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Hello and welcome to World Business Report from the BBC World Service.
I'm Rahul Tan and once again we're talking about tariffs, we're talking about what's been another up -and -down day for the global economy because that volatility we've seen it the most in the financial markets with big falls at the start of the day in Asia and Europe.
the US market will they close a short while ago after a bumpy session, we'll be looking at that.
In a bit more detail in a few minutes.
This, of course, is all linked to Donald Trump's tariff policies.
Well, what has he said?
A short while ago, I spoke to our North American business correspondent, Aaron Delmore, who started by telling me where exactly we are when it comes to those tariffs.
We have seen a real back and forth today.
And I feel for the reporters who are throwing questions at President Trump, whether it's on Air Force One over the weekend or during a bilat with Israeli leader Benjamin Netanyahu today.
Everyone's trying to nail down whether this is a negotiating tactic or whether the moves he's making on tariffs are really intended to level the playing field as he calls it, extract concessions from foreign partners.
And he talks about rebalancing trade.
Now, it seems like his White House is trying to have both lanes at the same time.
You will hear him, or you'll hear people in his administration saying, we're staying firm, we're not budging.
And then we'll also see him talk about phone calls he's taken, Vietnam, Japan, today, Mr Netanyahu announcing that they're going to be eliminating the trade deficit with the US, Israel will be eliminating all trade barriers, and holding that out proudly as a success.
So a lot of back and forth on what the tactic is and what the overall aim is.
70 countries, I think is what Scott Best and this Treasury Secretary is saying, have been in contact to have negotiations on those tariffs and that confusion we're seeing that reflected in the US markets aren't we?
Absolutely we've seen one of the most volatile days that I can remember and when we try to put it into context we hit these touchstones like March 2020 the onset of the Covid pandemic or November 2008 the sinking during the financial crisis.
Those are the last couple of times we've seen intra day swings like this and it just shows you how paralysed some of these investors feel and these business leaders trying to make decisions regarding their procurement, their supply.
And, you know, just to put a fine point on it, Rahul, we saw the Dow swing more than 2500 points today.
The NASDAQ was trading within a nearly 10 % range.
And at one point, we saw the S &P jump 8 % based on an interview that one of President Trump's closest advisors, Kevin Hassett, had done that was interpreted to say that he saw the President, you know, considering relaxing tariffs on most countries, not China.
And that really made investors feel bullish.
And we saw a couple of the indexes tick into the green, this giant jump.
And then within not long the White House denied that report.
And then the markets fell again.
So it's a real, real whiplash, seesaw, yo -yo, use the metaphor you like.
It's just been an absolutely dizzying day on Wall Street.
Aaron Del Mauldo, let's bring in Peter Jankowski.
It's one metaphor would you use for a day like this Peter from Arbor financial services, and it's a long time since we've seen anything like this, isn't it?
Yeah, yes, indeed. You know, it brings to mind, you know, the financial crisis this November and December of 2008, though, I think the big difference here is that, you know, all of this has been done kind of at the stroke of a pen, and could very easily be undone by a stroke of a pen as well.
That's a big distinction relative to what occurred during the financial crisis.
So it's not inherently structural, it's something that that potentially can be resolved through negotiation.
And I think that's what investors need to focus on.
But having said that, yeah, it was busy.
Yeah, understatement that let's speak to somebody else who's been busy today Peter with us for the whole of the programme Mark Malik, Chief Investment Officer at Siebert in New York, your clients, you must have been on the phone, quite a lot you must have been over the last few days last week or so on the phone quite a lot.
Mark, what are investors you're talking to doing at the moment?
Are they selling and just holding cash?
Yeah, that's a good question.
I think starting last Thursday, our retail investors were doing what retail investors have done for the past couple of years, that winning strategy of trying to buy the dip.
And you saw that happening a lot on Thursday.
Friday was a little tougher And we started to get a lot of calls asking questions on what they should do.
And today, when we woke up this morning to markets down significantly, I think today was shoring up to be a sell day.
In fact, we did witness some selling early on, sort of non discriminant sell at the market kind of actions.
But then, of course, everything changed the second that that report, which was ultimately called the False News Report came out and that sort of changed everything and the complete dynamics of the market action for the day.
