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Hello, welcome to World Business Report from the BBC World Service.
My name's Ed Butler.
In today's show, we're going to be counting down the hours to the August 1st deadline.
That's the one that Donald Trump has set for countries to do a deal or to face much higher tariffs.
In recent days, South Korea, Japan, the European Union and many others have announced framework trade deals to avoid the worst of the tax hikes.
But a large number of other countries have not.
And we're running through those seemingly still in the firing line.
We'll be asking, who's really winning this trade war?
The US? China? Who are the losers?
It's the smaller and medium -sized companies that are really suffering so far, for which reason the chamber has called for tariff relief for smaller businesses.
Well, we'll be hearing from businesses and from several countries around the world in a minute.
But first, let's start with the big picture.
Dozens of countries remain in limbo as speak.
With only hours to go before President Trump's trade deal deadline, tariffs as much as 50 % could be set to snap into effect at midnight tonight, US Eastern Standard Time.
The tariffs are Mr Trump's vision for remaking a global trading system that he has long criticised as unfair.
But while the administration has announced the terms of some preliminary deals, yields, the specific rates that importers and exporters are going to have to pay to move goods into the United States still remains unclear in many cases.
Still, despite the mood of chaos in some quarters, the White House press secretary, Caroline Leavitt, has been putting a very positive spin on the situation.
Of the our 18 major trading partners, two -thirds of those trading partners have a deal.
We've sent out 17 letters to countries around the world and the rest of those those countries that either do not have a deal or have a letter, they will be hearing from this administration by the midnight deadline tonight.
So yes, tomorrow, August 1st, the reciprocal rates will be going into effect.
If more deals are cut between now and midnight, I will never count out the president.
You've seen him do it before.
He cut three deals in one day very recently.
So we'll see what happens.
I do know foreign leaders are ringing his phone realizing this deadline is a real thing for them tomorrow and they're bringing offers to the table.
on well uh pulling all of this together let me bring in my first main guest for today's show kaylin birch is a global economist at the economics uh intent economist intelligence unit hi kaylin um and thanks for being with us today now uh people phoning in world leaders are phoning in probably as we speak they're not phoning into our program they're phoning into the white house trying to see if they can pull off a last minute deal we are told i mean that That sounds like chaos if you're on the switchboard of the White House, but how would you characterize the situation this evening?
I mean, chaos sounds accurate to me.
I think, I mean, in that clip, Caroline Lovett said, you know, two thirds of 18 trade partners have deals, but that's 10 or 11 or 12 if you're really generous, but the U .S. has only announced really seven trade deals, some with key partners like the EU and Japan and most recently South Korea, and others with much smaller trade partners.
It's very early days, in real honesty, about where this trade deal blitz stands now.
So between now and midnight, I wouldn't imagine there'll be enough to kind of have a really significant turn of events for the U .S., and likely a lot of those deadlines are going to have to be rolled over.
They're going to be rolled over or countries are just going to have to suck it up and pay those higher rates for the short term while they continue to scramble and ring the switchboard to get the attention of the White House?
Yes, this is possible.
And I think especially where we see the U .S. falling on the kind of follow -through show that Trump doesn't chicken out that taco phrase that's become so top of mind and where it's willing to roll things over will depend on a couple of things.
One is the size of the economy in question.
Canada is one that doesn't have a deal yet and it would disrupt markets a bit more than perhaps some of the others if one does not materialize.
There's also a question of politics, where politics gets in the way.
The US and Canada have recently sparred over Canada's decision to recognize Palestine.
Brazil is one that's facing that 50 % really high tariff rate where politics are really an issue getting in the way of the US and Brazil making a trade deal.
So there are some cases certainly where we're likely to see the tariffs come in and hopefully it will be a short period before they're negotiated away.
Okay, well I'm glad you mentioned Canada because we're coming to them in just a moment.
But one country that has seen positive movement today is Mexico.
Mexico's president Claudia Scheinbaum has announced that she and Donald Trump have have agreed to postpone a planned 30 % tariff hike on Mexican products for 90 days.
The increase was due to come into force on Friday.
This is the President of Mexico here.
He agreed 90 days. We're staying as we are, and it's 90 days to continue talking and building a longer -term agreement.
Why is this agreement important?
because the tariffs won't increase any further.
Ms Schaubein has said that the delay period would allow time for negotiations.
The extension does mean that Mexican imports to the US will continue to be taxed at 25%.
In any case, most Mexican goods are, of course, exempt from tariffs under the United States -Mexico -Canada Agreement, the USMCA, the Regional Free Trade Deal.
This does raise a question, though.
What about Canada, which of course is also a part of that deal?
President Trump has already threatened to extend sanctions, as we've just heard, against Mark Carney's government.
