Hello and welcome to World Business Report from the BBC World Service.
I'm Sam Fenwick. So global trade tensions are reaching new heights.
Donald Trump's decision to impose tariffs on Canada, Mexico and China is sending shockwaves through global markets.
Coming up today, we'll explore how these key trading nations are responding.
We'll start in Canada where Prime Minister Justin Trudeau has reacted strongly.
Now, it's not in my habit to agree with the Wall Street Journal, but Donald, they point out that even though you're a very smart guy, this is a very dumb thing to do.
Next, we'll turn to China and its decision to retaliate by suspending imports of U .S.
soybeans. Then we'll explore how Mexico plans to navigate this escalating trade war.
The struggles, you know, the drug war, the pandemia with COVID.
We were able to survive both of those crises, but I do not think that we can survive a permanent tariff war.
And it's not just these nations feeling the strain.
We'll also look at how tariffs could drive up car prices for US motorists.
And there are thousands of jobs in Canada at stake.
Now, we've done the work.
We are ready should the U .S.
decide to launch their trade war.
We will be ready. We are not looking for this.
We're not seeking this.
I've said it to you many, many times.
There's a level of unpredictability and chaos that comes out of the Oval Office, and we will be dealing with it.
The Canadian government may feel like they're ready to deal with it, but these workers at two different car plants in Ontario in Canada, a Stellantis plant and a Ford plant in the town of Windsor said they were concerned.
Every day we see over 3 ,000 people in here, and currently all 3 ,000 of those people's jobs are up in the air and left at the fate of Donald Trump and his tariffs.
We only have this job currently.
School costs quite a bit of money, so this job helps people pay for school.
I actually just bought a house, my first house, I'm 26, so the bills would have to get paid by my girlfriend, which would be hard on her.
We have these jobs here.
We have a culture of manufacturing.
We worked so closely with them for so long, and he's breaking the relationship, I guess.
So that was the picture in Canada.
In China, it said it would levy 10 % to 15 % tariffs on U .S.
agricultural goods ranging from soybeans and beef to corn and wheat, those to come into force from the 10th of March.
Meanwhile, in Mexico, the president, Claudia Sheinbaum, has spoken in the past hour, saying her government will announce retaliatory tariffs on its neighbour this Sunday.
A little later in the programme, we'll hear, though, how the new tariff war is already posing potentially an existential threat to some Mexican businesses.
My company has 47 years, the oldest one.
And this is the first time that I feel that our companies, you know, can cease to exist.
So we're going to try and get right around this trade conflict here on World Business Report today.
We're going to have more from that businessman in the border city of Ciudad Juarez.
We're going to be in Beijing in just a moment.
We'll also be wrapping up the immediate impact on many of the world's biggest companies, because it's pretty hard to keep your eyes on which of their share prices are falling the most on stock markets around the world.
but we thought it made sense probably to start in the United States where all of this, of course, began with this policy and our North America business correspondent, Michelle Flurry, joins us live from New York City.
Michelle, great to have you back on the programme.
Good to be here. Busy day.
Yeah, I bet, for you.
Take us back to the start then because there's always a danger, isn't there, on days like this that we pile into the reaction and the responses and what comes next.
The rationale from the White House's point of view for all of this and why it's decided to go ahead and impose these delayed tariffs now.
So, officially, the rationale we're told, at least for today's actions against Canada, Mexico and the extra tariffs on China, relate to the flow of fentanyl from these countries into the United States.
In reality, many suspect that there are other reasons that Donald Trump is doing that.
If you go back, for example, to when he imposed tariffs during his first presidency, a lot of the justification for that was this idea that America was sort of being taken advantage of.
That's what you hear repeatedly from Donald Trump, that it was not getting a fair deal from other countries.
And in his view, this tool is a very effective way of doing this.
But I've been speaking to some other people who say, actually, that's not what's going on.
What's going on here is all about alliances and geopolitics and it's been done with economic policy and the two can't be separated.
And that you have to think of tariffs as a means to achieve geopolitical goals, whether that is national security, stopping drugs into the US or other things.
But it can't be separated from other things like tax cuts, bringing back manufacturing to the US, energy dominance.
That's all part of the vision.
And I think that's why you're seeing Donald Trump willing to accept some pain.
But the question is, will ordinary Americans feel the same way?
Right. So as a part of a plank, I guess, in that broader economic policy, we've had some people who've been in the previous Trump administration come on the program and kind of outline this as well.
But this is sort of part one, right, before those other parts come tax cuts at home, things like that, to try and sort of balance out what would otherwise potentially be quite a painful period in theory for America domestically.
Yeah. So there's potentially more pain on the way for countries like Canada and Mexico and indeed China as well, because Howard Lutnick, the Commerce Secretary, was speaking on CNBC this morning.