Yeah buy the dip is when the markets go lower and people often think that's a good time to buy, but you've got to predict how low they could go.
What are your thoughts on that?
Yeah I think look the markets are trying to test lows, I think the way the market ended up today, slightly better was a positive.
There's certainly the possibility of the markets trading lower at this point until we see some resolutions or some sort of major policy changes.
Right now we're just sort of trying to read people's faces, trying to guess what might happen.
But until you see any major policy changes, we're not going to see a move back up.
But in terms of this negative bend to the market and high volatility, we expect to see that to continue.
Mark, stay with us Peter, I was talking to a couple of economists earlier today, they said something which I think is important that we stress on this program.
The markets are not the economy, are they?
You know, if the market's doing badly doesn't necessarily mean the economy's doing badly is because the markets are more based on sentiment.
That's correct. In my case, I've always thought of it as it's kind of a predictor of where economy might be.
In some cases the market is a decent forecaster of what the economy is going to look like in six to nine months.
Which in this environment that makes sense because people expect that with these policies the economy will slow down, but we can also see where that sentiment changes very violently as it did today with the prospect that some of these policies might be So, absolutely, it is not, the markets are not the economy but they do provide insight into where people think the economy is going.
Mark, final question to you.
Give us a word to describe the mood of your investors, nervy?
Panicky? What would you say?
I would say tender is a good word to describe it.
I think that there are some nerves out there.
I think that people are feeling a little exhausted at this point, unable to sort of use that regular playbook that has worked so well for investors for so long.
And so they're very, I guess, nervy, tender, and exhausted would be my three words I would use.
Well, there you go.
Why use one when you can use it.
Mark, we're gonna keep in touch with you over the next week.
Also, thanks so much for joining us here.
Asking the right questions can greatly impact your future, especially when it comes to your finances.
So if you're looking for a financial advisor you can trust, certified financial planner professionals are committed to acting in your best interest. That's why it's got to be a CFP.
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You're with World Business Report from the BBC World Service.
We heard earlier from Aaron Delmore talking about some of the announcements Donald Trump has made on tariffs and some of the questions that he was answering.
One of the things that he has put in place is much higher tariffs on China.
He says if they decide to go on with their retaliatory tariffs, that could take the Chinese tariffs to over 100%.
Speaking before the announcement, China's Foreign Ministry spokesperson Lin Zhan said US self -interest was jeopardizing global stability.
The US is seeking hegemony in the name of reciprocity, sacrificing the legitimate interests of all countries to serve its own selfish interests and prioritising the US over international rules.
This is typical unilateralism, protectionism and economic bullying.
We wanted to get the thoughts of somebody who knows China well, so I've been speaking to Nancy Chen, economics professor at Northwest University, also founder of the China Lab.
So how will the Chinese government react to this latest threat from Donald Trump?
One thing to note about Beijing and the Chinese government, for the way it's been behaving for the last few decades, is that it's very systematic.
In that sense, it's really different from the current US administration, which sort of flies by the seat of its pants.
Beijing does things that it's thought out that it has a plan for.
They usually plan for different contingencies.
And so given that there has already been a trade war during the first Trump Administration, and it's well known that Beijing has been prepping for a second trade war, I think most likely they're going to retaliate.
You talk about a second trade war here.
China is responsible for 32 % of global manufacturing.
If there is a trade war, and those products are not going to the US, where will they go?
Two things will happen to Chinese exports.
The first is simply that they're going to to export less.
20 % of Chinese GDP relies on exports.
Around 15 % of that goes to the US.
It can't face 50 to 100 % tariffs to the US and export the same amount.
That's just a fact.
And then, of course, part of the exports can be diverted to other markets, such as Europe.
Economically, it will be a challenge for the Chinese, but the Chinese like to play a long term game.
Do you think they may benefit in terms of new relationships?
We had that quite extraordinary meeting recently, didn't we, with economic officials from China, South Korea, and Japan all meeting together?
The meeting of the East Asian countries is really quite remarkable.
When you think of the animosity between these governments, you know, for the last 50, 60, 70, 80 years.
