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Hello and welcome to World Business Report from the BBC World Service.
Namaste. I am Devina Gupta in Delhi.
And on this edition, things just got real in the US -China trade fight.
We take you through all the ups and downs of this week.
We visit China's manufacturing hub and ask, can they really move production to the US?
It would take hundreds of millions of dollars of factory investment training of a workforce that does not exist. It would take an enormous amount of time.
Also, we hear from an American soybean farmer about how these shifting trade rules are hitting his bottom line and what he's doing to survive.
But first let's start with what a week it's been, because over a week now since US president Donald Trump announced widespread import tariffs on many of the world's economies, since then things have been moving rather quickly on a daily basis and today is no exception.
China has played its latest hand by upping tariffs on US imports to 125%.
Now, this after President Trump increased Washington's levies on China to 145 percent.
So trade tensions between these two superpowers have intensified swiftly.
And if you're trying to catch up, I know it's a lot.
So, here's a recap of the week so far.
In the last few minutes US President Donald Trump has announced sweeping tariffs on goods imported into the United States from all countries including the UK.
White House now says more than 50 countries have contacted President Trump to try to negotiate deals.
I don't want anything to go down, but sometimes you have to take medicine to fix something, I do want to solve the deficit problem we have with China, with the European Union and other nations.
Let's turn to a line of breaking news on our main stories.
Donald Trump it's being reported now threatening a further 50 % tariff on China.
Donald Trump has said that if China doesn't remove the 34 % tariffs it's threatened in in response to his earlier tariffs, he would impose a further 50 % tax.
That would see Chinese imports into the US facing a total tariff of 104%.
So Erin Delmore is joining us from New York, Erin, one doesn't know what to expect now as these news lines keep coming.
But how are markets reacting to it?
Yeah, it's been certainly a tough week for markets as a whole.
As far as today goes, the last day in the trading week, we're seeing all of the three major U .S. indexes down.
The Dow is down about 100 points.
That's about a quarter of a percentage point.
The S &P down 0 .2, NASDAQ down 0 .2.
So I'll put it into context, these aren't dramatic drops, not dramatic losses, but it comes on the heels of a tough day.
Certainly, we haven't seen any ending in the green except for Wednesday.
And while Wednesday was certainly an elevated day and something that investors absolutely cheered, the overall losses in the days since Liberation Day on April 2 don't outweigh those gains.
So, stocks have been underwater since then.
But what about the U .S. currency?
Because the dollar seems to be falling against the euro, against Swiss Franc, and hitting some of those historic lows as well.
Yeah. So this is one of those contagion effects of when you see market turmoil kind of spill over into the wider economy.
And it's not just the dollar.
I mean we've certainly seen an impact on treasuries, we've seen an impact on gold.
And usually the relationship we see is that when stocks get more volatile investors flock to safer haven assets right.
Gold, treasuries the dollar can be on that list as well.
And we we haven't really seen that kind of usual relationship going on now.
It seems like people are kind of spooked and it's it's it's having them treat this kind of risk off mentality in a more wider way than just on stocks.
And so it's certainly, it's certainly pretty interesting.
We'll be talking a little bit more about markets on the program.
But Erin Delmo, thank you so much for joining us with that overview.
Now, it's official, as we mentioned earlier, that China has just played its strongest card in the trade war so far.
But how these steep duties which it has imposed on the U .S. goods, playing out in real terms for Chinese businesses and for everyday consumers?
Andy Hsieh is an independent economist in Shanghai who used to work for Morgan Stanley and World Bank.
I spoke to him earlier.
China is not backing down.
Trump thinks that if you keep escalating, China will back down.
You only end up in a worse situation if you back down.
What Trump does is that he raise tariffs on you and then ask you to come to negotiate.
So he creates leverage like that and if you play this game you end a very bad place.
But is China also getting in a bad place because it has its own domestic economic concerns where there's been a property sector slowdown, consumers haven't been spending and with this kind of retaliatory tariffs.
Can it afford it at this time?
Well, the exports to the United States are 2 % of GDP in value.
I think that the country can get through that.
The central government has a very good balance sheet.
That is 30 % of GDP.
It can do stimulus to pay for over that.
But for an average Chinese, what would these tariffs mean?
What gets expensive for them?
Well, I think that Chinese consumer goods are not from the United States.
What China imports like chips, equipment, and agriculture products, and so forth.
I think that are their substitutes.
Even on the software side, China is prepared to place Android or Microsoft domestic substitutes already available.
China is in a pretty resilient position right now.
But does it change that old trade relationship with the U .S. now forever?
Because looking at agreement that the US companies would set up in China.
They'll get the advantage for cheap labor.
For China, it also meant that their people are employed.
Does this change that old relationship structure?
