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Hello and welcome to World Business Report from the BBC World Service.
I'm David Harper. So today is the day. We've heard the details of many of the tariffs threatened or imposed by Donald Trump over the last few months.
Some have already taken hold, but Thursday is the day that a vast swathe of import taxes come into force.
Posting on Truth Social, President Trump wrote... Well, in the next half hour, we'll find out how beneficial it actually will be to the US. as well as hearing from businesses around the world that have been affected.
First of all, though, let's get up to date on what has actually happened.
Michelle Fleury is our North America business correspondent and joins us live from New York.
Now, Michelle, we've been hearing about tariffs connected to the White House for some time on specific products and countries happening already.
What has actually happened today? So as of midnight last night, reciprocal tariffs on a range of countries have come into effect.
And these tariffs range from as low as 10% to as high as 50%.
It is something that Donald Trump first talked about on April 2nd.
He talked about an idea of this on the campaign trail.
And now they have taken effect. But that being said, many countries are still quite confused.
They're wondering about exemptions in some cases, what products do or don't fit into those categories.
There is also confusion about whether or not these rates can be negotiated lower.
For example, in the case of Switzerland that got stung with a surprising 39%, the highest of any developed economy in the world.
You know, their leader traveled to Washington earlier this week left without a deal, but no doubt they will be continuing their efforts to try and get that down.
As you say, there's so many nuances to this and so many different variations depending on where you are and what you're selling or what you're importing.
Is there any sort of certainty now? Can people say, well, this is the new world or are we still at the whim of any potential changes?
I mean, I hate to say it. I think we are very much still at the whim.
You know, Donald Trump may have sort of settled for now on country levels of tariffs, but there are still sectoral, in other words, industry specific tariffs that are kind of looming on the horizon.
So pharmaceutical is one that he's been talking about this week.
Also chips last night, threatening 100 percent on semiconductors imported into America this With exceptions, again, they're huge carve outs for companies that invest in America.
So, you know, this is, as we know, a tool that Donald Trump likes to use as leverage.
And I don't think he's going to suddenly give up on it.
And we will be delving into that a little bit further later on.
Michelle Fleury joining us live from New York.
Thank you very much for bringing us up to date with what we have seen today.
Well, helping us to make sense of this on World Business Report is Linda Yu, economics professor at Oxford University.
Very grateful to you for helping to wade through this with us.
We'll be hearing about some of the impact of this around the world at the moment.
Let's just stay with the US side of it for a second.
President Trump, in that little quote that we read earlier, said, as a result of this, billions of dollars are flowing into the US economy.
Is that a bit of a stretch? I think he's talking about tariffs, if you can think of it as just a tax, that is generating revenue.
But as we would say in economics, that's part of the picture.
That's not the entire picture. So it's true.
Since he started imposing tariffs... In April of this year, you see that the amount of revenue coming from tariffs has increased.
So, for instance, the government's collected about $100 billion in tariff revenue in the four months since.
And that's about three times the amount that they collected during the same period last year.
But again, to give some context to that, the U.S. has a budget deficit of $1.4 trillion.
So if it's going to go towards reducing that, then you might say, well, that could be helpful.
But actually, President Trump has said he wants to give a check to Americans as a rebate for all the unfair trade that they've suffered.
So he's actually planning, I think, to redistribute this to taxpayers.
In which case, that's not actually going to help the revenue.
So as with everything, yes, it's true, tariffs are up.
But there's also, I think there's going to also, as we've also begun to see, not just an uncertain impact on the US deficit, but actually whether or not this increased cost of what Americans buy from overseas is going to be inflationary.
And there are signs that is actually going to do that, which would actually then squeeze growth in people's disposable incomes.
We'll look a little bit more for what the future might hold in the US in just a moment.
Linda, we'll come back to you in just a second.
Thank you very much for being with us. We are going to hear now, though, how this has impacted people in several countries, India in particular.