But I think another place where an opportunity will arise is between the European Union and China.
Until now, the European Union has mostly been concerned about just a sheer volume of exports coming from China.
You know, whether the trade practices are fair or unfair, it's just impossible for the European markets to handle that amount of exports.
But with the US tariffs now going up against everyone, it means that it's going to be more costly for everyone to do trade with the US, so now there's more incentives for the world's second and third largest economies to deepen their relationships and engage more with each other.
But even if that happens, this is going to hurt the Chinese economically, isn't it?
The tariffs that Donald Trump has put in place and the impact that it will have on its trade.
The tariffs that the U .S. is putting in place is definitely going to cause a lot of economic pains around the world.
China first and foremost probably.
Also, given the fact that if China wants to deepen its relationships with other economies like Europe or Japan and South Korea, on the one hand these economies will be incentivized to take exports from China because it's more expensive to trade with the U .S. But like I said, China exports too much. They can't take it all.
So if China wants to have good relationships with these other economies, it's going to have to signal that it's willing to limit its exports so that it doesn't flood these other markets.
And that's going to hurt.
Peter Jancowskas still with us.
Fascinating to hear Nancy's thoughts there.
Do you think there is a danger here, that from his policies, Donald Trump might drive more countries into the hands of China?
Yes, I think that is a very significant point and something that we need to be aware of, you know, certainly trying to contain China, if you will, in their own efforts to expand and become a stronger power.
That's a very important strategic goal.
And this tariff program is running at odds with that.
So the task could have a huge impact on China.
Let's stay in Asia and move to India, which has reciprocal tariffs of 26 % placed on it.
Here's Donald Trump making that announcement.
India, very, very tough, very, very tough.
Prime minister just left and he's a great friend of mine, but I said you're a friend of mine, but you're not treating us right.
You have to understand we charge them almost nothing for years and years and decades.
So you may think that that's bad news for India.
But I've been speaking to different exporters in the country and depending on what sector you are in, there are very different emotion.
So to sum it up, I've been speaking to Ajay Sahahi, the chair of the Federation of Indian Export Associations.
26 % tariff is definitely pretty high tariff, this is much more than anybody expected in India.
As of now, orders are pretty on hold.
And that's not something which is exclusive to India that is with all the countries.
But at the same time, we're also looking into how it will look like when some of our competitors, countries are under a high tax bracket, to what extent it will help us in some of the sector.
It's interesting you say that I was speaking to some textile manufacturers over the weekend and they were exactly saying that point, they said look the tariffs we're not happy with them but the tariffs on Pakistan, Sri Lanka and Vietnam are much higher.
So is it an opportunity for India?
That's true. By that sector even the because China, Vietnam are two of the major suppliers of footwear in the world and hire tariff on them.
And now the US has also increased the tariff on China as we two are talking.
So we will have the market in textile, apparel, leather, gems and jewelry, electronics, chemicals, and plastics, because in all these sectors, our competitors are either from the South -Eastern Asian countries or China or South Asian countries.
In all of them, the tariff is pretty high compared to India.
But there are other sectors where it is a problem.
I was speaking to tea exporters, and Kenya's tariff is 10 percent, so a lot of tea exporters were worried about the effect on their business.
I agree with some of the sector are of concern also.
You have rightly said about the tea, so is the marine sector because Ecuador is having 10 percent duty, Canada will have zero duty, and both of them are keen competitors of India.
We already have lost the market with the imposition of subsidy and anti dumping duty on marina sector, so that's also the area of our concern.
We also have to be careful in carpet sector where Turkey is our competitor and Turkey is having 10 % duty whereas we are having 26 % Duty.
Even in some of the machinery segment where EU is having 20 % Duty, we are having 26 % Duty.
We have to be careful at the same time.
have you had conversations with the government we know the Prime Minister Modi and President Trump have a good relationship are you hopeful that there will be some sort of trade deal soon between India and the U .S that could actually remove many of these tariffs?
Absolutely when the Prime Minister met the U .S President, we talked about Mission 500, that means taking bilateral trade from 200 to 500 billion dollar and also about the BTA by fall of 2025.
BTA is a bilateral trade agreement, which we are working with the US which amongst many other things will also include a tariff concession on both the sides.