Following the Canadian Prime Minister's suggestion, he might be ready to recognise Palestinian statehood this week.
This was Donald Trump speaking a little earlier.
Well, they have to pay a fair rate.
It's all very simple.
They have been charging very, very high tariffs to our farmers, some over 200 % and they've been treating our farmers very badly they've been treating our country very badly for years look we like Canada I love Canada I have so many friends in Canada but they've been very poorly led and all we want is fairness for our country as President Trump well US Commerce Secretary Howard Lutnik has said that on Thursday that a 35 % tariff on all Canadian goods not covered by the US Mexico Canada trade agreement is still surely on the cards.
Let's bring in Joe Oliver now.
He's Canada's former finance minister under a previous Conservative administration there in Ottawa.
Hello, sir. Thank you for joining us.
A sense of foreboding then tonight.
Canada is due to get the full force of these tariffs.
Well, yes, there is some foreboding.
But as you mentioned, the US MCA products are exempt, And that represents 90 % of the trades.
So the increase, if in fact it happens, and if there isn't an extension as was just accorded to Mexico, will have an impact.
It won't be devastating, but it will be somewhat harmful.
We're talking about 50 % tariff on copper and maybe 200 % on drugs.
drugs. One doesn't know for sure what the president has in mind.
And that, I think, is part of his negotiating strategy.
It seems to be, you know, quite deliberate.
And of course, Canada, like most countries, has an asymmetrical relationship with the United States.
75 % of our trade is with the U .S. and trade in general is more important for us.
And in fact, trade with The U .S. accounts for about a quarter of our economy.
So, you know, an elbows up approach, which the prime minister talked a lot about during the election, hasn't worked particularly well.
and his attempt to put in a digital services tax on some of the largest social and media companies just didn't work and we had to go back on that.
Yeah, I mean, do you think, just to push that point, do you think that Mark Carney has played this wrong?
I mean, it seems like we had the deal earlier this week, didn't we, with the European Union and it was pretty clear that they were willing to make certain significant concessions to the White House in order just for trade to keep flowing.
Mark Carney seems to think, you know, calling Donald Trump's bluff is worth doing here.
Well, that I think if, you know, the president is quite unpredictable, but some things I think are safe to predict.
And one is he's not going to be pushed around and perhaps even more, not appear to be pushed around.
So coming in with an increase in tariff prior to negotiation, I think was doomed to fail and it did.
He said two days before the negotiations were to sort of get going that he would suspend any further discussion And the Prime Minister folded, you know, almost immediately.
Look, we have to, this is a tough negotiation, but we have to be strategic about it.
We don't have to give everything up.
But there are things that we ought to be considering doing, which we should do, irrespective of the President wanting to have us comply.
And one is is something that's a major irritant for him, which is supply management.
We have a cartel for for our dairy industry.
Right. And frankly, it is hard to justify.
Back in 2000, Australia got rid of it.
So there are things that we can do, but we also have to diversify our markets.
OK, Joe Oliver, thank you very much. That's Joe Oliver, former finance minister of Canada, speaking to us here on World Business Report.
We've mentioned then Mexico and Canada there, which will, it seems, be facing higher tariffs.
What about China? It's also another big question mark today.
Top officials from the US and China this week ended apparently constructive talks over whether to extend their 90 -day tariff truce.
Although that simply hasn't materialised yet, we think.
The US Treasury Secretary has said that any extension would be up to President Trump, and he has not indicated that that is going to happen.
Elsewhere in East Asia, a range of export -oriented economies are still unsure whether they're looking at tax hikes tomorrow.
I've been speaking to Joe Goya.
He's vice president at the US Chamber of Commerce, which is focused on Southeast Asia and Oceania.
Well, we are waiting to hear the announcements on Thailand and Malaysia.
We have also not seen the final numbers for tariffs on other countries, smaller countries in the region, Brunei, Laos, Cambodia.
So we are waiting for announcements on several of these countries.
Is there any way of saying, from your perspective, what's bringing it right to the brink?
It is premature to comment for a couple of reasons.
One is simply the limited detail that has been made available.
In some cases, there seem to be some unsettled questions with these agreements, a lack of of definition around some issues and seemingly conflicting interpretations of some of the points in these agreements.
So there's still quite a bit on which we need clarification.
Because of course, if these deals are not reached, Thailand is looking at what, 30 % tariffs on the stuff it's importing to the US.
That's a lot of stuff.
And of course, Thailand is an export dependent economy right now.
For Malaysia, similarly, 24%.
These are big numbers.
Do you think that there's a kind of brinkmanship going on deliberately on the part of the US?
Well, I don't know that it's brinkmanship so much as a extremely strong push to extract major concessions or face those very high tariff rates.
But I think what I would say as a broader statement is that, first off, tariffs are a tax and those taxes are paid primarily by U .S. importers and ultimately U .S. consumers.
