more countries do deals and tariffs?
Brazil faces 50 % levies on its exports to the US.
How will this go down with America's coffee -loving consumer?
And meanwhile, South Korea is among the countries settling for a late deal before Friday's deadline.
And in a dizzier day of wheeling and dealing, we're trying to make make sense of the great tariffs merry -go -round.
All that and more in half an hour.
Now let's begin with Brazil, which is now facing 50 % tariffs and South Korea settling for 15 % and other big nations such as Canada still to declare.
It's all going to the wire with just a few hours to the latest tariffs deadline set by President Donald Trump.
And all of that, of course, is happening right in the middle of earnings season in as companies reveal how they are coping with the uncertainty.
So today on the World Business Reports, we're going to break down who's agreed what, who's not agreed to anything, and who wins, if anyone at all, from all of this change on the International Trade Fund.
Well, let's begin the conversation now.
And I'm bringing in Emma Wall, who will be with me throughout the program.
She is Head of Platform Investments at Hargreaves Lonsdale.
Welcome to the program, Emma.
Tell us, is there any evidence to suggest, first of all, that countries that have done deals have actually come off better?
Significant, yes. If you have a look at the FTSE 100, so the index here in the UK, for example, where I'm speaking from, you know, part of the reason why we've seen the FTSE 100 reach all time highs over the last month is because of that early deal that the Prime Minister did with President Trump.
And you've also seen it act both ways.
So those that secured good and early deals have seen their stock market benefit from it.
And you've seen those that failed to see the stock market damage.
So if you look at India, for example, where the market expectation was the deal would be much lower tariffs than they've actually landed on, the Indian stock market over the last 40 hours has been really punished.
And also, if you look not just at country level, but at sector level, you may remember that Trump initially said that there would be 50 % tariffs on copper, which really benefited U .S. copper producers.
Now, in the last 24 hours, he's come out and said, actually, there's going to be a big exemption, which is refined copper.
Well, that's significant, if not nearly all of actually the copper market.
And so those gains that the U .S. copper producers had over the last few weeks have actually been completely eradicated and been really punished in the stock market in recent days.
And let's talk more about the U .S. markets now what sort of response are we seeing from there?
Well it's really interesting because the stock market actually holding up really well there's a mix of things going on here we're in middle of earnings season actually there's a number of large players tech stocks for example that have outperformed expectations so some of this is what we call micro but some of it is macro the US market is you know quite buoyant significant headwinds of tariffs have been you know, removed.
However, that's the equity market.
If we look at the bond market, we can see that although interest, you know, yields have come down a bit, they are still elevated over where they were just, you know, a year ago, which shows that although the equity market seems to be buying that these tariffs are good for the US, actually, the bond market is still very nervous about the potential for these tariffs to cause greater inflation, and indeed put pressure on the the consumer, which in turn could cause, you know, damage to the economy.
And how long is it going to take, really, for us to see, you know, different reactions?
You've talked about the bond market there, for instance.
It's a really, really interesting question, because actually, the expectation was that these would come, the impact of tariffs would be, would come in very quickly.
But we've not seen that, you know, we've seen softness in the kind of US economy at the margin, things like jobs figures being slightly softer, things like actually orders that came in, And we saw a massive spike in orders, which actually saw a massive spike in demand before Liberation Day, and that tailed off.
But actually, the real hit of tariffs, even if we have them at lower levels, the expectation is around three quarters of those price hikes will be passed on to the US consumer, which of course will put pressure on their individual bank balances.
And the US consumer is a huge driver of the US GDP, US economic growth, far greater, actually, than even other developed nations.
So we don't expect we don't expect to see the real impact of tariffs, both in terms of, you know, an economic point of view, a consumer point of view and a corporate point of view until the end of the calendar year.
All right, Emma, stick around with us.
We'll come back to you in just a moment.
but for now let's turn to one of the latest deals announced which is south korea and that country is now set to face a 15 tariff on goods entering the u .s down from an initial 25 percent and that of course is significant because south korea actually sells more to the u .s than any other country apart from china song gu hong is a professor of public administration at cookman university in seoul and i asked him whether he thought this was a good deal Well, I think the deal itself was quite the level that we have expected.
And of course, it is a little bit worse because we have to pay 2 .5 % more on automobiles, for example.
But that can be overcome by the automobile companies and the private enterprises here in Korea is quite vigorous.
And so I think the future, of course, it's a little bit worse than before.
But considering that this kind of tariff war was begun by the United States, I think South Korean economy will be still good and resilient in the future as well.