Do you see the point that Donald Trump makes though when he talks about India that there are many sectors of the Indian market that are closed still aren't they?
To American companies is it time that they were opened up?
So far, as the industrial sectors are concerned, we are not having much challenge.
Probably if he's looking into zero tariff on EV that may be a area of concern.
Our main challenge lies in agriculture and dairy because India is not having commercial agriculture or commercial dairy sector.
We are having sustenance farming and dairy is generally an ancillary to the farming only.
So probably we are having a little different position as compared to U .S. or EU.
In these sectors, the sensitivities are involved there.
Ajay there representing Indian Exporters, Peter, and I suppose giving a clear indication that countries that could strike a deal quickly with Donald Trump, those countries could benefit.
Indeed, First Mover will be a very important thing.
Yep, certainly will be.
Let us see who that First Mover is going to be.
We want to get some more thoughts from somebody who's been involved in advising a president when it comes to trade.
So, I've been speaking to Susan Schwab, she held that post, she was former top trade negotiator and advisor to President George W.
Bush. So, I asked her whether Donald Trump is right when he says America is not being treated fairly.
If you watched the Rose Garden ceremony the other day, he held up this big book that he referred to as the National Trade Estimate Report.
That's a very real report, it's done every year and it lays out foreign barriers to U .S. of goods, services, and agricultural products in every 30 -some countries that we do business with.
And some of those barriers, some of those constraints are, we believe, WTO -inconsistent.
Some of them are WTO -consistent and should be the topic of negotiations.
So those are very real, just as other countries have complaints about doing business in the United States.
But yeah, there's definitely some unfairness out there, no question.
But the question becomes putting up tariffs unilaterally, which of the issues are you addressing?
And when I started out talking about those individuals in the United States who have lost their jobs because of imports and productivity enhancements and so on, to what extent are those trade -related job losses and to what extent are those job losses related to other things?
And if you look at manufacturing output in the United States, it has actually gone up.
If you look at manufacturing employment in the United States, it has gone down.
The same thing, by the way, in Japan and Germany and through much of the developed world.
Yes, which we're seeing through mechanisation, aren't we?
Largely, but not exclusively, and this is when you start getting into conversations about China and China's industrial policy and non -market economy practices, where you have massive overcapacity and global underpricing and dumping.
So is he right to tackle China?
But do you think he's wrong to put tariffs on all countries?
Should he stick to dealing with China?
Well, I think he is right to be tackling China.
And I have not yet seen a convincing argument for the way he is going about it.
Let's put it that way.
And I think that there are things that can be done about China.
I think that there are challenges vis -a -vis some of our other trading partners.
But the bilateral, looking at bilateral trade deficits, for example, bilateral trade deficits are the result of other things, they are not the cause of the problem.
And the signals that were sent policies made in the first Trump administration, actually led to some of this investment in Vietnam, that is now showing up on our shores, that has made them unhappy about the rise in the bilateral trade deficit.
So I think putting up tariffs, this abruptly is going to do a whole lot of damage, not just to the trading system and trading partners, but a whole lot of damage to competitive US producers and exporters as well, obviously, as consumers.
You have given trade advice to one US President.
If you had to give it to this one, knowing that he doesn't like to back away from policies, what would you say to him?
I am not part of this administration.
I don't think he'd ever consider hiring me.
So let's be upfront about that.
I think what I would say is, okay, we find ourselves in the position that we're in, you have some objectives, some of which I think are fully on target, some of which I may not be as comfortable with.
What do we do now with the tools that you have that might actually address your concerns?
You know, we can get into the conversation about where are the tariffs leverage?
What kind of tools exist that are consistent with our trade agreements, where you can accomplish these things without over rotating?
And why don't we talk about what trade solutions can be used to address trade problems, and what other solutions can be used to address problems that aren't actually caused by trade?
Susan's rob there, who was the US Trade Representative for George W Bush.
We try and bring you the voice of businesses on the programme and how they are being affected by the uncertainty in the global economy.
So let's hear from another one now.
well Haley Pavoni runs passion football footwear, which makes fully convertible high heeled shoes, a design that she says can only be manufactured in China.