He was saying that these tariffs were very much about drugs and the drug trade and that if you look forward to April 2nd, which is that other date you're referring to.
That is when reciprocal tariffs go into place and they will be global in nature and they will affect many, many more countries around the world.
In the case of the EU, potentially you could see tariffs of as high as 25%.
The potential to really spark a global slowdown.
So Donald Trump is, President Trump is playing with fire.
Is there a way of prioritising Canadian business procurement so that you can make sure that you keep things kind of local as such?
Yes. Yes. And that will be happening as well.
That will be a big part of the retaliation as well.
Okay. Well, that was Laura Jones, President and CEO of the Business Council for British Columbia.
Thank you for joining us today.
Let's now take a closer look at how China has responded to the latest tariffs.
Beijing has held back.
It hasn't held back.
In response, China has imposed additional tariffs of 10 to 15 percent on key U .S.
agricultural products like soybeans, pork, beef, chicken and dairy, with these measures set to take effect on Monday.
The government has also taken specific action against imports.
It suspended shipments of U .S.
logs and soybeans from certain companies, citing quality concerns.
Now agriculture accounts for over 20 % of US exports to China valued at 36 billion dollars in 2022.
Soybeans alone made up half of all US agriculture exports.
In stocks as you said not just in the US Germany is being hit particularly hard and that's sort of on fears about what might come next for those German stocks you know with the fact that we've had these trade tariffs applied to Mexico and Canada, it sort of raised the likelihood of the tariffs or similar
tariffs going ahead against sort of companies in Europe, particularly carmakers.
And that's sort of, we've seen the DAX fall over 3 % today.
US tech stocks are under pressure.
Obviously, the automotive sector as well.
So, you know, Ford, thinking about those big car companies that have supply chains and manufacturing outside of the US, they're all down quite significantly as well.
Yeah, absolutely. I'm looking at Stellantis, a maker of Fiat, Chrysler, trucks in particular in the United States, down nearly 12 percent right now.
They're a company that had kind of bet on, as we heard President Trump talking about right at the start of the programme, having supply chains right across what was a North American free trade area.
Clearly not been enough to keep them out of the firing line here.
We'll perhaps look at a bit more of the impact on companies in just a moment.
Let's broaden it out, look at a couple of those countries in a bit more detail too.
In a moment, we're going to hear from business that companies will be tied up with or if it's more of an immediate situation with the companies.
Is it a worrying precedent, do you think, that China is likely aiming to exert pressure on key players in the US agricultural sector?
Well, I think it really depends and I don't know if we'll ever know exactly why.
Um, it has been something that I understand China does in our industry and other industries at times, if there's a company that ships a product that may be out of specification or something, uh, I don't think this is not, it's not without precedent that they may say for a period of time, we're going
to have that company on a no ship list until we kind of review their processes and procedures.
So if that's the case, you know, it's not a good situation, but it is not necessarily a worrying precedent.
If this is the start of China kind of picking winners and losers out of our export grain industry, I think that's worrying.
Is it worrying this is down to the tariffs, that this is getting more tit -for -tat than it has been previously?
Yeah, I think, Sam, it's disappointing to us that these tariffs were put in place.
Maybe not totally surprising, but disappointing for sure.
Our organization and the whole U .S.
soy industry, farmers, goods including soybeans, Caleb Ragland, a farmer in Magnolia, Kentucky, is president of the American Soybean Association.
He told our sister program, Business Matters, that he's very concerned about what could happen next.
This is going to have a devastating effect on U .S.
soybean exports. China is our leading export market.
Soybeans are America's leading export ag product.
We've been through this before.
In 2018, that trade war, we lost over $27 billion in U .S.
agriculture sales, and soybeans were 71 % of that.
For more on the Chinese response, we spoke to Professor Wang Wen in Beijing.
Professor Wen is a researcher at the Chongyang Institute for Financial Studies at Renmin University and was also the chief opinion editor for the Chinese Communist Party's English -language daily newspaper, the Global Times.
China is strongly dissatisfied with the United States in position of terror and firmly opposes it.
So actually, compared to the first term trade war, China has a lot of experience dealing with Trump.
Because as we all know that Trump's first term, the total increase in tariffs in this Chinese war is about 20 billion US dollars, which is only 0 .1 % of China's total economic output of 18 trillion US dollars.
And in fact, what I want to say is that in China's public opinion, as I mentioned right now, this tariff war has not attracted much attention.
So what I want to say is that even we are in very serious tariff or trade war with the United States, but our economy has been affected by the tariff war or trade war are not very big.
Really interesting.
And we heard the Chinese government say exactly that, that they were willing to fight a trade war, if that's what it's going to be, to the bitter end.