South Korea has managed to dodge a 25 % tariff, right?
Settling for 15%. How big of a win is that really, especially for the economy?
We have expected that it would be decided around 15 % because Japan and the European Union already got 15%.
The concern is how big our kind of package to invest in the United States would be.
That was the question, and it was $35 billion compared to $55 billion of Japan.
So kind of about the average that we have made a deal with the United States.
Let's talk about one of the major sticking points in that deal.
How did South Korea manage not to cross the red lines in that set by keeping U .S. rice and beef imports out of this deal?
Well, I think we only import the beef from the United States under 30 months old.
And that was a kind of marginal line for the Korean government.
And I think the United States already understands how critical it is to the Korean government because Korean people were upset if that particular condition was broken.
But I think both items, the U .S. already knew and understand how critical they are to this kind of deal with Korean government.
That was Song -Goo Hong, a professor of public administration at Cookmead University in Seoul.
Now, let's bring in Anna Swanson, who's a New York Times reporter and she's been covering the Trump terrorist. Many thanks for joining us on the World Business Report, Anna.
So give us a quick recap, you know, as we approach the president's deadline on tariffs ending tomorrow.
Where are we? Right.
Well, there's certainly a lot going on.
So President Trump has introduced a variety of tariffs in the time that he's been in office, ranging from tariffs on Canada, Mexico and China related to fentanyl, to big tariffs on steel and foreign autos.
But one of his biggest measures was in early April on what he called Liberation Day when he announced big tariffs on dozens of countries globally.
Now, those tariffs were only in effect for a few hours before he paused them.
They had roiled financial markets and the president decided to give his advisors more time to strike trade deals.
But now they're set to go back into effect at 12 .01 a .m. And so in the meantime, the administration has negotiated some deals that will bring some of those tariff rates down, but they still remain quite high overall.
Other countries have not reached deals.
So really what we're looking at is kind of a quite dramatic increase in the tariffs that the United States will impose on products coming in from a lot of the world in the next, you know, 14 hours.
And what are we likely to see?
We still have the likes of Canada and Mexico, which haven't reached a deal agreement.
So it's just a few hours before this deadline comes into effect.
What do we expect? Right.
Well, I've been fixed to the president's social media account and every day is kind of surprising, right?
It's hard to predict.
We did see a deal announced late last night with Korea.
We also saw the president imposing very high tariffs on Brazil yesterday and saying that he had not yet reached a trade deal with India, threatening high tariffs on India.
So we could see some last minute deals, perhaps with India, you know, perhaps with Mexico.
Mexican officials are meeting with the president today, you know, very much the possibility of last minute deals.
deals however you know I think the most important message is that tariffs in a lot of these cases still remain high so even after deals have been struck the tariff levels are between 10 and 20 percent you know that might be half of what the president is threatening without a deal but it's still just a incredible increase from where we were before he came into office.
And I guess the countries that have struck the deals whether 25 percent or 10 percent or 15 percent will say I I mean, we're still better off than those who haven't reached any agreement.
So where does this leave the countries without an agreement?
Yeah, so it is somewhat of a relative game for countries.
You know, it's quite a big difference for a country if they're facing a 15 percent tariff and everyone else is facing zero or if everyone's facing a 15 percent tariff selling into the United States.
So I think for a lot of countries, they have looked at this relatively once Japan, for example, settled on a 15 % tariff rate.
That doesn't look so bad anymore to South Korea or the European Union.
They just want to make sure they're in line and not higher.
You know, similarly for India now, having potentially a 25 percent rate as compared to, you know, 19 or 20 percent for other Southeast and Asian nations could really put it at a disadvantage when it's exporting to the United States.
So I think at this point, countries are realizing that tariffs are going to be significantly higher and they're just trying to get a little bit of an advantage over other trading partners when it comes to that relative rate.
That would be a good point to leave it.
Anna Swanson, New York Times reporter.
Many thanks for joining us on the program.
Thank you so much. Now let's bring in Dimitri Gruzubinsky in Switzerland, who teaches about trade after a career as a negotiator for Australia.
He also wrote the book Why Do Politicians Lie About Trade?
Thanks for joining us, Dimitri.
So what do you make of all the deals that have been reached so far despite not having any details of the agreements?
I think what we've seen from the president is a clear shift in preference from getting really concrete market opening.
You know, you were speaking to one of your guests about Korean rice or Japanese rice.
unless he pivoted away from that.
And now what he's trying to do is to make sure the countries don't retaliate against the tariffs he wants to put in place at 10 to 15 percent, and to create these big announceable moments with very, very high dollar investment announcements in the $600 billion range.
