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Hello and welcome to World Business Report from the BBC World Service.
I'm Rob Young. On this edition, the trade war between the world's two biggest economies has escalated.
China says it will retaliate to America's retaliatory tariffs.
Financial markets have fallen sharply in response.
You'll get the latest from the trade conflict over the next half an hour.
Well, the corporate and financial worlds are still reeling from the global trade war sparked by President Trump's announcement of import taxes on almost everything that enters the United States from almost everywhere.
One of the most important trading relationships there is that between China and the United States has become even more strained, as if that were even possible.
China has today hit back hard retaliating to a US decision to impose further tariffs on Chinese goods.
Beijing has announced additional tariffs of 34 % on American products, matching Washington's latest move.
Financial markets are sharply lower again on Friday as a result amid fears that a global tit -for -tat trade conflict will lead to company profits tumbling and a recession in the world's biggest economy.
Speaking in Brussels after a meeting of NATO foreign ministers, the US Secretary of State Marco Rubio defended the Trump administration strategy.
Markets are crashing because markets are based on the stock value of companies who today are embedded in modes of production that are bad for the United States.
We have to be a country that think we're the largest consumer market in the world and yet the only thing we export is services.
And we need to stop that, we need to get back to a time where we're a country that can make things.
And to do that we have to reset the global order of trade.
so the president rightly has concluded that the current status of global trade is bad for America and good for a bunch of other people and he's going to reset it and he's absolutely right to do it.
Well in addition to China's announcement of additional tariffs of 34 percent on US goods on Friday, Beijing also said it would take other measures such as tightening the export of so -called rare earth minerals which are critical in high -tech products.
Well, President Trump How sins go to China, saying on social media, China played it wrong.
They panicked. The one thing they cannot afford to do and his message was written all in capital letters.
Well, for more on China's response, here's Joe Lay, the bureau chief for the Financial Times in Beijing.
China up until now has been relatively restrained.
The US has already put 20 % tariffs on China, to lots of ten.
China retaliated with tariffs on US agricultural imports, but they were sort of a little bit less than what the US had done.
But this time, it seems like China is really just going all out and and slapping the same tariff on all US imports as well as some export controls and other non -tariff measures.
What then do you think is China's plan?
Is it just a show Donald Trump that they are just as tough and as strong as he is?
Are they trying to do something else?
Are they trying to kind of escalate to de -escalate this?
What do you think is going on?
I think it's more the latter.
They do need to show strength.
China is not the kind of place that's going to go running to the U .S. to try to negotiate.
But China's position is not as strong as it might look.
China is the world's largest exporter, it does need global markets to stay open, so it will be quite keen, even through all of this, to try to negotiate a deal with Trump.
But at this stage, I think this retaliation does show that they are putting on a tough face on the negotiations.
Does China buy much from the United States?
We know that the American consumer seem to have an almost unending appetite for goods produced from China.
But what's the trading flow the other way?
To be honest, it's much less.
The US runs a huge deficit with China, but China does buy a lot of exports that are important for the US, such as agricultural goods.
And these have been particularly hard hit in previous rounds of tariffs.
And this year, so far, There have been very few shipments of US agricultural goods, so it's already starting to hit US farmers.
And if this escalation doesn't lead to a deal and some kind of de -escalation in the near term, what's the Chinese government's plan for how it protects the economy and protects jobs in manufacturing?
The Chinese government is going to have to do a lot more on the domestic front.
It'll have to essentially stimulate the economy much more than it's been planning to so far.
These tariffs that are coming from Donald Trump, they're at the extreme end of what people were expecting.
He did warn that he might slap 60 % tariffs on China, but I think people had thought that maybe a negotiation would be possible first. But what he has announced, according to some economists, is even higher than 60%.
So China's government is going to have to launch a massive stimulus program if it wants to make up for the impact on its industries.
I know it could be difficult to work out what Chinese people really think but what is your sense of what company bosses, of what Chinese consumers are thinking or feeling or planning to do?