From what you're saying, Professor, you think China is well placed to do that, that they could, you know, ride this out in the long term.
Yes. In fact, the Chinese government is now from Mexico City.
Katerina, do you think other business owners in Mexico share the same feelings there as Jose?
I certainly agree. I think for a lot of people, there is a fear that these tariffs are going to drive Mexico into a recession, particularly because the Mexican government has really followed through with Trump's demands in terms of cracking down on fentanyl trafficking, on the flow of undocumented migrants
from the Mexican into the U .S.
border. and i i think that with these tariffs it's going to make that crackdown even more costly and for a lot of people who are working in mexico mexican people here they rely on the industries that are going to be most impacted like agriculture and automotive and we've already seen that honda has made
this promise to uh to to shift manufacturing of their hybrid civic model into Indiana and the United States.
And so this will result in a potential significant loss of jobs.
And I think it is worrying quite a few people.
And it's certainly worrying the Mexican president, which is why she has decided to sort of hold off in a way in announcing retaliation until Sunday.
Yeah, we're expecting that announcement sometime on Sunday, aren't we?
I mean, the impact of the tariff announcement has already caused the peso to drop by about 1 .4 % across the day today.
Yes, it has. Climate at the border is not good.
Having a mood that is negative to business and being in the middle of a war makes everything very slow.
That's one big impact.
Does it mean you have to change your prices?
You have to change your prices.
Everything takes more time.
One load that I just imported from the United States to Mexico, it took four weeks to be able to cross.
And what would it normally take?
What would it normally take?
Hours. Oh, right. Hours.
The other thing is the cost.
You know, it's a 25 % cost to any side.
If you're going to import from the United States, you have to pay 25 % more.
If you're going to import from the United States into Mexico, you know, we're expecting that there's going to be new tariffs being imposed by the Mexican government.
It's very difficult because when you're being bullied, I understand that the Mexican government has to respond.
I think that the business sector understands if tariffs are going to be imposed on the Mexican side.
But we really hope that, you know, some sense comes into the process and we dedicate ourselves to SAFA system that has been working in the border for 50 years.
Local peoples are the ones that are being affected in their everyday life.
Do you worry about the force?
For on the other businesses, from what you're saying?
My company has 47 years, the oldest one.
And this is the first time that I feel in the last 40 years that our companies, you know, can cease to exist.
It's the very first time in a long time that our businesses are in real danger.
We have gone through a lot of crisis.
You know, we have gone through security crisis.
The drug war in Juarez, you know, that made us famous as the most dangerous city in the world.
We were able to survive that through resilience.
But this one is very difficult.
We have 365 worldwide companies that produce here that create around half a million jobs.
If that ceases to exist, there's nothing to replace them.
And if we lose that, then we're going to have a greater crisis than what we have now.
We have right now the crisis of drugs.
We have the crisis of, you know, insecurity, you know, the crisis of migration.
But if you add that destroying the economic system that has been in place for over 40 years, then the buffer zone, the security buffer zone that has been protecting not only Mexico, but also the United States is going to disappear.
And that's the real possibility that we're facing now.
It sounds extremely stressful.
Are you scared? Has said that staples like strawberries and avocados, bananas, are expected to become more expensive.
And the National Retail Federation expects that American consumers could lose between $46 billion and $78 billion in spending power annually due to the tariffs.
The car industry is among the hardest hit sectors.
For decades, automakers have relied on the economic alliance between the US, Canada and Mexico to establish highly efficient supply chains.
And these tariffs threaten to disrupt that balance.
Earlier, I spoke to Patrick Anderson.
He is the CEO of Anderson Economic Group, and he's in Detroit.
And he's been analysing the economic impact these tariffs will have on the industry, including how much more it could cost to buy a car.
The Anderson Economic Group estimates, which are based on 10 different actual vehicles assembled in North America from a variety of manufacturers, are that these tariffs would add $4 ,000 to $10 ,000 per typical vehicle.
And it's a number that we consider to be unsustainable for customers and for the manufacturers.
A typical car now, brand new car sold in the United States can cost $46 ,000 to $50 ,000.
And you're adding more than 10 % to the cost of this car for nothing valuable from the point of view of the consumer.
It's just additional cost.
So you can expect that customers are going to be resistant to these kind of tariff costs.
Where do those costs come from?
Have you broken that down?
The estimates that we have are based on the announced tariff policy of the United States and of Canada and Mexico.
So these are all additional costs that are in the form of taxes or tariffs that go to national governments.
And obviously there's no service that a customer gets because of this.
The product doesn't get any better.
They just pay more to buy it.
Can American consumers afford the extra cost on these cars?
A lot of American consumers are simply not going to pay an additional $4 ,000 or $8 ,000.
We have to remind ourselves that very few auto buyers actually have to buy a new car this year.