And these negotiations usually take months and even years to work out.
Does the US us actually have the capacity, especially in terms of having enough negotiators to look at these deals one after the other?
Ordinarily, when we do these kinds of negotiations, they are comprehensive.
And what we are trying to do is lock in every single detail and then bring our principals, our leaders, the president, our ministers, the last few outstanding big ticket ticket questions to resolve.
The U .S. is doing it backwards, and so it's having the leaders resolve a couple of big announceables and then kicking the detail can down the road.
To the effect they want to continue doing that, they certainly have the capacity to keep doing that very, very quickly, as often these things are resolved in one or two hours.
But then, as we've seen with the U .K., it can then sometimes take months to work out all of the things that the leaders punted into to the long grass.
And are we likely to see a situation where some of these countries that have reached the agreement come back to say, look, at the time, we may have acted in a rush.
These deals don't actually favour us, you know, looking at the fact that we don't have all the details as we speak.
I don't think that is particularly likely.
The biggest benefit of all of these kind of deals is that they create at least some certainty and they decrease the likelihood of the US choosing to escalate to find new grievances and slap higher tariffs on.
They don't eliminate that risk entirely, but they do mitigate it somewhat.
I think what countries are going to do is negotiate hard at this sort of less public level on those details to make sure that they don't agree or give away more than they want to.
But I think they're going to be really reluctant to be seen as publicly reopening this can of worms for fear that 15 % becomes 50.
All right. Stick around, Dimitri, as we continue the conversations in just a moment.
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the US also gets about a third of its coffee from Brazil.
Dr. Venusia Nogueira is the executive director of the International Coffee Organization, which represents Brazilian producers.
When it comes to the US coffee consumer, she says she's worried.
They will have inflation for sure, or they will need to decide to replace some products that they love.
In the case of coffee, we know that the U .S. is the biggest consuming country in the world for coffee.
And what about you in the industry?
I mean, the Brazilian coffee industry.
How does it actually feel to be used as a political football here?
I come from a coffee producing family in Brazil.
And we are trying to understand the better way to negotiate with our partners in America.
Putting together the traders and the roasters, mainly the roasters and retailers in America, together with us to try to see which kind of solutions we can follow and how we can convince the American government that technically we are doing very well together.
We have a very, very good partnership.
How big is the U .S. market for your business or, well, I say the Brazilian coffee industry in general?
18 % of the exports, the coffee exports from Brazil are going to U .S. This means around $3 billion and is the biggest market.
Individually, if you think country by country, it's the biggest market for the Brazilian coffees.
Could this push Brazil or Brazilian coffee exporters to shift away from the U .S. market entirely, you know, towards other markets?
They insist on this 50 % of taxes.
The Brazilian producers will need to look for other markets.
So we've been talking about the economic side of the tariff negotiation.
So what about the politics?
President Trump has been accused of using the 50 % tariff as a means to punish Brazil for its prosecution of former President Jair Bolsonaro over his alleged coup attempt.
Let's bring in Mark Bush, Professor of International Business Diplomacy at the School of Foreign Service at Georgetown University.
university. Thank you for joining us, Mark.
I believe a good place to start really is to find out what exactly is the political endgame for President Trump in all of these.
There's a couple of different endgames.
One is to create the illusion of reshoring US manufacturing.
And he's going to do that with this kind of tariff skipping foreign direct investment strategy.
Another is simply to raise tariff revenue, which is getting a lot of play and certainly is something that he's begun to tout much more frequently.
And the final end game is to look like a winner.
And while we may have previously defined winners as cutting taxes, we seem to be defining it now as raising taxes through trade deals that lock in really high, historically high protectionism.
And this is quite a blunt instrument, you'd say.
I mean, we're talking about people's livelihoods here on the line.
It comes with some political risk, doesn't it?
Absolutely. And as soon as we start talking about the R word, you're going to see a lot of pushback in Congress and by constituents clamoring for more attention from their members in Congress.
But really, until that happens and until the GDP component parts begin to tell a very different story from the one the president likes to recount on the stump, we're going to be talking more and more about deals.
And as hard as it is to believe, this is how deals are getting defined right now.
And does this signal a sort of shift in how trade tools like tariffs are being used more like a political weapon rather than for pure economic gains?
Absolutely. This is political leverage and leverage is the key.
The president has run on the theme of being a deal maker and America first being an outcome and whatever that outcome is defined as at the moment.
Deal -making is the key.
So the tariffs and everything else, economically speaking, are about finding a way to gain more and more leverage.
