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Hello and welcome to World Business Report from the BBC World Service.
My name is Ed Butler and today we are hearing from Chino. where Xi Jinping is entertaining neighbouring powers, India and Russia, in a very public show of diplomatic unity.
So what's the economic significance of the event, we're asking?
Also in the show, why a tiny Caribbean island is cashing in on its internet domain name.
And President Trump's claims that Ethiopia's showpiece hydro dam... formerly to be inaugurated later this month, has actually been financed with American money.
Ethiopia says that's nonsense. They did try to get the financing, but nobody would give it to them.
So it's a proud moment for Ethiopians. so that we can actually do these kinds of very large infrastructure projects, financing it on our own.
More on that later in the show. First though, the head of the European Central Bank, Christine Lagarde, has today been warning of a serious danger to the world economy.
It will occur, she says, if President Trump were to undermine the independence of the US Federal Reserve.
Mr Trump has repeatedly attacked the head of the US central bank, Jerome Powell, for not cutting interest rates.
He's called him a numbskull, a moron, among other labels, and has on occasion threatened to fire him.
Miss Lagarde told French radio that if President Trump succeeded in sacking Mr Powell, it would be very concerning for the US and world economies.
If he succeeded, I think it would be a very serious danger for the American economy and for the world economy. because US monetary policy obviously has effects on the United States to maintain price stability and to ensure optimal employment.
If it was no longer independent and if it depended on the diktat of this or that person, then I believe that the balance of the American economy, which is the largest economy in the world... would be destabilised, and that would be very worrying.
The words there of the EZB chief, Christine Lagarde, speaking to French radio.
Well, to digest those and other comments that she's been making, I'm joined by the Financial Times Markets columnist, Katie Martin.
Hello, Katie. First of all, before we get into the detail, are you surprised that the ECB chief has been quite so forthright about this subject now?
Well, am I surprised? Yes and no. No, from the point of view that she is very much in line with the overwhelming majority of economists and academics. and other central bankers who are all horrified by what Trump is trying to do with the Fed.
It's not just his efforts to fire Jay Powell, the chairman.
There's another... official there called Lisa Cook, who he is seemingly hell-bent on forcing out of position.
The general direction of travel is that the president clearly wants much more control over the central bank than anyone has been accustomed to for the past several decades.
So everyone is horrified by this. I am surprised, however, from the point of view that, as Christine Lagarde will know very well, Officials in other countries who put their head above the parapet to criticise the US president quite often find themselves sparking unfavourable treatment in other areas, whether that's tariffs or national security or whatever it might be.
So It's not without its risks that Lagarde has been willing to articulate these concerns.
But also, the subtext here perhaps, is that the markets generally themselves... are maybe being rather blasé about this whole subject.
I mean, after a lot of the stuff you've been describing has been going on for quite some time, hasn't it?
And do you think the markets aren't really pricing in the risk here?
Yeah, markets are really quite baffling at the moment.
It's not just the assault on the Federal Reserve that Trump is undertaking.
He's also... interfering in corporate life, taking stakes in companies and cutting deals with companies to try and bend them towards his will.
He's also fired the head of a very important statistical office and he's sort of setting tariffs based pretty much on personal grievances and on preferences.
So there's a lot that he's doing to undermine institutions in the US.
And yet markets are kind of carrying along as if nothing happened. is happening, and in part that's because the really big technology companies that really dominate the stock market, they're kind of doing fine.
So that's helping to keep the stock market afloat.
And the other thing is that the irony of this whole interference in the Federal Reserve is that if he just left the central bank alone, it would probably cut interest rates. rates soon anyway.
So there's an extent to which in the short term markets are, investors are just screening out all of this stuff as noise.
In the long term, though, investors will discover, I'm very confident that undermining statistics, undermining the setting of interest rates and how financial stability is secured It's extremely dangerous and there will be very negative long-term consequences unless there's a course change of the type that Christine Lagarde describes.
OK, well, to pick up on some of the other comments we've heard in the same interview from Christine Lagarde...