It's not only dealing with this round of tariffs, but also a further escalation that's due to take place in a few weeks' time.
Archana Shukla is our correspondent in Mumbai.
There is pressure and nervousness across businesses here in India.
I've met a couple of textile exporters and all they talk about is the uncertainty around trade right now.
The 25% tariffs apply from today and the additional tariffs come into the picture from three weeks from now is dealing a big blow to many of the exporters, especially textile, gems and jewellery industries.
These are all sectors which employ a lot of people.
Most of these exporters, at least 50 to 60 percent of their exports go to the United States.
And they are fearing that if this 50 percent tariff stay, they will literally lose out on business.
And some of them even said it could be doomsday because.
Small businesses particularly will not be able to compete with other countries, rival countries like Bangladesh, Vietnam, even China, which are at a much lower tariff percentage and they may lose out on buyers.
Even the bigger ones, you know, one of the textile guys who exports upholstery, garments and home decor to the United States, he was telling me mostly for the spring orders, orders are locked in by June.
It's already August, but these orders have not been locked in because buyers in the US are waiting to watch which way the tariffs go, which countries should they approach.
And in this period, Indian businesses might definitely lose out too.
And that is the bigger, you know, most of these sectors, most of these export sectors like the textile, gems and jewellery, seafood, even auto components, these are large job creating sectors in India.
And if they lose out business, the fear is it would lead to large scale job cuts as well.
And that would definitely impact the Indian economy.
A lot is at stake right now. Given that situation, and given that there is this other impending deadline of further tariffs hanging over Indian businesses, there must be a lot of pressure on the government to negotiate.
There certainly is. But, you know, there is a general and a broad consensus from bureaucrats to businesses who all feel that this latest escalation from the US is only like a pressure tactic to fast track trade talks.
And there is a general sense that India should not bow down. to the pressures.
Indian Prime Minister Narendra Modi, in fact, today said that they would do everything possible to protect the interests of the farmers here in India.
He was speaking at a conference, and that has been one of the sticking points.
You know, the trade tariffs and the way it's been coming is playing out differently here in India.
There are two sticking points. One is definitely India being reluctant to open up the agri sector and the dairy sector for United States where Donald Trump is wanting India to lower tariffs so that they can sell the genetically modified crops here.
And India has maintained a very tough stance over the last couple of weeks that that seems to be non-negotiable.
It's a politically and economically sensitive sector that India and has been protective all through and India doesn't want to open up.
The second bigger sticking point has come across more pressure coming on India buying Russian oil Over there also, India has now toughened the stance, saying that these additional tariffs are unjustified and that this Russian crude coming into India is crucial for the country's energy security.
It makes it affordable for people here and is important for a developing nation like India.
So while India has toughened its stance, But if the 50% tariff is what we are negotiating, then India may need to look at other options on what can they compromise on, because this will definitely impact trade relations with the United States, which is India's largest trading partner.
About 18% of India's total exports goes to the US.
And there is also a GDP impact. So there is an impact on India's economic growth as well.
So keeping all of that in mind and the job scenario here, there would be certain elements where India would want to negotiate on.
But how these talks go forward is something everybody wants to know.
Arjuna Shukla speaking to me from Mumbai.
Well, we heard there a little bit about some of the issues facing textiles exporters in India.
Let's take a look at the other end of the chain now.
Legrand Lindor is the owner of LMI Textiles in Milton, Massachusetts in the United States.
Thank you very much for joining us to talk a little bit about how this is affecting people.
Are imports from India particularly important to you or are there other countries that are presenting more of an issue?
For our supplies, we get a large amount of our supplies actually from France.
So we've been hit with some tariffs on that and in regards to aluminum products.
So actually, we're now facing 50 percent tariff rates from the 25 percent before.
And before that, you know, it was a much lower rate.
And so it really puts a damper on our business as we are actually having active import coming in right now.
