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Hello and welcome to World Business Report from the BBC World Service.
I'm Roger Herring and on this edition, chaos across the Iberian Peninsula as Spain and Portugal suffer a huge power blackout.
The situation in Spain is bewildering.
There are traffic jams and trains are stopping across the country.
What is happening is absolutely extraordinary.
We'll have the latest live from Spain.
Also today the impact of US tariffs begins to bite as there's a big downturn in goods arriving from China.
The steepest rise in global spending on defence since the end of the Cold War.
We'll find out who's buying what.
Kenya lifts the ban on licensing new commercial banks.
And as the people of Canada go to the polls in their federal election, why the economy is very much in the front of their minds.
I'm looking for someone who has spent the time and put in the work to know the way economies operate.
That's all coming up.
But first, over the last few hours, much of Spain and Portugal has ground to a halt due to massive power cuts.
Transport has been particularly badly affected.
The government in Madrid has convened a crisis meeting.
the causes of the blackout are not yet clear.
Spain's power network says services are beginning to recover in the north and the south of the peninsula.
These people are in Madrid.
It was difficult to get here, the bus driver took pity on me.
I told him I had no mobile phone signal and he let me pass.
I went down to the metro to recharge it and there was no power.
We had to go back to the hotel and then they told us there was no electricity.
I leave the hotel and there is no power anywhere.
We cannot put down the shop shutters.
We are here, a bit cut off, waiting to see what's going to happen, like all the other people in the shops.
Frustrated people there in Spain's capital, Madrid.
Well, let's speak to Ashish Sharma, freelance reporter who is in that city and joins us now.
Ashish, well just give us an impression of what it was like.
I mean, just the lights went off, I guess.
Yes, it's absolutely chaotic scenes here, Roger.
I'm just looking out my window and it's just chockablock with cars, people desperately trying to get back home.
Everything is shut down.
The supermarkets have closed.
Before they were closed, there were people rushing in trying to buy goods at the last minute.
I, myself, was coming out of the gymnasium when all of a sudden the alarms went off.
It sounded like there was a fire alarm alert.
and as I got out into the street you can see that traffic lights had completely switched off.
There were people in clusters coming out of offices trying to cross roads.
There was a ramp underground car park ramp that was full of cars and I just had pity on the very first car at the bottom because at some point he's going to have to reverse a long way up.
Just to give you an idea of the sudden madness of it all, but from what we're hearing it seems like the Portuguese electricity operators have suggested that it could be a rare atmospheric phenomenon related to a variation in temperatures and they're predicting it might even take up to a week for them to restore power.
As you rightly said, the mayor of Madrid, Almeida, has been telling people to stay at home and only contact the services for emergencies, but all throughout I've been hearing fire alarms going off, ambulances, police, so they're already being quite busy and quite active.
Yeah I mean I was gonna ask what people are being told but I suppose they can't be told very much because how can the government get their message to people if they can't communicate?
Well that's the problem and there are people as I was walking back I could hear people having conversations and I got involved with some of them as well just asking people what was happening because I'd been literally spending an hour and a half in a gym and wondering, well, it's just coming to another world as you leave. And it was all about people saying suddenly everything's gone dark, all the offices suddenly sort of just sort of buzzed down and people were asked to leave buildings.
Shops were just closing down and people just did not know exactly what the cause of it was.
There was a lot of talk about could this be a security alert, could it be a cyberattack?
But I think that's been completely ruled out at the moment the Spanish government are in a security meeting But it's really more to look at how they can restore services restore electricity as opposed to Looking at some nefarious acts that might have been taking place But certainly people were very confused and I think now we have a better idea of what is happening and it's just a case of people trying to get back home to be with their families and just wait to see if Some power can get back and I think as you mentioned in certain parts of Spain It may be just beginning to get restored, but I
think it's going to take most of the day We're looking at maybe at least six to ten hours before we see some sort of some form of normality But even that's just a prediction.
Yeah, and I suppose the problem is it's it's the width of what's going on What are the effects we've heard that the transport system is effectively broken down No trains that the the airports are beginning to be closed flights aren't coming in because Madrid is a big international hub for for ongoing flights, isn't it?
Absolutely, it's not just the hub of its national flight, it's an economic hub for Spain.