She of course is based in the US and she took her frustrations with US tariff policy onto social media at the weekend.
What I'm hearing is I should also tariff Vietnam.
That's really not what I'm trying to say, actually, why don't I just tariff everywhere so that you have to make it in America?
Again, Again, that's not really an option.
If you're not manufacturing in America, you should be punished for that.
OK, but business models are fundamentally built on product cost and a 99 % tariff would double our product costs, so it would fundamentally change our entire business.
That is really sounding like a you problem.
Hayley there, speaking to Hayley trying to give you a sense of some of the questions that she's been facing and I've been speaking to her.
Looking at my company, specifically, we operate in the footwear space, I think something that a lot of people do not understand with these, you know, most recent tariffs that have been announced is that that is not the full tariff.
That is a tariff that is added on top of previous tariffs, as well as on top of the base duty rate.
And so for our product in particular, we're now going to be looking at a minimum total import cost of 64 percent.
And then on our textile line of footwear, up to 99 percent.
So effectively doubling our product cost. And that is because some of the key components to your products come from China.
Yes, our shoes are fully produced in China, largely because our main method of production for our unique technology is injection molding and scaled injection molding for footwear really only exists in China.
We have vetted several other countries to try to find a competitive supply chain and have been unable to do so.
And is it possible for you to move that to the US?
Is the technology there?
Unfortunately, no. So there's currently no scale footwear manufacturing in the US whatsoever because there physically is no facility to move to.
We've looked far and wide and it's just not an industry that exists here at scale anymore.
We know that Donald Trump has threatened China with even higher tariffs if they go on with that retaliation, so your costs could increase even more.
Will this put you out of business?
There is a possibility of that.
I mean, of course, you know, we are an entrepreneurial organization We've already navigated very challenging times with the pandemic, supply chain crisis, the recession, and so we're pretty battle tested and good at pivoting and finding solutions.
But that being said, you know, looking at an overnight gutting of our profit profile, essentially, is probably the trickiest one I've managed yet.
And you mentioned the pandemic.
That was an uncertain time.
Is this time as uncertain?
I would say it's uncertain in a different way, especially in recent months.
You know, We have seen pretty sweeping changes to import law in the US that are promised and then taken back and then promised again.
And so I think what's what's different this time is there almost seems to be a greater level of uncertainty coming from the top.
In this instance, it feels like even the government agencies I'm talking to don't know exactly what's happening or what the next step is going to be.
And because of that confusion, is that why you came up with this idea for the clever skit that you've done on TikTok?
We heard a bit of it just before we started this conversation with you where you're basically asking yourself questions.
Yes, for sure. It's actually very reflective of the actual conversations that I've had for the last two weeks.
We'd been working on a government backed facility that we had gotten all the way to the final term sheet process that then fell apart in a matter of 24 hours because of new sweeping regulation changes for government backed loans.
And then adding the tariff news on top of that, I think a lot of small businesses are wondering what exactly is expected of us?
Haley Pavone there of Passion Footwear and we will continue to follow her story.
Peter, Tuesday is going to be a pretty crucial day because these reciprocal tariffs, you know, they're due to come in, aren't they, on Wednesday.
So, a crucial day tomorrow.
Indeed. Well, we'll see how the market reacts and as this becomes more and more real in terms of its impact it makes it a little harder to hold out hope that will be quickly reversed.
Yeah, final 30 seconds to you.
So, if we don't see a sort of movement away from the tariff, the reciprocal tariffs coming in, could be a difficult day?
It could be, it very much could be, we'll just have to wait and see.
As I've said, it's very easy, it was very easy to start all this with a stroke of a pen.
It could very well be ended with a stroke of a pen too.
Peter, I'm sure that Tuesday will be another busy day for you every day.
Really busy day for those involved with the global financial markets.
We will be back with Business Matters in a couple of hours time where we'll continue the conversation about tariffs.
Asking the right questions can greatly impact your future, especially when it comes to your finances.
So if you're looking for a financial advisor you can trust, Certified Financial Planner professionals are committed to acting in your best interest. That's why it's gotta be a CFP.
Find your CFP professional at letsmakeaplan .org.