She was talking, for example, about Friday's appeal court ruling in the US that the presidential tariffs imposed on countries around the world were illegal.
Traditionally, these taxes, changes in US tax, of course, have to be approved by US tax.
Congress. Simon Evenett is a professor of economics at the University of St.
Galen in Switzerland. He's an expert on trade.
Simon, Very briefly, I mean, the Court of Appeal, right, has made this ruling.
The tariffs remain in place for now, but this is all pending further legal review.
That's correct. The Court of Appeal decided that the tariffs were illegal.
The president had misused the underlying legislation.
The matter now goes to the Supreme Court, who will probably decide by the end of their term, which is the end of quarter two next year.
And so there will be a shadow of uncertainty over the future of these tariffs beyond that timeframe.
We should be clear, though, that the president is very committed to imposing tariffs and he has other legal options to put in place tariffs either temporarily or for the longer term.
Right. Well, we'll talk about those in just a second.
But I mean, it's interesting, isn't it? Christine Lagarde has endorsed the reputation and respected standing of the US Supreme Court.
She made a point of saying that, whilst perhaps... pretty clearly criticising the suggested moves of the President towards the Federal Reserve.
I'm wondering what will happen. In your view, there are a bunch of scenarios, but very simply...
If the Supreme Court kind of endorses these lower courts rulings that essentially...
The president is not free to set tariffs arbitrarily himself.
He needs congressional approval. Where does this go?
So in the event of the Supreme Court throwing out the tariffs as well, they will be replaced.
The president has essentially two types of options.
One is to invoke 15% tariffs for about 180 days, which he can do pretty much without any any sort of legal redress or prevent or a countermeasure, and then he would replace in the sectors that he cares about the most, they would investigate whether imports are causing national security.
And if they find that they are, they typically do find that they are then you can have much longer term tariffs like the ones we're seeing in cars, steel, aluminium.
That would be the strategy. So we would have a different type of tariff But ultimately, very sector by sector tariffs would emerge from this.
And of course, if the Supreme Court rules that the current tariffs are okay, then the president will carry on as he is continuing to use this tool to essentially get other countries to come running to Washington to negotiate.
So KT Martin, he's still basically going to, according to Professor Evenett, he's going to carry on doing what he's doing.
He'll find a way. Do you think this is why, I suppose all the legal interventions are why, one reason why the markets are... are more blasé, more relaxed about the situation.
They keep seeing changes. They keep seeing fluctuations.
They keep seeing uncertainty, a bit like the Federal Reserve.
They're going, we'll just wait and see. Well, there's a certain sort of circularity there, right?
Because one of the things that stopped Trump in his tracks in April after he announced those very aggressive global trade tariffs was the fact that the markets freaked out. out.
And now markets are not freaking out. And the message that that sends across to the president is this is fine.
And so to my mind, what's happening here is that he's becoming more and more extreme in his policy interventions, the more the markets sit back and do nothing.
And it's not clear to me when that changes.
I talk to a lot of investors who are all horrified. but saying, well, there's nothing I can really do about it just yet because it looks like interest rates are going to fall anyway.
I feel like this is quite an uneasy truce and that at some point it has to snap.
Katie Martin of the Financial Times and also Professor Simon Evenett in Switzerland, thank you both very much for your thoughts.
A quick word from Bill Dunning, Chief Investment Officer at W1M.
So your thoughts on this? Well, I think the conclusion that you came to at the end of that conversation about the result of all this from the point of view of what the Federal Reserve is going to do. is the market's extremely confident the Fed's going to cut interest rates later this month and that they're going to carry on cutting and get the policy rate, which is currently 4.5%, down to 3%.
And if that is the outcome, then that's supportive for financial markets.
And I think that's what the… focuses on i think the thing you have to watch most closely or we're looking at most closely is what the market expects from future inflation.
If they start to worry about future inflation then that would be a legitimate worry.
I think that changes things. Bill Dunning, for now, thank you.
OK, the leaders of China, India and Russia. have been presenting a friendly united front at the Shanghai Cooperation Organisation meeting today in the northern Chinese city of Tianjin.