And with the variable picture on tariffs, depending on what exactly you're importing and where it's coming from, is this really affecting your decisions going forward as to what you buy and who you buy it from?
Yeah, absolutely. So now we're really looking around, sourcing from different areas to see where we can possibly get these products or manufacture them ourselves through some partner's So it's definitely making us, you know, open up our eyes to see what options we can have.
At the same time, it makes us, you know, hold off on, you know, possibly having these supplies that are for health departments that we who are our clients.
So it might have us hold off on, you know. importing these items because we just can't afford to sell them, actually.
You might sell them at a loss. You mentioned potentially manufacturing stuff yourself in the United States.
That is part of the aim of these tariffs.
Is it competitive? Is it practical to do that?
Presumably, it depends what you're manufacturing.
We haven't dove deep in that aspect yet for the aluminum side.
We're definitely going to take a look at it.
But understanding our industry, it's very price sensitive.
So based on what we know from labor rates and things of that nature over here in the U.S., it probably won't be feasible for that part of the business for here in the U.S., I was going to ask about some of the costs as well, because in the face of import tariffs, how practical is it to speak to suppliers overseas and say, look, this is the deal.
We've got to pay an extra whatever it is percent.
You're going to have to talk to us about a cost reduction.
Yeah, it's definitely an ongoing conversation.
We've worked with some partners for long periods of time, so we're hoping that we might get some good feedback from what is actually going on, especially now that it jumped up to 50%.
I was just looking at a customs bill that's coming in, and it was $20,000, and it should have been possibly $8,000.
So it's a big jump from what we were expecting.
A lot of unexpected bills. Not a good thing for a business to have that level of uncertainty.
Correct. Yes. Great to hear from you, LeGrand Lindor, the owner of LMI Textiles in Milton, Massachusetts.
Linda Yu is still with us. We're also joined by Susanna Street, a head of money and markets at Hargreaves Lansdowne.
And we should talk a little bit about the market reaction.
Susanna, how has the reaction been on this in the day we've seen these tariffs introduced?
Well, actually, looking at the S&P 500, I mean, it's pretty flat, actually, edging into positive territory.
Slightly different story in terms of the FTSE 100 in London.
But that is also to do with the latest interest rate decision and a bit of a split, the Bank of England, over interest rates and what should be done.
They did vote for a cut, but actually ahead, it looks a lot more clouded, the outlook, and that's kind of weighing on. on the FTSE 100.
But of course, as well, even though the UK has on the face of it done better than other nations in terms of negotiating a broad 10% tariff compared to the more onerous tariffs from other nations, it's still going to be hit by the fallout on the global economy.
And so there is a bit of a downbeat mood around because this game of chess is still ongoing.
We don't yet know where the pieces will land.
And that's causing a lot of uncertainty.
I was going to ask about that UK interest rates cut that we've seen today.
I mean, how much of a stretch is it to say that this is connected with the tariffs climate?
Well, it certainly is connected because what we've seen is since Liberation Day, even though the UK economy had been growing, it's now gone into reverse.
Now, that can partly be down to some domestic factors and increases in tax.
But more broadly, it is because of the uncertainty over tariffs.
It's hit car production. It's hit consumer and business sentiment.
And so growth is expected to be lower than expected earlier in the year.
And so inevitably, it will have this effect, not just on the UK, but of course, other nations as well.
In the United States, of course, growth forecasts have been halved because we're hearing, of course, so many more businesses are going to be reticent about investing and that's going to have an impact on growth going forward.
And what happens in the United States and in other nations also impacts the UK, of course.
Let's turn to you for a moment, Linda, because this has been quite interesting.
We're talking about the future in the United States and in the tech sector in particular, because interestingly, in the last day, we've heard that announcement from Apple that they are making more of a commitment to manufacturing in the United States.
Yes, I think this is an area where the US is hugely worried about competing with China.
And so semiconductor chips is the latest area that the US is going to impose tariffs.
