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Hello and welcome to World Business Report from the BBC World Service.
I'm Rahul Tandon. On this edition we will bring you the latest on these turbulent times for the global economy and this week of course we have been focusing on growing tensions between Donald Trump and the chair of the Federal Reserve that is the US central bank Jerome Powell.
He has been the subject of fierce criticism from Donald Trump who's accused him of being too slow to cut interest rates.
Let's remind you what the US president said on Thursday.
I don't think he's doing the job.
He's too late. Always too late, slow, and I'm not happy with them, I let him know it.
And if I want them out, he'll be out of there real fast, believe me.
Well, on Friday, the White House's economic adviser Kevin Hassett told reporters that the Trump administration was considering whether Mr Powell could be removed before his term ends.
He claimed Mr Trump's frustrations were justified.
The obvious runaway spending from Joe Biden was textbook inflationary and we didn't see anybody worrying about that and then they cut rates right ahead of an election and so if you think that it's unacceptable for President Trump to be frustrated with the policy history of the Fed, then I think that you got a like some explaining to do.
Going to bring in Chris Lowe now from FHN Financial familiar voice here on the programme.
Chris a lot of people will be listening to this and wondering can Donald Trump actually remove the Chairman of the Federal Reserve, is that clear?
Raul, thank you, yes.
It's a good question.
We have different types of entities within the executive branch of the U .S. government.
Some of them, there's no question, are at -will employees, meaning the President can fire them.
Others are considered not at will, meaning they can only be fired for cause.
I think what Hassett is suggesting is that perhaps the White House will make the case that there is cause, but at the moment the Fed is considered immune at the very least from at -will firing.
Well there we go. We started with an easy question for Chris, plenty more from Chris in the programme.
We wanted to hear from a central banker who understands what it's like to be under political pressure.
So I've been speaking to Jean -Claude Trichet, former president of the European Central Bank.
I think first of all it's unbelievable, very aggressive for the executive branch of dealing with central banks.
We know that from time to time you have quarrels between central banks, independent central banks and executive branches.
I had myself to experience something of that kind.
I had a speech of my own President in the occasion of Bastille Day, which was extremely aggressive on Banque de France.
I was the governor.
How did you deal with that situation?
Did you feel undermined?
Did you feel contemplate leaving at that point in time?
No, not at all. Not at all, because I considered that the Central Bank Banque de France had been made independent by a change of the French constitution.
So my duty was, of course, to maintain strictly independence and to continue to do collectively.
Because don't forget that no decisions are taken by a single individual.
You have a committee.
You have a conseil, monetary policy council, open market committee meeting.
So it's more complicated than being aggressive towards one man.
you are aggressive towards an institution.
And in the case of the United States, the institution does not depend on the executive branch, but on the Congress.
You will tell me, in the present circumstances, depending on the Congress might be of the same nature as being depending on the executive branch. But nevertheless, not the same.
And I doubt very much that the Cenate would be very happy to eliminate its own position as regards the central bank.
How crucial a moment do you think this is, because there is a reason why the central banks are independent, aren't they, from political influence?
So for the United States, when we're seeing this developing in the public, how important a moment is this?
Well again, I think that a large part of the credibility of the United States depends on the independence of the central bank and that's a reason why again central bank has been really made independent and the same in the UK, the same in in France and in Europe of course.
I would say it's very damaging as is damaging to embark on a very aggressive tariff war towards the friends and the foes but also the friends as is damaging in my opinion to embark on calling for a weaker dollar which I have to say, But that will help the US exports, won't it?
Well, of course it might help a little bit exports, and it might totally damage the necessity for the US to be financed by the rest of the world, taking into account their current account deficit.
They have a large current account deficit, and we could see the consequence of the combination of the tariffs on the one hand, the impact on inflation and perhaps on future of interest on the other hand, and the call for a weaker dollar or this combine created something very abnormal that we have not seen since a very long period of time, namely, capital leaving the US quite aggressively.
It's interesting. You talked about the deficits there, the US deficit, because that is what Donald Trump is giving as a reason for this policy.