The United States has been talking about decoupling from China for a long time.
This is a kind of manifestation of that desire.
If the US does not want to do business with China, It doesn't make sense trying your everything to hang on to it, to bend backwards to hang on to it, it doesn't make sense because in the end it's going, eventually it will end.
So will it end? Can these two countries up the ante even more?
Can there be more tariffs imposed on each other?
I think it's the tariffs at such levels basically mean complete cessation of trade between these two countries.
I think it's okay. If the US doesn't want to do business with China, why should China try so hard to hang on to it?
So I think that everything comes to an end, if this thing is coming to an end now, so be it, it's okay, life goes on.
Will the life go on in China with other trading partners including the EU and Southeast Asian nations?
but there is a concern there that they fear their markets opening up to cheaper Chinese goods even more, and then they would feel that domestic pressure from their own industries.
Yeah, of course, that's a US narrative.
Look at the other countries know what to do.
You know, the Southeast Asia imposed tariffs on some Chinese goods in recent years, because Chinese have used the machines, AI to produce handicraft products, and these products have become much cheaper than what small companies could do, small business could do in South East Asia.
So, for labour market stability they imposed tariffs on Chinese products.
Chinese government didn't react to that.
To say that other countries don't know how to protect themselves, that's kind of an Anglo -Saxon narrative, trying to box China in verbally.
You're just underestimating other people.
What's the fundamental economic shift that China will have to do?
China has arrived basically, they let people have a good life.
That's the end point.
People have cars, they have properties, they all have education, what more do you want?
Jobs because the unemployment rate is still quite high in China?
No, that's not true.
Again, that's another Anglo -Saxon narrative, try to portray China in certain way.
China has a labor shortage because of labor force contracting.
Okay, China has a labor shortage.
There are college graduates who want white -collar jobs, unwilling to take blue -collar jobs, and 70 % of the youth in China go to college.
The economy can never generate 70 % white -collar jobs.
That's the story. That's Andy Shih, an independent economist in Shanghai.
And while the statement coming out from China and the first public comment by President Xi Jinping since Trump's tariff offensive last week has been while meeting Spanish Prime Minister Pedro Sanchez, who's in the country.
He talked about China and the EU joining forces to defend globalisation against unilateral acts of bullying.
So a lot to unpack there as well.
But another impact China is likely to feel from these tariffs is also a further shift in global supply chains.
We've seen this before.
During Donald Trump's first term, he slapped higher tariffs on a range of Chinese exports, from solar panels to computers and footwear.
And in response, many manufacturers tried to pivot expanding operations to nearby countries like Vietnam, India and Cambodia.
But that takes time.
And for many companies, it's still not an option.
So Marketplaces China correspondent Jennifer Park has more from the southern manufacturing hub of Dongguan.
Shoe manufacturing is labour intensive.
Workers punch every hole and lace every shoe by hand, says James Gao, whose company ShoeBot owns this factory.
Every lacing is manual.
There's no robot. When local wages get too high, he says, shoe manufacturers, like him, have to relocate.
That's been the pattern ever since shoe making started out in the west. The footwear started from Europe and then America.
By the 1960s, he says shoe factories had shifted to Japan and Brazil, then Korea and Taiwan And for the past three decades, the industry has been based largely in mainland China.
Until President Trump's first term, when he hiked tariffs on China.
And China hit back with tariffs on U .S. goods.
So seven years ago, more companies started to look at relocating production to Southeast Asia.
Among them, Colorado shoe brand Xero, spelled with an X.
We actually looked at Vietnam.
Co -founder Laina Phoenix says though the brand didn't make the move to Vietnam.
Because they produce specialized shoes meant to mimic the sensation of being barefoot.
We make everything from casual sandals to technical hiking boots to professional -quality basketball shoes.
So because we have such a wide range of styles requiring different technical capabilities, we use a number of different factories.
And those factories are in China, because that's where the skilled work forces are.
Phoenix's company is doing business with James Gao's Shoebot.
Shoebot works with small and medium -sized brands.
It also makes shoes in Vietnam, though its operations there are small.
One of the company's clients Mark Olson co -owns a Portland shoe startup called Avali.
He says Vietnam may be good for big brands, not niche ones like his that make volleyball shoes for women and girls.
Vietnam is where China was maybe 15 years ago.
But China, he says, has so called industrial clusters with everything you need for shoes from raw materials to foam manufacturers, knitwear, lacing and embroidery groups.
They're all within driving distance of Chinese shoe factories, he says.
So it's just setup to do it right.
And he says the Chinese factories are innovative.
They find new materials, upgrade machines and cut down production times.
Manufacturing in China makes it easier to roll out and test different colors for new volleyball shoe styles, says Avali's other co -founder Rick Anguilla.