India's Prime Minister Narendra Modi has been shown holding hands with Vladimir Putin, sharing jokes with the Chinese President Xi Jinping.
Mr. Xi said that they would challenge bullying behaviour, in his words.
Apparently that's a reference to Donald Trump and the tariffs that he's been imposing on...
Asian countries. And he's proposed development funds.
This is Xi Jinping has proposed development funds for other members of the organisation. to promote the better development of the Shanghai Cooperation Organization China has always focused on taking real actions to ensure better development of the SCO.
Going forward, China plans to implement 100 small and beautiful livelihood projects in member states with such need.
It will provide 2 billion yuan in grants to SCO member states within this year and will issue an additional 10 billion yuan in loan to the member banks of the SCO interbank.
The words of the Chinese president. Well, the BBC's Stephen McDonnell is in Tianjin, where the summit is taking place.
He spoke about not only the need to prioritise fixing military trust problems along border areas, and not only sharing information about security and about combating illegal drug trafficking. but said that there needed to be a new development bank set up by this body.
So that's clearly moving it much more firmly into an economic direction. and he was talking it up as a multilateral trade organisation as well as one that deals with security.
The BBC's Stephen Macdonald. Well, let's pick up on that idea around a development bank.
I spoke earlier to Dr Yu Jie. She's a senior research fellow on China at the Chatham House think tank in London.
I asked her what the new development bank could look like.
So far, we know very little on this new development bank organized under the Shanghai Corporation Organization because initially the organization was designed for security purposes. essentially secure border among Central Asian countries and China.
Now, I think really as China's role grow within the region and China felt is Forte perhaps not just as being a security player, but rather as being an economic player, and by playing that sense of economic statecraft. for example, development system landing, and in terms of extend this political influence within the region.
So we already have Asian Infrastructure Investment Bank.
We also have the BRIC banks, so among emerging economies.
But of course, I think for that part of the world, There isn't such a mechanism of development finance.
So that is one thing why they set up this.
But I think much bigger reason is that Russia, particularly together with India, looking to have alternative solutions. payment system against US dollars.
So by having these ICO banks, perhaps will come in very handy to rebuild that attentive payment system.
It's a way of sidestepping finance obstacles, you're saying?
Well, it is a way of sidestepping sanctions, I should say.
That's not about sanctions, but I think it's more about... how they're able to trading fossil fuels.
And for example, India is the biggest purchaser of Russian oil.
So I think it's also looking to alternative payment system. to smooth the ETH transaction on the oil businesses at the same time.
The connection, I guess, a lot of people will be picking up on is the relationship this week between India and China.
It's been a pretty frosty relationship, let's be fair, over recent years.
But maybe now the new kind of tariff environment coming from the White House has changed the dynamics, particularly for New Delhi.
Well, I don't think it's only the tariff environment that India has enduring 50% of the punitive tariff imposed by Donald Trump.
But I think also this has been a long way coming, a long process, the sense of de-escalation. on this bilateral relationship between China and India that already took place at the end of last year.
And I think what Donald Trump has done is actually accelerated this process of rapprochement between China and India.
But such a rapprochement would be something considered as being temporary, not something permanent, precisely because the remaining irritants regarding the border dispute the remaining irritants of that sense of economic competition between China and India, and also the remaining irritant China-Pakistan relationship stands there.
So I think for now, it is a temporary reset.
And how long such a reset would last, we don't know at the moment.
There's one more announcement. Xi Jinping just made an announcement to introduce the so-called China's Global Governance Initiative.
So that is the already existing global government.
Development Security and Civilization Initiative on top of that, I think in a way it is ready to stark contrast. with the United States retreating all the multilateral organizations, but instead trying to fill that space by introducing the latest global governance initiative.
So China is basically saying America is retreating.
You can depend on us. And we advance on this initiative based on our own terms and conditions.
Are you seeing great symbolism today in this meeting?
I mean, do you think in general terms...
This represents a cementing of these relationships, which, of course, have been getting ever warmer, not just between India and China, but India, of course, and Russia and North Korea as well.