He's fed up of the country running big deficits with the likes of China and the EU, and he think Taris is a way to solve that problem?
Yes, I understand pretty well the reasoning.
And the reasoning is not totally false as regards the correction of the deficit.
But for practically all economists, the main reason of the US deficit is that you have a domestic imbalance, the US very simply consume and invest more than it earns.
And that is creating the deficit.
So we could, of course, discuss that a lot.
But clearly, it is not through abnormal tariffs, increasing the inflation, domestic inflation in the US, and diminishing growth in the US which goes with the retaliation and all the impacts on global trade that would solve the problem.
Clearly, we have an anomaly in the way I would say the executive branch in the US follows advices that explainable perhaps in a different universe, but combined are creating what has happened, namely big big decrease of the value of the bonds, not only of the stocks, but of the bonds, and all the financial instruments, they nominated in dollars and signed by the US Treasury.
US sum, one final question to you, who has been a key part of the global economy for many, many years now.
Have you ever seen a period like this?
How would you describe this period that we are now in?
Let's put aside the fact that we have a war in Europe, a war in the Middle East, I never saw an executive branch, and particularly the most important influential executive branch, embarking sharply and abruptly in these kinds of decisions that obviously have a very, very bad impact on global growth, on global inflation.
I hope very much common sense will be back in the room and that we could go back again to a much more normal behavior.
But it's clear that you cannot simultaneously arrange to have stocks and shares falling down, bonds falling down, and call for a weaker dollar.
If you do that, which was not done to my knowledge by any executive branch in the US in particular, but anywhere in the world.
If you do that, you have to pay for the consequences.
Jean -Claude Trichet, let us pick up on some of those points with Ulrike Almandier, a member of the German Council of Economic Experts and a professor of economics and finance at Berkeley in the US.
We had a professor there from Jean -Claude Trichet saying there would be consequences.
What could those consequences be?
Well, he alluded already to several of them.
These measures that are taking right now are likely inflationary for the US.
I feel that – I expect that the US population will feel that first. They also hasten the prospects of a recession hitting the US soon.
And then, both globally and in particular here in the US, a big impact comes from uncertainty, increased uncertainty.
That is poison for investment.
Business leaders do not like to invest when they don't know what change of tariffs will happen tomorrow or what regime they are under and that of course will considerably weaken economic power of the United States.
Globally do you think that is an issue as well?
Obviously Germany, a country that you know well, the manufacturing powerhouse of Europe, it's got rid of its debt break, hasn't it?
So, it looks like there could be a lot more investment there.
Could this mean that some of that could slow down?
Yeah, so for starters, we Germans know something about the damaging effects of uncertainty.
We have been begging our own business leaders over the past three, five years for Germany has basically been stagnating.
We've been begging them to invest more and the answer we get is, well, you know, sure energy cost up, labor cost up.
But really, they mentioned policy uncertainty all the time.
And so if you consider the regime Germany has been under the last couple of years is high policy uncertainty, what are we under now?
So I think this is like a huge doubling, tripling, quadrupling of that effect.
We will feel that – we are feeling that in the U .S. right now.
We will also feel it globally.
I do think that this recession it might induce will not be restricted to the US but will be globally damaging, unless of course countries get together in ways of trying to counterbalance it.
Well that raises a really interesting question doesn't it, because we've had guests on this week who say, slightly paradoxically, China is ending up as a sort of champion of free trade could we see China and the EU, these two extremely powerful trading blocs, moving much closer together because of it?
Well, I don't know about much closer.
You know, we have all learned our lesson, being careful with regards to Chinese economic policies, but I think directly you're right.
I found myself over and over in the puzzling position of thinking, well, yeah, I understand why Beijing is saying, well, we're not going to enter any negotiation until we know where earth this is supposed to go here it is we were really faced with the policy which you know did have a clear motivation one does have to give that to president trump that he has singled out that there were um a uh trade practices that were maybe not always completely balanced and more specifically for the us that globalization the uh entry of china in the into the wto did lead a two hugely adverse effects for large parts
of the U .S. population, for regions like the rest belt, and that needs to be remedied.