There's nothing more satisfying than being at one of these tournaments and having our product on display.
And you hear those four words as they pass by, oh, those are cute.
He says his company thought about manufacturing in the U .S. but decided the challenges were too great.
Laina Fenix of Zero Shoes agrees.
It would take hundreds of millions of dollars of factory investment, the training of a workforce that does not exist. It would take an enormous amount of time.
Vietnam seemed like a more attractive option, despite its less skilled workforce.
And her company had hoped to shift manufacturing there.
Since Trump increased tariffs on Vietnamese exports by 46 % last week, she's been having second thoughts.
One of the things that's critical for us to know is whether or not these are, in fact, the final tariffs.
Given all of the changes that have come out of this administration, we are to some extent waiting for the dust to settle.
In these uncertain times, some manufacturers remain optimistic.
Again, Shubhat's CEO, James Gao.
As an entrepreneur As an entrepreneur he says he's excited because the tough economic climate and uncertainty means large players don't hold all the advantages.
Small manufacturers like him are more agile and can help clients pivot quickly he says for whatever may come next.
That's Jennifer Park reporting there from the southern Chinese city of Dongguan.
You're with World Business Report from the BBC World Service.
So, we heard from factory owners and manufacturers in China.
Now, let's cross continents to the US because this trade war is also going to impact the agriculture sector in the country.
Now, the agriculture sector accounts for over 20 % of US exports to China and is valued at $36 billion in 2022.
too. Among different commodities, soybeans alone make up half of all agricultural exports to China, which will now be hit by that 125 percent tariff.
So joining us now from Iowa to speak about it is Bob Calbo, a fourth generation corn and soybean farmer.
Thank you so much for being with us, Bob.
Let's just get right into it 125 tariff on US goods.
How directly does that hit soybean producers like yourself?
Well, it kind of keeps the price and fluctuation.
You know, you go from one day to the next and President Trump decides, is it going to be a 25 percent tariff or 125 percent tariff?
And so you never know really where exactly you are.
And you need to because you need to plan for how many acres of each commodity that you're going to plant.
Once those acres are planted, there isn't much that you can do about it should he decide to change his mind yet again on his tariffs.
So it's really leaves an unstable market.
Right now, I would say that the market It is staying pretty steady.
It's not dive in one way or the other, but...
Are you looking at a price escalation in the future for these export markets?
A price escalation?
With the tariffs that you imposed, yeah.
Well, what I see in the future is a weakening of our export markets because China isn't gonna wait around for the United States to decide what they're gonna do.
They're going to seek out a source of soybeans, for instance.
And they did that after Trump did his last tariff go around in his first administration.
and they started going to Brazil.
And so they do have a market established in Brazil and other countries will do the same thing with other exports.
So, yeah, it'll... Then what happens to farmers like yourself?
Are you looking at new markets away from China?
No, not at all. We sell locally to co -ops.
We harvest our crop here on the land and take it into a co -op.
and then they market it on down the line until it goes overseas.
So we don't deal directly with China or any other country.
But there must be some ripple effect.
Right? Because there must be some sort of fallout, especially for those farms which are exporting, and if these tariffs come into play and suddenly China's market becomes too expensive, there's bound to be a fallout.
Exactly, exactly. And you don't know exactly what that fault's going to be, but it's not going to be good.
I know that. The last time that Trump did this and he did it not nearly to the extent that he's doing it now, the farm market went down so badly that he put cash from the US Treasury into the USDA to give farmers cash to operate on.
And of course it wasn't enough, but it was something.
That could help. But this time round, President Trump has said that this tariff policy would come with the transition cost. He was referring to the markets that were reacting to it.
But farmers like you, do you feel there is an accountability there that needs to be fixed on how volatile past two weeks have been?
And obviously you need to plan ahead as a farmer what to do next.
Well, and this is the thing that President Trump is so unstable on what he says and then what he does.
He'll say one thing one week and then two weeks later, he'll change again, and it's hard to plan long term.
And the other thing that then happens is the countries that we've dealt with all these years, well, look at Canada and Mexico, now they can't trust what he says.
You just don't walk right back into a market that you used to have. It will take years to rebuild trust and years to rebuild markets that we used to have. Thank you so much for joining us, 4th Generation Corn and Soybean Pharma.
They're from Iowa talking to World Business Report.
Thank you so much for your time.
And you're talking about consumer trust and consumer confidence data also is now out in America.
Let's get in Natasha Eptihatch Fund Manager at Global Equities at Artemis Investment Management.
Natasha, how are you reading these numbers?
Hi. Well, there's no doubt.