So, you can imagine the impact that this is going to have in terms of people that can't get on with their normal businesses, so if businesses are shutting down, people that are expecting to do things, and let's just have a think, I'm in a block of flats that's got nine floors.
A lot of elderly people live around here, so how are they going to be able to get up up and down stairs, are people stuck in lifts?
These are the sort of questions now that are beginning to permeate through as people begin to understand that, okay, we've got a power outage and now we really need to look at people that might need specific help, elderly people, for example, and I think that's really now the next stage.
But of course, from the other side of it, from the business side, there's a big supermarket, El Cotinglés, it's a very famous brand, completely shut down, closed.
There are the workers that are standing outside.
I could actually see them.
They're all in big groups and huddles outside because while they're close to supermarket They don't really know when things might pick up again So the kind of idling by and that's pretty much the state of affairs and I think people are trying to get back home But also I was speaking to my wife that she was coming back from school And she was saying people just rushing into shops trying to buy things as well So perhaps people are anticipating that this could be a long haul and they're just trying to get some sort of goods and products into the house because they don't know how long it will take?
Well I was going to say actually how can they even buy things?
I suppose if they got cash they were all right but any other system isn't going to work either is it?
Well Roger it's funny you say that because as I was sort of getting back I sort of saw that there were restaurants that were still obviously serving people but there were groups of people that were having meals with a nice bottle of wine and they you know ordering a lot of stuff and I thought well if we have got a bit of a power outage I hope these people have got cash on them, because they're not going to be able to use the normal machines by which to make payments.
I mean, that's been a little bit lighthearted, I guess.
But it is the sort of problems that emerged as and when the whole thing has just sort of shut down.
And it shut down instantly.
It wasn't just like a gradual warning.
So people have been completely caught off guard. And literally the road in front of me is chock a block on both sides.
Cars can't move either way.
So this is going to take some time for people even to get home.
Ashish, thank you so much for giving us a picture of what's going on, and we will bring everyone up -to -date with the details as it goes, as we get them information about the resurgence of the power in Spain and Portugal, but our thanks there to Ashish Sharma live on the line from Madrid.
Now pressure is mounting on the White House to scale back the massive US tariffs on China, Amid warnings that Americans are facing rising prices and even empty shelves in stores.
This week the volume of imports due at the port of Los Angeles, where most goods from Asia arrive, is down almost 30 per cent compared with last week and it's expected to fall further next week.
Meanwhile it's pretty unclear what prospects there are for a trade deal with China.
President Trump was questioned by reporters as he flew back from Pope Francis' funeral on Air Force One.
I'm speaking to a lot of people from China but I'm speaking to people from all over the world on the tariffs that we're making very good deals, very good deals.
It's going to make our country rich, we're not going to be ripped off like we have been for the last literally 50 years.
What do you want to see from China?
Well, I'm not going to drop them unless they give us something that's substantial, otherwise I'm not going to drop them but it'll all work out.
So what is the state of imports from Asia, especially China, into the US?
Michael Starr is Vice President for Growth and Expansion at the global freight company, ZEN Cargo.
I spoke to him in his office in Chicago.
Almost immediately after the tariffs were introduced and quickly escalated to 125 % on China, we saw anywhere between a 40 and 50 % drop in shipments, specifically out of China.
Actually, Southeast Asia is seeing their volumes return because of the 90 -day pause on the accelerated terms that went up to 46%.
So yeah, right now China is definitely seeing a lot less exports.
The transit time to the US is about 20 days to the West Coast and 35 -40 days to the East Coast. So the West Coast is going to start seeing the impact first. And we are starting to see volumes drop.
What sort of volume drops are you actually seeing?
About 40%, and the carriers have reduced the amount of ships call in between Asia and the US quite dramatically as well by about 20%.
And I guess that has a knock -on impact, of course, also on drivers, truck drivers.
They're not going to be needed as much, I guess, in the US?
Absolutely. That's something that the industry and the ports especially are extremely worried about the moment especially in Los Angeles, Long Beach, Oakland, Seattle you know especially Oakland has a lot of agriculture so it's a kind of a double whammy for them.