You know, the tariffs that have been put in place thus far represent the largest tax increase certainly in our lifetimes.
So this is a real challenge.
Tariffs will hurt U .S. manufacturers, they have been, who need to import in some cases substantial numbers or amounts of components, parts, raw materials in order to produce goods in the United States.
So they will be hurt.
And then, of course, you know, one would worry in the longer term about retaliation.
The Thai finance minister says he expects there to be a deal.
Are you concerned? Well, we're concerned more broadly about the impact that tariffs are having.
You know, and in particular, it's the smaller and medium -sized companies that are really suffering so far, for which reason the chamber has called for tariff relief for smaller businesses.
And, you know, we have had lots of conversations with lots of these smaller enterprises across the United States, and they are hurting.
There's a medical device manufacturer that imports some of their product because they have to, and tariffs have eroded their margins to such an extent that they're considering closing their business altogether.
Other companies have said that they are likely looking at closing down, in some cases, after decades in operation.
The increase in their costs are just not survivable.
And, you know, every option seems to be a no -win.
You know, for example, changing factories, not easy, and there's risks around quality standards, raising prices, they lose customers to bigger brands, pausing production, well, may as well shut down.
John Goya there of the US Chamber of Commerce.
You're with World Business Report from the BBC World Service.
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That's Greenlight .com Let me revert now to my live guests here.
We have Cailin Burge, global economist at the Economist Intelligence Unit, and also Kerry Leahy, an economist at Columbia University in New York.
Kerry, first of all, are we seeing the impact yet of these higher tariff rates within the U .S. economy itself?
I'd say the answer to that is yes.
if you average the last two quarterly GDP figures, you come up with a number of about one and a half percent, which was probably less than what most people would have thought would be been happening six months ago.
And you'd probably argue that inflation is somewhere between a quarter to a half a percentage point higher than it was expected six months ago.
So they're arguing about stagflation of potentially slower growth, higher unemployment and higher inflation.
The unemployment story hasn't turned negative yet, though we may know more tomorrow.
tomorrow but clearly the number it's in the numbers but it's not so slow in the labor market the labor market may be the last chip to fall but if the labor market stays where it is now growth could be one percent two percent or three percent but most people won't be too terribly upset as long as they have a job and have decent wages gains yeah right so it's complicated picture i mean we did see the three percent number earlier this week didn't we um on on growth temporary growth both perhaps kind of boosted by the rush to trade before this tariff deadline.
Caelan, I mean, how do you see this?
Is there a sense that we're all just kind of, as economic watchers are just gazing at the stress about to burst when importers really do start transferring these costs onto the US consumer?
Yes, and we really haven't seen that yet.
So we did see 3 % GDP growth in the second quarter.
That was on top of a half a percentage point contraction in the first quarter.
So on average, as Kerry said, we get to about one and a half, one and one and a quarter percentage points of growth.
growth that's all just balancing the kind of bizarre world trade movements we've seen so far and more likely than not once we have a bit more clarity on tariff structure potentially tonight that's when the the perhaps heavier effects start to be worked through we start to see a bit of a rise in unemployment we expect that will start to weigh on spending and then that reinforces the hiring trend so that's all likely to come in the second half of the year okay we're turning to the the tariffs themselves.
For those who do have deals, the countries that is, that do have deals, how binding do you reckon they seem right now?
I mean, the US is already, the White House is investigating perceived breaches of fair trade on things like pharmaceuticals, semiconductors and other things.
There are potentially more sanctions due to come in, aren't there, on some of those other products.
And if they start playing with current framework agreements, like with the EU or South Korea or Britain or whatever, those could anger the people who the deals have been done with, couldn't they?
I mean, everything is still sort of very much in flux on these deals.
Yes, absolutely. The White House is kind of putting these deals forward as if it's a new kind of trade era for the US.
But I mean, some of the sectoral tariffs, so on steel, aluminum, aluminum, copper.
These are all much more kind of stable tariff mechanisms, Section 232 investigations.
You have to put together a lengthy nine -month investigation, has to go through a comment period.
Once those tariffs come on, they tend to stay on for longer.
But the bulk of the measures that have been announced so far already are based in kind of a very unconventional tool, IEPA, the International Emergency Economic Powers Act.
And all of those tariffs that are country specific might well get struck down by the court over the course of the next couple of months.
So everything is definitely still in place.
Yeah, there is that legal challenge going on in the US courts.
And we have to watch that one.
Let me bring in now Everett Eisenstadt.
He's a partner with in the Public Policy Practice Group, was a deputy director of National the National Economic Council and Trade Advisor to President Trump.
This was back in his first term, right, Everett?
Thank you for joining us.
Would you say, looking at the deals that we've seen and those in the offing, that President Trump is winning this battle?