For Chinese company bosses, this is really terrible, terrible news.
You know, I've been talking to exporters this whole year, and last year.
And you know, they say when they, you know, when the first sort of 10 % came in, they were kind of happy because they thought they were going to get hit with 60.
And now that the 60 has come, you know, this is really, really forcing them to seriously think about their supply chains.
Lay there in Beijing.
Well, let's talk to Colleen McKuna, who's investment consultant to Wealthify, because financial markets are sharply lower again on Friday after that announcement from the Chinese government.
What is your broad take on what we're seeing on the markets today, Colleen?
Well, Rob, the markets are not liking this.
I mean, clearly they weren't happy yesterday.
I mean, we had the S &P 500 down over five percent yesterday, nearly five percent yesterday.
And today that pain is continuing.
The markets opened broadly lower this morning, but went a lot lower when these retaliatory tariffs were announced by Beijing.
So the real fear here is that what China is doing is, will this be replicated by the EU?
Does the EU turn around and say, well, we're going to impose our own tariffs on US imports.
So it's this whole notion of, now are we about to see a global trade war?
And markets are really not liking it.
At the moment, we've got the S &P down about 4%.
Again, that's on the back of yesterday's decline.
We've got similar declines in the Euro Stokke 50 and the FTSE 100.
The Nikkai closed down.
The Japanese Nikkai closed down nearly 3%.
And the Hang Seng is down 1 % on the day as well.
Only as a class that's rallying at the moment is treasuries.
Flight to safety on US treasuries at the moment.
So investors perceive the US government to be the safest haven even though it is the US government, which is causing all of this chaos.
Yeah, exactly. It's quite ironic, isn't it?
the flip side of that actually is the dollar.
We generally see the dollar performing well in terms of turmoil and of course when that turmoil starts in the US then you have investors scrambling for other currencies and massive appreciation over the last 24 hours and the yen, Swiss Franc, even the euro is outperforming the dollar which is a little bit odd but then again And it is probably the most liquid G10 currency after the dollar, so perhaps no surprising really there.
All right, thanks for now.
Colleen, I want to come back to you to take a closer look at what is happening in different areas of the markets a bit later on.
Now, we heard what China is doing in its approach to the United States a few minutes ago.
India though is taking an entirely different line because India and the United States have been holding talks about reaching a possible trade agreement.
Indeed, just this week New Delhi said it hoped to be able to report progress very soon, but the U .S. is still imposing new trade tariffs on goods from India – 27 % they will be as of next week.
So the need to reach a deal is even more urgent.
I have been speaking to Anup Wadhawan, who is the former Commerce Secretary in India.
Does he think this change – does this latest development change the terms of those trade talks?
In some ways it spoils the pitch for a good faith negotiation and it tarnishes the atmosphere of condusiveness and cordiality.
India would be working with the US to put these reciprocal duties aside because they don't convey a good faith intent as far as the trade negotiations go.
Well, what is India likely to have to offer the United States to get a trade deal and therefore get these 27 % tariffs removed?
Well, there's no question of offering anything.
You know, a trade deal, it's a sort of well structured systematic process.
Both countries have their ambitions and wish list and they convey those to each other.
And then each country examines them, processes them and sees what they can do for the other side, what they can't do what they can do with some sort of you know, moderation, or safeguard, and that applies to both sides.
And ultimately, you reach something which is balanced and you know, mutually beneficial, the White House said the other day in a document that released alongside the tariff list was that apples that enter the United States do so free of duty, but in India, the duty is 50%.
That is clearly something that annoys the United States.
They also said that computer Wi -Fi routers when they enter the United States, have no tariff, but in India, there are tariffs of between 10 and 20%.
So they're clearly two areas that the White House is particularly irritated by.
Do you think India should abolish those tariffs?
I don't think so. There is no scope for any irritation.
India is a developing country and a per capita income of $2 ,800.