Well, I see a wave of this major powers in the world. seeking non-US-led international order that is essentially a multipolar international order.
So China conveniently convening the summit and somehow cast the image of that new world order to be defined by the non-Western powers.
So I think that is a symbolism we're trying to discuss in here.
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You're listening to World Business Report from the BBC World Service. developments for Chinese firms as well.
Bill Dinning is a chief investment officer at W1M.
We've heard from him already. Tell me about BYD.
This is, what is it, it's now the world's biggest, largest EV maker, isn't it?
And its shares are sliding. Yes, they are.
Their profits have been hit, but it's an interesting one, BYD, because they are taking market share.
They're taking big market share. in Europe.
And I suspect that the growth in that the volume of cars coming from BYD and from other Chinese electric companies is going to carry on. they are undercutting in terms of price.
Right. So it's a price war inside China that's driving that.
Yeah, it's a price war. And that's obviously one of the things that the Chinese authorities are questioning about whether or not they want to continue that price war.
But BYD's volumes have enabled it to be a leader in that.
So we'll have to see. Yeah, BYD not the only electric car maker struggling, though, is it?
Tesla's new registrations in Denmark over the last year, 41% down.
In Sweden, 84% down year on year. It's extraordinary.
It seems like the loss of support for Tesla in Europe here.
Yeah, it's a bit country by country. I think I'm right in saying that in Norway, they still have a... the biggest market share and always the most electric car penetrated European country.
So I think with Tesla, it's a bit of a mixed picture as well.
And Tesla's obviously got other things going for it apart from just what the cars it makes.
Okay, Bill, we'll have to leave it there.
Thank you. Now, Ethiopia has rejected claims made by President Trump that the United States financially supported the building of a controversial megadam on the River Nile. the Grand Ethiopian Renaissance Dam, or GERD for short, which will be formally inaugurated next week. has been at the centre of a diplomatic row between Addis Ababa and the countries downstream, Sudan and Egypt.
Speaking to the BBC, Ethiopia's Minister for Water and Energy said that no foreign money was received for the $4 billion dam.
I've been discussing this and the formal inauguration of Africa's largest hydro project with Zemedene Negatu.
He's an Ethiopian-American business leader and an investor, It's played a big role in attracting inward investment into Ethiopia.
It's a very significant milestone. It's a very large infrastructure project. the largest hydroelectric power dam in Africa, even though it's based in Ethiopia.
It is designed to provide power to many countries in Eastern Africa and eventually maybe all the way up to North Africa.
It was fully financed by Ethiopia. All $5 billion plus was financed by Ethiopia, which is very unusual for large infrastructure projects in Africa.
Right. I'm interested you say that because Donald Trump is saying different things, isn't he?
He's saying and he said more than once that U.S. money went into this.
I sincerely believe President Trump was misinformed by his advisors as to who financed this project.
So I think they need to provide him with accurate information because the fact of the matter is, over the last, what, 12, 15 years, this... damn project was initiated, all the indications, all the evidence that we have shows that it was financed 100% by Ethiopians.
In fact, I remember the Ethiopian government at that time went around the world seeking for financing, even from the DFIs, development financial institutions like the World Bank. who flat out refused to finance it.
In fact, the statement I remember they were saying, they were telling the Ethiopian governments, first and foremost, you don't need a 5,000, 6,000 megawatt dam.
They didn't really think an African country needs an infrastructure project of this size.
And then subsequently, certainly in the United States, Both Democratic and Republican administrations made it a policy not to finance directly or indirectly I saw figures, though, that there was Chinese money going and at least to some of the machinery that was as part of the turbines that were generating the power itself.
Is that not right? The financing came from Ethiopia.
Now, contractors, the prime contractor is actually a European company, the Italian company called Salini, which is been rebranded as WeBuilt.
But there are many subcontractors, which I understand includes some Chinese, but there is no Chinese money.
To be honest, Ethiopia would have loved to have gotten the financing back then.
They did try to get the financing, but nobody would give it to them.
It's a proud moment for Ethiopians to show that we can actually do these kinds of very large infrastructure projects, financing it on our own.