He wanted to revamp global trade.
He's succeeding and he's certainly winning concessions, it seems, at least in terms of the headline framework agreements he's managed to nail so far.
Yeah, it's quite fascinating, really, because President Trump really set the terms of what is winning.
As you recall, he defined the purpose of these tariffs to do a number of things.
One, to reshore manufacturing back to the U .S. economy, two, to raise revenue, and three, to combat unfair trade barriers.
And if you look at the structure of the frameworks that he's a group that many of these frameworks that we have seen and we do know the outlines and contours of, you can see all of those elements are there.
There's tariffs that say, you know, to fight the unfair tariff barriers, there's concessions on market access.
Of course, there's a 15 percent tariff across the board on most products that entails the revenue raising and then the investment funds which are directed towards reshoring.
So, yeah, I think he is winning it and he seems to be getting what he set out to achieve.
Now, there's more to come and we need to see these implemented over time.
But certainly the structures that he has negotiated aren't aligned with his objectives.
The goals he is trying to reach. Yeah.
But some would also point out that his top trade adviser, Peter Navarro, was promising the president was going to achieve 90 trade deals in 90 days.
This was back in the early days after Liberation Day, as we were being told.
It's been 111 days since then, and only two days have really been finalized.
And China, that one expires in a couple of weeks.
Yeah, trade deals do take a long time, and these will continue to be negotiated over time.
I think that 90 in 90 days was ambitious.
It did represent the idea that many countries were interested in addressing the concerns raised by the president.
in. But obviously, sometimes we set objectives, the execution doesn't quite go as readily as we as we hope.
There was this, I want to raise another point, which is interesting around just the revenue side of this.
And we don't talk about it very often.
We're seeing numbers, aren't we, that June alone saw $30 billion revenue raised entering the US Treasury through through these new import taxes.
In other words, the White House is kind of coining it by the back door, if you like, by this extra tax revenue it's making, which is covering, I guess, the other tax cuts that the White House has announced separately for the US.
Does that add up, or is that part of the equation here for the White House as a way of covering its other tax cutting agendas?
I don't think that's the objective per se.
I think that there is a hope and a mindset that goes back to a period of time when the internal revenue service and the income tax was not the primary source of revenue for the US government.
And that was a long time ago.
And of course, tariffs were the revenue source.
So the idea that you want to relieve some of the tax burden on individuals through tariffs is not something that's never been done in the US before.
I don't think it's a quid pro quo.
I don't think one of those is designed to offset the other.
But I do believe the president sees it as a way to pay for some programs that are going to be beneficial to the United States, which is very much in alignment with his America First agenda.
Okay. Everett Eisenstadt, a former trade advisor to Donald Trump.
Thank you very much for your thoughts there.
Let me return now to Cailin Birch. What are your thoughts?
Trump is winning? I think it depends on the goal I think to have a handful of agreements not signed but announced that for Trump will look like a win and then there's the revenue issue that you just raised having that money flowing in will look like a win and that's true but ultimately what it comes down to is the longevity of these deals and the impact on the US economy and we've seen time and time again in the past that import tariffs tend to have the heaviest economic impact.
So through higher inflation and slower economic growth on the country that imposes them.
So I think in terms of the economic effects, which will take time to show up, no, he's not.
Kerry Leahy, let me bring you in your thoughts on that.
And I suppose your thoughts on what we were hearing from Apple just today, that they are seeing record returns among other tech companies, Perhaps born of this tariff deadline and selling an awful lot of iPhones earlier this year because people were rushing to beat the deadline.
I agree with the earlier analysis that says that the tariffs are going to be problematic for many companies and many industries and will be stagflationary.
But there are some positive effects.
Look at Apple. We've got a huge surge in buy in advance to beat the tariffs, which is unexpected gain there.
there. So Apple was a big winner at least for a month but it will be very hard to get a US -made Apple ever created even if they tried their darndest to do that.
So that's really the story there.
There are a lot of ramifications, it's very complicated.
I think net -net Trump is winning but I don't think he'll be a winner three years or four years from now.
A final thought for what happens at midnight tonight.
We've got deals coming up to the wire, who knows if we'll get any more in the next few hours but it's going to be a nightmare for the border officials setting tax rates for tomorrow, isn't it?
They don't even know what they're going to be.
Spare a thought for CBP.
It's not going to be easy.
It's not going to be easy for a few months.
And that's true even if everything that we've seen tariffs do come in place, even that is complicated.
The copper tariffs, for example, they're going to have to go through line by line to see how components are made up to tariff different components at different rates.
So spare a thought for some time.
Kaylin Birch, thank you very much indeed.
And Kerry Leahy as well.
That's all we have time for.
This has been World Business Report from me, Ed Butler and the team.
Bye bye.