U .S. companies aren't able to export as much out of the ports because China's put those on hold and now they're also not imported as much. Now one of the things people are talking about is potentially empty shelves.
I mean is that going to happen and how soon do you think in the U .S.?
A lot of Retailers and brands, consumer brands as I've spoken to, they actually have stopped shipping to bring in their products at 125 % tariff.
They lose money on every sale that they make.
So, they have stopped.
Most companies are not sitting on four months of inventory.
Therefore, we're going to probably see maybe towards the end of May, early June, the effect It's possibly on a shelf basis.
But out of China, you're talking a lot of consumer goods, a lot of clothing.
We've already seen the patterns of consumers' behavior change.
So to put it briefly Michael, what Americans, ordinary American consumers are going to start seeing this in their lives pretty soon, maybe towards the end of May.
They're actually not going to be able to buy the things they want.
Very, very possible.
The American consumer right now is definitely going to see the impact if if nothing changes between the US and China relationship in the next two to three weeks the American consumer is going to see a sizable impact.
Michael Starr there talking to me from Chicago.
Let's now pick up some of those throats with Rachel Winter who's partner investment manager at Kilik and Care Rachel thanks for being with us.
I mean the fact is interesting I mean when Wall street opened just about an hour or so ago.
It doesn't seem that that that show that investors are particularly spooked by the impact of all this that we're hearing there from Michael?
No, it doesn't. I don't think any of this is particularly new.
But what I do think is really interesting about it is it shows how far behind the official inflation data is.
So the last inflation reading we have for the US is the March data that showed that inflation was running at 2 .4 percent.
But that's nearly a month out of date and it really doesn't reflect any of the increase and prices that we've seen from tariffs.
It's only anecdotally by listening to the comments from freight companies saying that the amount of imports coming to the US have massively dropped.
It's only by looking online and seeing that prices have gone up a lot it's only by doing that that we can see that inflation actually in the US is really starting to rise.
And we've got a lot of data coming out this week haven't we?
I mean as well as big earnings.
So what are we looking at?
What are the key things to look for?
We're looking really for comments from chief executives who were are reporting on quarterly earnings season saying that they expect tariffs to increase their prices.
So far 90 % of CEOs who have reported this week have commented on tariffs in their earnings calls.
And I suppose they're going to also be projecting a bit.
I mean a lot of this is time related isn't it?
Because the tariff effect as we heard from Michael only just really beginning to come in and gonna start affecting things.
And also I guess we're moving through that 90 -day suspension of non -Chinese tariffs to a point where that's going to have an effect pretty soon.
Exactly. So, I think that is a big fear for many company leaders.
What is quite interesting is that many company leaders are just not really sure what to do with their earnings guidance because they just don't know what's going to happen with these tariffs.
So, actually a lot of them have left their previous earnings guidance in place, but just put a big caveat in there and just said, you know, this really could change a lot depending on what happens with tariffs.
Rachael, stay with us, we'll come back to you in a little bit for some more information.
But for the moment, just a reminder that you're with World Business Report from the BBC World Service.
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Well, one of the things that is happening is a big boost in defense spending nations the world may be wary of what US tariffs might do to their bottom line, but they are still willing it seems to spend on tanks and bombs and guns and drones.
World military expenditure reached $2 ,718 billion in 2024.
That is an increase of 9 .4 % in real terms from 2023 and the steepest year on year rise since at least the end of the Cold War.
The Stockholm International Peace Research Institute, which published the data on all says the biggest growth perhaps unsurprisingly was in Europe and the Middle East. Xiao Liang from the Institute explained to me who the biggest defense spenders are.
Huge investment in arms from Europe driven by the war in Ukraine obviously and also more like long term security threats posed by Russia but you also have huge investment coming from countries like Germany, Poland, Sweden, which are all ramping up their defenses following the war in Ukraine.
Now, what are they spending the money on?
Is it possible to say what kind of things they're buying?
Again, if you look at Europe it was mostly a refocus, a reshifting into conventional arms, so a lot of ground weapons, armoured vehicles, banks, artillery or air defence systems, which have become a lot more important, regained their importance, since the war.
Drones are a very big part of it as well, aren't they?