OK, lots of pride. And I take what you're saying about the financing.
It's controversial, though. I don't think Egypt and Sudan are interested. entirely happy about this dam.
In many ways we're seeing that the water levels of the Nile, Blue Nile further north are significantly down as a result of this.
This is an electric generating power dam.
So the water comes in, runs the turbines, and flows out again, and it continues to flow.
There's no water being cut back. At least not from the dam itself.
Maybe nature during the dry seasons might do something, but that's another story.
And I'm not even sure about that. It should never have been a controversial issue for, as you mentioned, the Egyptians or, to a lesser extent, Sudanese.
In terms of the benefit is what we need to focus on, the economic benefit for everyone in East Africa.
The tens of millions of Africans right now living in object darkness every single day.
And this is what this dam is designed to address.
Generate power for everyday life. And secondly, for economic transformation.
Are you going to be exporting power to other countries?
Yes. Ethiopia is actually already exporting power to Tanzania, to Kenya, to Sudan.
So yes, absolutely, Ethiopia will be exporting power.
And then it generates hard currency for the country, which can build manufacturing plants, transform agriculture.
Yes, absolutely. It's part of the strategies to provide power to other African countries.
The Ethiopian-American investor, Sembedene Negatu, on next week's inauguration of the Grand Ethiopian Renaissance Dam.
The island of Anguilla, Caribbean paradise?
The tourist promoters would have us believe so, but has it now discovered a new canny investment stream?
The web address in your country, as you probably know already, will usually end with a two-letter code.
Here in the UK, it's .uk. In France, it's .fr.
It is perhaps unsurprising then that the tiny Caribbean island of Anguilla has been assigned .ai, except, of course...
Many to many, that's rather an appealing suffix.
And in recent years, the island has found a great way to make money out of it.
The BBC's Jacob Evans has been looking into this.
Hi, Jacob. I guess when it was assigned .ai, no one was really talking about artificial intelligence quite so much as they are now.
No, absolutely. You know, back in the 80s and the 90s when the internet was sort of in its infancy, these names are being handed out, like you say...
And I think AI or artificial intelligence was slightly innocuous.
It wasn't really part of our vocabulary as it is today.
But for Anguilla, this has proven super lucky because...
Fast forward to today, and artificial intelligence and AI is everywhere.
And in fact, if you even go back to 2022... which is before the launch of ChatGPT, the online chatbot, and its parent company, OpenAI. there were less than 100,000 internet addresses ending in .ai.
You fast forward to today, and that's nearly a million, and the boom has been absolutely exponential.
Hmm. So, you know, I'm just wondering, I mean, if Anguilla then is charging for access to its domain name, what's the price and who wants it?
Yeah, I mean, so they're earning big bucks from this.
Last year alone, they earned about 40 million US dollars, which is about a quarter of their entire GDP.
And for a small island nation, which is quite reliant on tourism, that's huge.
And these are open to anyone. Anyone can buy a domain name.
And there's two ways of really doing that.
You've got the normal one, so if you just wanted for your company to have... you know, xyz.ai, you go online and you can buy that for a set fee, you know, sort of 10s, 20s dollars.
Or you can have these premium ones, which are often short names, which are worth a lot of money.
No, you can either buy them for a set fee or you enter an auction site.
And then you can auction for these big ones.
And some of them have gone for hundreds of thousands of dollars.
So who's buying? So you've got certain companies who run AI chatbots or AI things like that who want to buy their company and make their online presence known.
But you've also got business people who realise that this could be an opportunity.
If you get in early, get a good domain name, wait for that to sort of increase a little bit more, and then you can flog it for a little bit more money and make a huge fee on that.
Clearly. Jacob Evans, thank you very much indeed.
That's the BBC's Jacob Evans on news that the tiny Caribbean island of Anguilla has been assigned, which of course has been assigned .ai. is now selling access to that domain.
Well, that's just about it for today's edition of World Business Report.
There'll be more from us later today. And of course, business matters. at one in the morning.
But from now, from me, Ed Butler, and the rest of the team here in Manchester, thank you very much for listening.