US is a highly advanced nation with a per capita income over $80 ,000.
And all our bound rates were negotiated at the WTO.
And they were paid for, they were paid for in terms of concessions offered to the developed world in services and intellectual property rights, e -commerce.
And that is how all these American companies, the Googles and the Microsofts and the Amazons are prospering.
Of course, President Trump is not thinking beyond goods, he is not counting the huge profits these companies make, he is not counting the huge income which accrue to American entities to those activities, and which gives America a per -capita income of $80 ,000.
We are a low -income country, our farmers are particularly low -income, so to the extent to protect agricultural products, it is understandable.
And they look at the subsidies that the US gives to its agriculture, so where does the leave India, we need to have some protections in place.
There's been a lot of talk this week about how the period of globalization that has seen the world get richer over the past 30 or so years is now over, that the terms of trade that people have become used to have been torn up, do you think they have?
Globalization is not going away, globalization is not there because it's a fashion of sorts.
It is there because it's the necessity and the logic is efficiency and cost minimisation.
No country by itself can be self -sufficient, no country by itself can produce everything it needs, no country can by itself do every activity with the cutting edge level of efficiency.
So that is how global value chains have emerged, an element of shrinkage and globalisation where countries want to produce some critical things by themselves.
Some reordering will happen, but globalisation is there to stay.
Former Indian Commerce Secretary Anup Wadhawan there.
Well, what do you make of what is happening at the moment?
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You're with World Business Report from the BBC World Service.
Well, companies as well as countries are trying to work out how to respond to the U .S. tariffs.
the boss of the British digger company JCB says it will double the size of its new factory in Texas in the United States to 1 million square feet to mitigate the impact this had put it of the tariffs.
Here's Graham MacDonald, speaking.
We can't ignore the biggest market in the world, you know we've been there for decades and this investment is not for the next four or five years, this investment for the next 50 years, you know, we have a factory in Savannah in Georgia that's been there for 25 years, it's still going strong, and we intend this to deviate the business through for the next 50 years.
But, you know, we've got to be pragmatic about our decisions.
You know, we face these tariffs, no one wants to be in this position.
But we've got to be pragmatic at what actions we can take quickly to try and mitigate the impact on our business.
Bossadega company JCB then, let's hear now from Brian Panabeka, you may remember him as the former car factory worker from Michigan who was brought up on the stage by Donald Trump during the tariff announcement in the the Rose Garden of the White House on Tuesday.
He said he backs the tariffs plan.
I understand completely what he's trying to do with tariffs and that is bring production back into the United States and I had two automotive plants in my county closed in the last few years where thousands of auto workers lost their jobs.
We've seen our plants close and those products be moved to Mexico and then they're shipped right back in.
They're paying the workers down their sub par wages.
They're taking advantage of us.
They're taking our jobs away.
They're making record profits, billions of dollars a year in profits.
So we want those jobs returned to the United States.
And Donald Trump says he knows how to do it.
Let's speak now to Dmitry Grozubinsky, who is a former Australian trade negotiator and now the Executive Director of the Geneva trade platform, also founder of the consultancy Explain Trade.
Welcome to the program.
What is the best way to respond to this U .S. tariff onslaught?
Is it that the Chinese response, which is to hit back just as hard, or is it the Indian response, which is to say let's sit down and talk calmly about this?
I think every country has to find the right response for them.
And those are going to very wildly.
The Chinese have been in the U .S. crosshairs for a very long time.
It's patently obvious that there isn't a quick deal to be done here, especially not a lasting deal.
And the Chinese have a great deal of market power with which to swing back at the United States.
India was, as you mentioned earlier in the program, potentially on the cusp of a deal already.
They can't hurt the US as much as the Chinese can by withholding access to the Indian market.
So they have more dependency that gives them less of a bat to swing.
And Modi and Trump have a really good personal relationship, which I think gives them hope for getting a deal done.
So it's different strokes for different folks.