They have been shown to be very important, especially since the start of the war, That's why we see like a huge search for for example some Turkish drone producers Which have benefited a lot from this war, but in the last couple of years since the word entered the attrition stage Again, we're going back to more Conventional ground and air arms the companies producing this stuff for the European are the American Which which companies are doing it so the top five?
The biggest arms producers last year were all based in the US.
But we see that European countries are really trying to ramp up their arms industry, which had been kind of struggling since the end of the Cold War when defence spending was declining in Europe.
And there are a number of big factories, I suppose, you know, Volkswagen companies like that that are having trouble at the moment building the cars that they normally do.
Can those sort of companies be adjusted, changed to perhaps making tanks and other military paraphernalia?
They are trying to buy will take some time because they are still trying to recover from the supply chain disruptions during COVID and Trying to like ramp up production in a couple years.
It's not very easy So they need to for example retrain workers We start supply chains and factories Which will take quite a few years to come to fusion and the money that's being devoted to defense I suppose, comes out of other budgets.
I mean they're spending less, presumably, on some things, in order to spend more on defense.
Especially if you look at NATO countries who are all trying to meet the 2 % target, they have to make very tough trade -offs in their budgetary allocations.
For example, we see the UK is cutting international aid to fund its defense.
And countries like Germany or Poland, they are relying more on debts and loans.
Or some of the countries are even considering raising taxes, which, of course, will have very significant social economic and political consequences.
Shao Liang there from the Stockholm International Peace Research Institute, still with me, Rachel Winter.
Rachel, let's pick up on a point I was talking to you about, the boom, really, perhaps of increased defence spending for some major manufacturers in Europe.
I mentioned Volkswagen, but there are a lot of big companies out there that can do big engineering, this might work quite well for them.
Yes it might do, but actually there's been a huge change in investor attitudes towards investing in defense in Europe.
So, I think before Russia invaded Ukraine, a lot of clients just anecdotally would say to us, we don't want to hold any defense in our portfolios, we don't see it as ethical.
That's all changed post -Russia invading Ukraine and now a lot of people are happy to hold defense.
And we've seen a huge amount of money piling into European defense companies.
For example, BAE which is listed in London.
Shares in that are up over 65 % in two years.
But the biggest gain is a German company called Rheinmetall.
Shares in that are up over 400 % in the last two years.
Well, let's talk about another company that's having an interesting time Deliveroo, the food delivery app.
Now they shares, I think, went up quite a lot in London because the companies confirmed it's received a takeover proposal from the US.
Similar company, I suppose, doordash?
Hello, Rachel. Hello.
Sorry, I the line just caught up.
Oh, right. Oh, yes.
So we're talking about door dashes attempt to take over delivery and its impact.
Yes. Yes, interesting.
So it's really sad actually, to see so many UK companies being acquired.
What we have seen over the last few years is that the valuations for London companies have declined a lot, they've just been quite unpopular post Brexit.
And that has sadly led to a lot of opportunistic foreign buyers swooping in and trying to buy these companies on the cheap.
And I think that's exactly what's happened here with Deliveroo.
Excellent. Thanks very much for telling us about that.
That's Rachel Winter there.
Well let's turn our thoughts to banks.
For almost 10 years it's been impossible for commercial banks to get a new license to operate in Kenya.
Only existing banks could work there.
The 2015 decision by the Central Bank of Kenya was introduced to tackle various systemic issues, governance weaknesses, risk management concerns, operational inefficiencies within the sector.
The idea was to use the moratorium to strengthen regulation and governance.
Well, now commercial banks are free to apply for licenses once again.
Let's speak to Habil Olaka who's former chief executive officer of the Kenya Bankers Association joins us.
Now, Habil, thanks for being with us.
First of all, why the decision now to overturn this ban by the CBK?
Yeah, thank you. Maybe we need to possibly go back to the time when decision was made which was in 2015, at that point in time, a new team had just been appointed at Central Bank.
The governor and the deputy governor are still fairly new and within a very short while they had to make some very drastic decisions.
One was to close almost in quick succession three banks.
That was Dubai bank, Imperial bank, and Chase bank.
And some of the challenges you have mentioned down there are part of the reason why these banks are closed.
So at that point in time, the CBK leadership, I think, decided that rather than open the window for more banks to come in, they would rather study the ship and ensure that the existing banks have the stability and they're operating within the framework that had been put up.