It's unsurprising that U .S. consumer confidence has been hit and we should start to see that slowdown now in that spending data soon is probably going hit the lower income consumers the most. In the end, most of that, kind of, the low end products that they buy are made in China, where the profit margins for a lot of companies are very small, meaning that the price has to go up a lot to offset the 104 % tariff that is now in place.
Now the consumer is very important for the US economy.
Consumer is the main reason for the US having avoided recession in the last few years.
So hitting the consumer may well be a markets are worried about right now.
And that's been the warning from various investment bankers as well and experts.
And this is where it's getting real.
Natasha, be with us, because we want to hear also from what Americans are feeling and thinking at this point of time, even before the ups and downs in the markets of the last few days, people were watching what they were spending on.
And just as President Trump was announcing the tariffs last week, World Business Report's Monica Miller spoke to People in New York.
Spring has arrived in Greenwich Village in Lower Manhattan.
Buskers are fine -tuning their performances.
Daffodils and tulips are in bloom.
But when it comes to the economy, Ivy St. Clair says it's not so rosy.
Scary is the word of the hour, I guess.
She's a college student from New Mexico, in the Southwest Region of the U .S. who depends on a college savings fund which is impacted by the stock market.
I'm only 21 years old so it's not like I had much to begin with but I see it most in my like 529 or my student savings account I know that I've seen like I know there's an expected like 40 % drop by tomorrow and what I've got and you know as a college student in New York City I really depend on that for not only school but survival.
New York City is known for its high cost of living but she says this year has been really tricky.
Going to the grocery store in the last couple months I think has been really scary for a lot of us and I I'm really scared of tariffs.
Again, I probably don't fully grasp the full implications of everything, but you know from what I'm what I'm feeling in my neighborhood, in my home, it's yeah definitely scary.
Ivy also has a job lined up for her back at home with the US government but with widespread job cuts, she doesn't know if it will still be available by the time she graduates.
Yeah so that's also a huge fear, you know, the Department of Culture, the Department of Education that's kind of where I see myself heading in the and especially right now.
Again, a lot of fear.
But Jack Eskewits says he supports a good amount of what the Trump administration has proposed, particularly shrinking the size of the federal government and sweeping tariffs.
Elon Musk and Trump are both businessmen and I believe that this is like a classic negotiation tactic.
Jack is studying economics and is the president of the New York University College Republicans.
He understands that some people are concerned by the fast -paced speed decisions being made out of Washington.
It's very shocking, but I think that nowadays, especially when it comes to how just modern media and the internet works, like these stories of things happening quickly get people's attention.
He says President Donald Trump won because of his use of social media platforms like X and TruSocial.
This is an extension of this new world we're living in.
Quick, fast, flashy policies.
One thing I can say for sure is that I am seeing it so it's working.
I think the fact that people are talking about it, the fact that people are debating it, I think it's what he wants.
Joseph Foundy is an economics professor at NYU.
He says the US economy has been strong.
Inflation was coming down.
GDP numbers have been great.
The US has the strongest recovery of any major economy in the world, but now we're just seeing this level of uncertainty, both in the business community among consumers, so we don't see slow down yet, but there's a real, real risk this year of falling growth and even of a recession.
But he says there is a potential upside for consumers and businesses.
But if we at least get clarity on what the tariffs are going to look like, even if they're high, that at least will resolve some uncertainty.
Now that President Trump has laid out his marching orders to impose reciprocal tariffs on U .S. trading partners, consumers and businesses have a clearer idea on how to for the future.
But they're still divided on whether this approach will make America great again.
That's the big question, isn't it?
That's the World Business Report's Monica Miller there.
Nadarsha, we were talking about confidence in the world's largest economy, and it seems that if you look at the companies on the stock markets, it is shaking, isn't it?
Because there were also companies that were gearing up to go public like Klarna and StubHub, and and they've reportedly hit pause on their IPO plans.
Yeah, it's unsurprising.
Companies are now canceling IPOs and any other market activity, such as companies raising debt, that's also being paused.
Essentially, big swings in the market make it very difficult to know what to price companies at. And also, any buyers probably prefer to keep their money in cash or maybe gold now, so there's a buyer's strike too.
Companies also don't know what the end state of all these trade policies will be, So that makes it very hard for them to invest, which is why these expectations of a recession are growing and stock market prices are falling.
And just about 30 seconds for a complicated subject.
We've spoken on World Business Report.
But U .S. bonds. How are they doing?
They are very volatile at the moment.
They're trying to find that base price.
But the biggest surprise at the moment is probably that the bonds are selling off.
Really, at this point, the price should be rising, and that's the biggest concern for markets.
These are government IOUs that the government will buy them back and will give you your money back.
Safest assets which are now seeing a sell off.
More on that on BBC .com.
Thank you for being with us.
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 Let'sMakeAPlan .org.