And when you look at this Chinese retaliation today and Donald Trump saying that China is panicking, what's your assessment of who has got the most to lose from this battle?
Is it Chinese factory workers or American consumers?
This is going to be painful for for a lot of people on on every side.
Pain is not zero sum.
So there is it's going to be quite a difficult time for Chinese companies, because even those Chinese companies that in previous years have moved production to places like Vietnam, and Cambodia are now finding themselves hit over there too.
And that certainly makes it difficult for them.
As you said earlier in the program, China is an export focused economy, still much more than the U .S. is, and that hurts.
On the other hand, American consumers, especially those American consumers at the lower end of the socioeconomic spectrum, will face higher prices and that is going to hurt.
and American production will lose some of the components it needs and affordable prices and that's going to hurt too.
We heard China say today that they've complained about the United States' actions to the World Trade Organisation, saying that the new tariffs are a blatant violation of WTO rules.
Is it pointless, them complaining to the WTO, because it has no power to restrain Donald Trump, does it?
International law has never come up with a way of restraining a global superpower that wants to do something.
However, I think what the Chinese are doing is trying to run a multifaceted strategy, where one of the ways that they are trying to pile on a few more ounces of pressure onto the US is through global condemnation.
They're also trying to send a signal to other countries and to investors that while the US is disregarding the rules of the game and the treaties it signed up for, the Chinese want to position themselves as law abiding and champions of those rules.
Mileage may vary. We heard the former Indian Commerce Minister say earlier on that this will be a negotiation between India and United States where there'll be concessions on both sides.
Is that how you see it when you hear what Donald Trump and his advisors are saying?
They're saying if you offer us stuff, we might cut the tariffs.
They're not saying, this is a negotiation where we're also going to make concessions, are they?
The US has put the rest of the world into quite a difficult situation.
Ordinarily, when we are negotiating free trade agreements, we're talking about our existing regimes as they've existed for years, and each side is offering concessions on the way their systems work.
Here, by raising these tariffs so high, the U .S. has effectively created a negotiating coin from nothing.
So you would be trading real ways your system has worked for years against ways their system didn't work until two days ago.
And that is a difficult position for parties to be in because even though you may be trading something below U .S. tariffs, those are U .S. tariffs they've just raised now.
And that makes it a difficult negotiation.
certainly can be hard to see the US administration as it currently stands from putting too much on the table, additionally.
They don't appear to be in that mood.
Thanks very much indeed.
Dimitri Grozabinsky their former Australian trade negotiator, now executive director of the Geneva trade platform.
Let's go back to Colleen McHugh now, investment director at Wealthify.
I want to break the market down into various kind of sections, if we can, and just look at the share markets, first of all.
We know why companies that make clothes in Asia for example or electronics in China that are then going to America are seeing their share price fall, because the cost of their goods when they're imported into America is going to go up.
But why are we seeing the share price of banks fall for example – how are they affected by all this?
Well it's not tariffs, basically Rob it's the fact that earnings are going to fall.
So if you have earnings going to fall that means that those earnings need to be reflected in lower share prices and that's we're going to see in the next couple of weeks.
We've got earnings easing fast approaching, specifically to two banks.
The thought is that oh my goodness are we now going to see elevated interest rate cuts required because is this tariff situation going to develop into a full -blown recession.
And what we've seen in the markets over the last 24 hours is, particularly in the U .S., we've seen a situation where additional rate cuts are now being priced by the markets, and banks just don't like that, and this uncertainty.
And of course if we do go into recession, that will have an impact in terms of their their loans and other parts of their business.
Right, so banks make less money when interest rates are lower.
What about commodities, stuff like oil and copper, we've seen falls there too, why is that briefly?
Yeah so again the oil oil is off, it's fallen to a four year low, it's trading about $62 a barrel at the moment it was about $72 a couple of days ago and the reason for that again is this sense that our tariffs going to trigger a recession and therefore if we're in a recession there is going to be a lower demand for oil, so it's very much a demand story.