And they're confident now that's the case, therefore they can change?
Yes, I think there is now a fair degree of confidence in the banking sector.
banking sector has weathered a few storms. If you look at the COVID -19, if you look at the post -election violence that rocked Kenya, sometimes back and a few other challenges.
I think one thing that has stood up for the banks is, one, is that most of them are operating well above the minimum co -capital requirement.
And then two, their liquidity levels are pretty high.
And those two things that has weathered the banks weather through various storms. So the results of this change in policy now might mean more banks, I suppose, opening up.
And many people in Kenya, I certainly heard that's gonna be a good thing, they don't actually have bank machines nearby from which to get cash?
Yes, I think it's a good thing.
One is that, one of the decisions they have made as well is that the new banks, if they come in, they will be operating at the new increased core capital requirement, which is 10 billion, showing up from the original 1 billion.
So that's a significant increase.
And if the new banks that come in at that level, they'll certainly be very strong, resilient banks that would be allowed to come and paint the Kenyan market.
And hopefully, then it will strengthen the market, access to financial services would be fortified.
And then two, I think the ability of the domestic banks to fund large ticket items will also be enhanced because the banks that will be coming in will be those that will demonstrating the capacity to find negative items. Habil thank you so much for being with me.
Habil Olaka there, former Chief Executive Officer of the Kenya Bankers Association with the news about that change that new commercial banks will now be able to get licenses to operate in Kenya.
That's a decision that's just come through.
Now Monday is the day millions of Canadians are heading to the polls to choose their next Prime Minister.
It follows a turbulent few months from Prime Minister Justin Trudeau's resignation in January to taunts about Canada's sovereignty by President Trump and the constant threat of a trade war with the United States.
In Toronto, Sam Grewett has been finding out what's driving voters to the ballot box.
At this wine bar and shop, there's many decisions to be made.
Red, white or rosé?
And of course, who the next Prime Minister should be.
The tariffs are, and Trump is, like, really top of mind for everyone.
So obviously we provide a great space for people to get together and to talk about those things and commiserate over a glass of hopefully Canadian wine.
Nicole Rolfeisen is the co -owner and director of imports at GrapeWitches.
They are three locations across the city.
What would be a game changer is to change the import laws.
She's hoping the next prime minister will reduce trade barriers between Canada's 13 provinces.
As it stands, some goods are subject to import taxes, without leaving the country.
Wines that are imported into the province to have the tax that is applied to them, which is an international tax.
So it's the same tax that gets applied to a French bottle or an Italian bottle, to have that, you know, dramatically reduced or completely done away with.
That would be the thing that, you know, on a national level could really support the Canadian wine scene.
Whoever wins this election will have the task of rebuilding Canada's economy after years of stagnation, and in the face of an escalating trade war with the United States.
Most of the variables that whatever government gets elected has to manage are unknown at this point.
And it's hard to judge somebody's strategy or policies against an unknown environment.
Out on the street I meet Mark, who says he's voting with tariffs in mind.
sucks. It's absolutely ridiculous, it's completely unnecessary and I think that we're doing exactly what we should do, that's fight like hell.
Canada's main federal parties agree that some form of retaliatory tariffs are needed, though they have different ideas on how the money raised by these levies would be used.
The Liberals say they would help workers and businesses, while the Conservatives want to remove trade barriers between provinces.
The NDP say they would put every dollar collected from tariffs towards supporting those affected.
I'm looking for a steady hand in our leadership.
A little way down the road I meet Michelle and a leader out on a dog walk.
Like Mark, Michelle is also voting with the economy in mind.
I'm looking for the voice of reason and experience and wisdom and knowledge and someone who has spent the time and put in the work to know the way economies operate.
But now everyone's vote will be shaped by tariffs, including elitists.
The tariffs will hurt everybody, that's true.
But the US should not be deciding how I am going to vote.
You know, there's other things that matter.
That report by Sam Grete in Canada as people there.
Get ready to vote in a new government for new federal government, right across the country.
Just before we go, just to tell you, Spain's power network services are beginning to recover, and it could take up to 10 hours to fully restore power.
That's the latest from here on World Business Report.
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