And if we see the production cutbacks, reductions in sale that I expect we will, you're going to see job losses in these states.
Why are Canada and Mexico so important to the U .S.
car -making industry?
The United States and Canada, all the way back in the 1960s, understood the benefits that they could share by integrating some of their manufacture across the border, really between Ontario and Michigan.
And then with NAFTA, that expanded to northern Mexico too.
And one of the reasons why the North American auto industry is so productive and sells so many vehicles is that you can build parts and whole vehicles in northern Mexico, Canada, Ohio, Michigan, Alabama, different states, making use of these other components.
And that makes it an incredibly productive place to build cars.
And that's why you've got German automakers, for example, building vehicles here and exporting them back to Europe.
The supply chain is very well established, isn't it?
I mean, how difficult is it going to be for it to continue like that?
This is a body blow on the whole supply chain across Canada and the United States.
And if you maintain 25 % tariffs, it will have permanent effects on our ability to do what we have done, which is a big threat to Michigan and Ohio and Ontario.
because if you don't think of the state of Michigan as a centre of auto manufacturing and design where you can build some parts of a car and send it to Ontario or get some products from Ontario and bring it here, then really a lot of the advantage that Michigan has had for the past century starts to
go away. In tariffs that we've seen in decades, right, so we are seeing that rollback of globalization.
We've gone back 70 years.
American consumers are in the firing lines and make no mistake, what we hear from President Trump, this is about jobs and prosperity.
What do we all know about trade wars?
You don't have to read the textbooks.
Those tend to be the biggest casualties of all, right?
So those are things in the firing line.
It's interesting when he thinks about where he may be inflicting the damage.
When we talk about China.
Now China, only about 3 % of its GDP comes from selling to America.
And guess what, that first trade war with Trump, if you like, you know, all those years ago, all those years ago, about seven years ago now, feels like a lot longer, that actually changed trade patterns quite a bit.
So China became less reliant on the US.
So it's less vulnerable than it might have been.
So when we're talking about what could happen in the global growth picture, recession is possible in Canada, although they do have some scope to cushion that blow through monetary and fiscal policy.
Mexico too could be in the same kind of firing line.
China could be more resilient.
And what you could see is more of that trade diversion happening.
So if you're not in the full glare of the Trump tariff headlights, you could actually see some benefits from North Carolina and opportunities too.
That's so interesting, isn't it?
Because the bet here, as Michelle was saying right at the start of the programme, from the Trump administration perspective, is basically unpicking globalisation isn't it it's doing kind of global economics and business and trade in a totally different way what you're saying is that actually some countries
have already begun to do that they've already kind of sort of braced themselves for this they have and you know we've been talking in recent years about globalisation being rolled back and the sort of fragmentation of the global trading system but this is a further seismic change right because what we'd
seen in recent years is you thought you knew who your friends were and you kind of banded together with them.
And then Trump's come along and said, no, unravel all of that.
Forget everything you thought you knew.
Canada, Mexico, effectively, you're on your own.
And the same could be said of the EU as well, which is causing huge changes in the world order when it comes to trade.
And here in the UK, for example, we've been looking once again at China in a way we've not been used.
I was going to say, how quickly do you think those changes come next for all of us listening around the world?
Well, it's really fascinating, isn't it?
We've heard the boss of Target saying If you are an American consumer, you're going to see price rises within the next few days.
You've got a great example about Whirlpool washing machines on our live basis.
No, well, I was looking at their share price just now as well before you came in the studio down 6 % as well.
These are integrated companies.
These are integrated companies, and the tariffs are not going to be here in the next few weeks.
I think, well, you know, you never know, right, with the current administration, what headlines are going to cross tomorrow.
But if you look at kind of how the market reacted today.
So, for example, the EWW, the ETF that represents the Mexican stock market, it was down 3 .6 % at the lows today.
It actually closed up on the day.
Canada didn't close up but closed well off the lows as did the U .S.
stock market. So, I think there's some inkling that this is going to be a short -term impact, but we'll just have to wait and see.
So, what are investors doing at the moment?
Are they just sort of waiting, biding their time to see what happens?
Well, they seem to be trading a lot because there's a lot of volatility during intraday as well as across days.
I mean, the S &P hit a high just a couple of weeks ago and is down about 6 % from those levels.
So certainly a lot of volatility.
I expect that to continue as we get these headlines crossing.
And we'll see what happens.
Well, thank you very much as ever.
Walter Todd, President and Chief Investment Officer at Greenwood Capital, joining us today from South Carolina.
Thank you for being with us.
The producer today was David Kan.
Thank you very much to him.
Don't forget you can always get a podcast of World Business Report by searching for us wherever you get your BBC podcasts.
Thanks for listening.
I'm Sam Fenwick.