Interestingly, I've been looking at gold.
Gold is your usual safe haven trade.
It's been up remarkably year to date, but in the last couple of days it's been quite erratic and it's actually down.
I suspect there's a little bit of trading going on there.
It's very liquid and I suspect people are just taking a little bit off an asset that's done very well year -to -date and just raising some cash and having some optionality amidst all this uncertainty.
Thanks very much, Colleen McHugh, there from Wealthify.
Let's here now from the tiny Southern African nation of Lesotho.
It is one of the country's worst hit by President Trump's tariffs.
Lesotho, which is one of the world's poorest countries, has been slapped with 50 per cent tariffs on all of its exports to the United States.
Let's speak now to Tarboo Khesi, an economist and chief executive of the Private Sector Foundation of Lesotho.
Welcome to the programme.
How are businesses, particularly those that export to the United States reacting to this announcement?
Clearly, they cannot proceed to do production in Lesotho in view of exporting to the US market because they have been enjoying duty -free, quarter -free trade arrangement and agua since the 2000.
That's the African Dosen Opportunity Act which allowed duty -free exports into America.
Exactly. So now, moving from zero percent to 50, it's quite heavy for them so it want to appetise them, you know?
It won't be lucrative for them to do the production here in so to clearly they are going to shut down and textile and and a parallel sector here in this room is the largest employer there for more than 40 ,000 workers direct jobs and then have any companies already yeah some they've already uh closed some yes the thing is because if you look at jeans I mean and what could be more iconic an American garment than jeans and Lesotho does make an awful lot of quite well -known jeans brands doesn't it they are still cheaper to make Lesotho than in America aren't they?
They are they are yes you talk of Levis yes yes you have so many jeans, T -shirts and a tracksuit yes they were produced here saving the markets like JCPenney Yes, Walmart.
Yes, they were sourcing products here in this hotel.
What can the Lesotho government do then?
What can it offer the Trump administration to try to have these tariffs overturned?
Yeah, yesterday, after the announcement of this new tariffs, the Minister of Trade made a statement in Parliament showing that they will prepare a delegation which will go to the US to negotiate with the US government, and also lobbying the Congress members you know.
Maybe to revisit that decision, so we don't know what the future holds, but as we can see how the new administration in the US is handling things, I don't see that there's gonna be a significant change.
People must be very worried, are they, new workers?
Yeah, they are extremely worried.
Even other sectors like transport, retail, those workers, there were so many...
they were renting houses, so it means, property owners are going to lose, transport sector is going to lose, retail financial services, telecommunication insurance, you know.
So many sectors are going to be negatively affected by this measure.
Thanks so much. Thabo Qhesy there joining us from Lesotho.
We're going to move away from the trade conflict now to talk about the hugely popular video sharing app, TikTok, which is just hours away from a deadline to find a non -Chinese owner or face a ban in the United States.
Here's the BBC senior tech reporter Graham Fraser.
President Donald Trump has said he is very close to brokering a deal to find a buyer for TikTok.
The popular video app faces a ban on the U .S. if its Chinese owner ByteDance does not sell it.
And the deadline for that sale, is Saturday.
A bipartisan law passed by congress last year mandates ByteDance to sell the app.
The platform went dark for a day in January in the U .S. after the law took effect and it came back online after Trump intervened and delayed the ban.
The U .S. government has said TikTok poses a threat to national security because Chinese authorities might access its vast trove of user data.
Beijing denies this.
The White House is reportedly considering an option where ByteDance would keep the ownership of TikTok's algorithm but lease it to a new entity operating the app within the US.
There are many reports about who is interested in buying TikTok.
They include the founder of adult website -only fans, Amazon, and the biggest YouTuber in the world.
And then there is tariffs.
President Trump has said he might cut Chinese tariffs to help seal a Tech Talk deal.
Tech reporter Graham Fraser.
And you can get the latest on that story and the trade conflict on our website at BBCNews .com.
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.