And it's a whopping 100% tariff on semiconductor imports, except for those companies that invest in the US.
Of course, Apple is an American company, but it just shows you that The global supply chain, the value chains that these companies work with means that, you know, they do what's efficient and semiconductor chips are dominated by Taiwanese company TSMC.
But that being said, TSMC has also said they would invest in the US.
So this is all part of the US trying to, I think, maintain or control one of the areas of technology that's probably going to shape quite a lot of the tech race, if I can call it that, this century.
And they're mostly targeting this against China, of course.
Yeah. And just on that subject, there have been huge fears in the American tech sector over this, given their dependence on resources and manufacturing abroad.
We heard this from President Trump, who's dead set on bringing the industry back, he says, to the United States.
We'll be putting a tariff on of approximately 100% on chips and semiconductors.
But if you're building in the United States of America, there's no charge, even though you're building and you're not producing yet in terms of the big numbers of jobs and all of the things that you're building.
If you're building, there will be no charge.
It's difficult to interpret that because you wouldn't expect it to be a charge if you were building in the United States.
Yes, as with everything, I think we need to see the details on this one.
This has just literally been announced. But I think the gist of it is very similar to what we've seen in other areas where the US very much wants to maintain its dominance or its competitiveness.
The semiconductor chip, again, 100% is much higher than what we saw compared with what's called Section 232.
These are the steel and aluminum tariffs, so basically sectors the U.S. wants to promote at home.
But remember, those tariffs are 25%, so 100% is basically cheaper.
It's basically saying don't sell chips into the US, produce them within the US.
But I think the limitation here is companies like Apple, companies that or other companies, Microsoft, which are doing a lot of artificial intelligence.
There's not enough chips produced in the United States.
This is why they import them elsewhere. from from mostly from Taiwan, actually, and increasingly other parts of East Asia.
So I think this is going to be fairly disruptive.
And I wouldn't be surprised as we get the detail on this, that there will be a bit of a pause or a halt or carve out or clarity on what he means by that.
And Susanna, just in terms of, as we said, this was known about for some time.
This is something people have had time to react to.
But is it causing a problem for any particular sectors, tech and also other areas?
Certainly, we heard from clothing textile companies earlier in the programme.
It's certainly causing a huge headache for them, given the uncertainty surrounding the imports and the costs that are going to rise so dramatically for that sector.
But of course, look at the huge rebuild that needs to take place in California.
And you've got timber from Canada. And supplies from South America, those countries hit by high tariffs, it's going to cause real problems for the construction industry as well going forward.
And the big question, of course, for all of this is, even though Trump wants to make more products in America, they will inevitably be much more expensive, whether you're looking at tech. whether you're looking at chips, whether you're looking at building products, because simply labour costs are much more expensive.
And will consumers put up with that? Yeah, you either pay the tariffs or you pay the extra cost of building in the United States.
Susanna Street, Head of Money and Markets at Hargreaves Lansdowne.
Thank you very much for your analysis. Ryan Reynolds here for Mint Mobile.
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This is World Business Report from the BBC World Service.
Now, we've heard quite a few people talk about some of the preparations for the imposition of these tariffs.
Put simply, many businesses have been buying and importing as much as they can ahead of time to avoid the increased charges.
But that tactic doesn't work for things with a short shelf life, things like food imports.
And in Indonesia, prawn exporters are feeling the impact after the new US tariffs hit their biggest market today.
Budi Wibowo is the head of Indonesia's seafood industry.
In Indonesia, fishery, we export totally about US$6 billion to all the world.
Around 33%, around US$2 billion we export to USA.
How worried are your members about these tariffs that are coming in?
How has the landscape changed now? Actually, the problem is one of our biggest competitors is Ecuador.
Ecuador is only get 15%. So that will be a problem because we have a different 4% with our strongest competitor, especially in exporting for shrimp products.
Are American customers now having to negotiate lower prices with you?