And when you see the president talk about protectionism, it really isn't about taxes through tariffs.
It is, strictly speaking, something that gets us ahead of other countries.
And that's why the spin on the EU trade deal is, as you're reading about, a win for the president over the feckless EU negotiators who had to give away the store.
At this point, let me bring back Dimitri and Emma.
You've been with us from the beginning of the program and you've heard some of the conversations.
But then, Dimitri, let me come to you on this one.
As a trade negotiator, what's your take on the impact this is having on the American consumers?
Is there any evidence of tariffs driving inflation up?
I think as your guests were explaining earlier, we are still sort of beginning to see it start to trickle in, but it will take some time.
Retailers front loaded a lot of their investments.
and in the early period when the tariffs first came into effect, you saw a little bit of paralysis and a reluctance to visibly pass along price hikes, but that can only run for so long.
We've also seen the president grant exemptions or cancel a lot of the initial wave of Liberation Day tariffs at the levels that would have driven immediate, very noticeable inflation, inflation and things like comparatively low energy prices are also keeping inflation lower than it should be.
But we are beginning to see it start ticking up in a range of indicators.
And Emma, let me bring you in now.
You are a regular markets guest on the World Business Report and we've, of course, had loads of conversations on this.
But from an investor perspective, how are these escalating tariff moves being viewed?
Are we seeing any signs that that market confidence has been shaking or our investors just taking it in their stride.
What's really interesting is having a look at the difference between what the market is doing and actually what our clients are telling us they want to do.
So certainly before kind of the beginning of this calendar year, the US really was the only game in town in terms of flows on our platform.
So looking at like what our clients are buying, it was very much US, it was very much tech, very much NASDAQ, S &P 500.
But now actually you see a much more larger diversification.
So So people are thinking actually, is now the time to be putting more money into the US?
Probably not. And instead, they're looking at the UK, they're looking at Europe.
They're still too nervous to be putting money into emerging markets.
That uncertainty around what happens between US and China is still playing in the back of their mind.
But certainly when it comes to allocating new money, we're seeing our clients not be so gung ho on the US as they have been in recent years.
And Mark, do we know how sensitive the American voter is to this kind of economic pressure or are they likely to buy into the idea that tariffs are about them in the long run?
I don't think anyone is thinking the long run.
And in my discussions with various House representatives, they have a very unrealistic timeline for looking for dividends from the president's tariff strategy.
strategy. I've even heard some talk about whether the president could deliver on the goods by Labor Day.
This is completely unrealistic.
And when you calculate in that some of these efforts will take years, maybe a decade or more to come to fruition, assuming everything goes according to plan, I would imagine that you're going to see by November a lot of backlash.
And it's going to going to be pocketbook issues and the bond yield that are going to drive that backlash.
Mark Boosh, Professor of International Business Diplomacy, School of Foreign Service at Georgetown University.
Thanks for joining us, as well as Dimitri Grubinsky.
Thank you for staying with us on the program.
Well, let's get back to you, Emma.
Let's talk some markets, more markets, I'd say.
And Meta and Microsoft, we've seen the earnings in, and plenty of good news there.
It's all thanks Thanks to AI.
Exactly. We talked a lot about the macro, but now let's talk about the micro.
Meta and Microsoft, two of what were known as the magnificent seven stocks, which drove something like 60 % of outperformance of the entire S &P 500 in 2003 and part 2004.
What's been really interesting is to see the difference in those max seven stocks.
Tesla was one of them, which has really struggled over the last 12 months, particularly the last six months.
And the difference is between those companies where the hype has actually turned into to reality when it comes to AI.
So both Microsoft and Meta in their recent results are showing actually there are tangible revenue benefits to AI here.
So looking in particular at Meta, for example, significant increase in average price per ad, so up 9 % over the quarter.
So, this is showing the actual impact of the AI integration into Google.
With Microsoft as well, majority of that upside is coming from its Azure business, which is its cloud computing business, of which AI is a significant proportion.
It's one of the ways that that company is benefiting from the trend.
So we're seeing the reality here that is living up to what was the hype.
Right. And a quick one in 30 seconds.
Your thoughts on the interest rate decisions we had last night?
Not surprised. I think as we've been discussing over the last half an hour, there's still so much uncertainty in the U .S. economy and tariffs will be inflationary.
Therefore, the Fed is not ready to cut rates just yet.
Emma Wall, Head of Platform Investments at Hillgrave Lansdowne.
Thank you for joining us on the program.
And that's it on the World Business Report today with me, Bissi Adebayo.
Thank you so much for listening.