Yes, yes. They want to decrease some prices with us, but I think it's not so easy to decrease the price in our side because production costs also not decrease in our side.
In terms of individual farmers, how is this affecting them?
I think the effect is we cannot see now.
It's still waiting one or two or three months later so we can see because...
The tariff actually should not depend only for Indonesia, but depend also for another country.
Let's say for another country, our competitor beside Ecuador is India and Vietnam.
India, 25%. So we will see during one, two or three months what happens.
Do you have other potential markets? Could you look to sell elsewhere?
I know China is a huge market for seafood.
Yes, yes. Of course, one of our very potential markets is China.
But you know, as you know, that to change the market is not so easy because every market has different requirements, different standards, different prices.
So we need time to expand our market to different countries.
But of course, we will try best to try to diversify our market as soon as possible.
In terms of individual businesses, what sort of an impact is it going to have on them?
Are people going to lose their jobs over this?
Are people's businesses going to really struggle?
I cannot see now, but maybe if the price will decrease, maybe some people will stop farming.
Are you expecting this to be the new normal now?
Or are you confident that there could be some relief from tariffs on the horizon?
Yeah, I still hope our government can negotiate again with USA to decrease the tariff, especially for fishery products.
Because in joint statement between USA government with our government, some product can renegotiate about the tariff.
For example, if the product is not available in USA or maybe not so much produced by USA, our government will try to negotiate to decrease the tariff, including the fishery products.
You think American consumers could suffer as a result of this?
Yes, of course. If we cannot decrease the prices, of course the buyer, the importer, will increase the prices.
Rudy Rubo with a bit of insight on what this has meant for seafood exporters in Indonesia.
Linda Yu, economics professor at Oxford University, is still with us.
That talk about increased prices is quite interesting because President Trump's taken an awful lot of pride in these tariffs.
It's been a key promise. Is this pride a bit premature, though?
Have people in the US yet to see the full impact of what this will mean?
Yeah, but they are beginning to see the impact.
And, for instance, US inflation actually hit 2.7% in June.
That's beyond what the consensus estimates were expecting.
And it does reflect the fact that these tariffs which have been in place since 2008.
April is actually increasing prices. And in fact, what's called core inflation, which when you strip out volatile things like food and energy, that actually rose by 2.9%, nearly 3%.
So that high inflation is actually one of the reasons why US interest rates right now are actually higher than what they are in the UK, which is pretty unusual, given the US has a fairly robust economy.
It is because of the inflationary impact of tariffs.
I know you don't have a crystal ball and it's impossible to completely predict the future, but on the balance of probabilities, given the situation we're in now and the impact that we're likely to see as this really beds in, what can we see in the US economy potentially in the next few months?
Well, we should probably say the U.S. economy actually contracted in the latest figures because there was a rush to get all of your goods bought into the U.S. before the tariffs came in in April, which are widely expected because that's what President Trump had advertised.
So it's quite hard to read what will happen in the rest of the year, except that with higher costs, consumers will be hit.
Uncertainty will reduce business investment.
People will just hold off and wait. All of those things suggest a slowing economy.
So I think for the rest of the year, given the amount of trade negotiations that we're still expecting, I think that pattern is unlikely to change.
Where the U.S. benefits from is that it has a fairly robust jobs market.
It's got very strong fundamentals. But that doesn't change the fact that cyclically, which is what we're talking about, increasing taxes depresses demand.
And that impact is unlikely to go away until we get a bit of certainty, which I don't think we will in the coming months because As you've seen, when you negotiate something, it's not quite done.
So Indonesia, you know, great discussion you had there with the head of the seafood industry that the tariffs that they're paying is after they negotiated a trade agreement.
And then there's still countries that haven't yet negotiated a trade agreement.
So this is going to go on for months. We're going to have to wait and see what happens.
Linda Yu, economics professor at Oxford University, joining us here on World Business Report as we take a moment to look at some of the tariffs coming in today and how they might affect the world.