Unfortunately I think the path being taken right now with tariffs, with isolating the U .S. economy, is not a path that will work in the 21st century.
It will come at huge welfare costs.
Stay with this, back to Chris Lowe.
Chris, the market's shut in the U .S., which may be a bit of a relief to you because to say they're volatile is an understatement.
Yes, although I would note that, well, a couple of things.
One, it is important to note that both the president and the treasury secretary have actually said they'd like a stronger dollar, not a weaker one.
So the policy isn't achieving that, but that's the goal.
Another point though, and I think it's equally important, maybe more, is that the markets really calmed down this week.
Last week was freefall, and it was bonds falling, stocks falling and so on.
Bonds rallied every day this week and they're back within the sort of center of the range.
And I think what that's telling you is that the immediate sort of panicked selling by people in highly levered positions and the Bank of England, for example, warned there were London hedge funds that were highly levered.
That selling is over and so hopefully the markets calmer and more rational going forward. I like the way they used the word hopefully there.
This week on our business programs we've been hearing from Chinese manufacturers at the Canton fair about the impact of tariffs on their businesses.
Also, it was very hard for us because it's clearly Trump.
This is clearly, he is clearly one.
Not good, not bad, no production already.
All the products are in the warehouse, yeah.
They don't want us to export.
They put too much tax means that no need to export.
We already have China market, very big, many people see.
Yes, we give the best thing to Chinese first. And on business matters last night, James Mega, senior reporter on the Chinese economy and government for Bloomberg said this.
I was just at the Canton Fair this week, which is the world's biggest trade fair in Guangzhou.
Now they're certain that things are going to be terrible.
The customers are already cancelling orders.
People we spoke to said a U .S. customer just cancelled a $15m order.
People have told us to hold our shipments for three months or six months cause they don't know what's going to happen.
Basically they're not being paid.
Let's speak to a U .S. business that deals with China.
Rick Waldenburg is the chief executive of Learning Resources, an educational toy company.
Rick, thanks so much for joining us on the protocol.
What is it exactly you're bringing in from China?
Well, we make educational materials and educational toys.
And so we make a range of those products in China and in other countries, but our largest manufacturing market is China.
So I'm sure you've been following the news, trying to keep up with the growing tariffs that have been put on China.
Now with what's in place, Do you know what you'll have to pay in tariffs in 2025 if they stay there compared to last year?
Well, we've prepared an apples -apples comparison, partly for our own curiosity and partly to help make it clear to others.
Last year we paid cash for duties and tariffs of $2 .3 million and based on our 2025 plan, which probably won't be achieved, we would have for that, the projected revenues paid $100 million.
Wow. I mean, that is quite a difference.
I mean, can you afford to do that?
I presume you couldn't, could you?
Would be very difficult.
Absolutely not. We don't have the $100 million.
And if we raised our prices to be reimbursed for that tax increase, we would go out of business.
So what do you do now?
I mean, we've heard from Chinese manufacturers that orders are put on hold.
Is that what you're having to do?
Do you have enough inventory to keep going for a few months?
We have a decent amount of inventory, which buys us some time, but the problem doesn't really go away.
It's just a question of when it hits our books.
We're having to shift our production to other countries, which is no small undertaking.
We built the supply chain over 40 years and we're being asked to move it and set it up somewhere else in two weeks.
Which you clearly can't do.
No, it's completely unrealistic.
No matter how fast and dynamically we move, it just can't be done.
So we'll move it as fast as we can, but the supply disruption is enormous and it will affect the ability of retailers to have a stock shelves for Christmas there's no question about that yeah first mention of Christmas on the program already but stay with us Rick I want to bring Ulrika back in here and here a clear indication that the global supply chain now is so complicated isn't it it's not simple that you just say we're going to stop products from this country because everything is so interlinked yeah that's right and to So, in infused a little bit of hope maybe.
Please do. You know, we all went through a shock therapy, a fast lesson during COVID, what it means to have supply chains disrupted.
And what happened for many countries is they did establish new supply chains, they did establish new trade routes.
And my hope is that this will get fostered and pushed ahead.
I see already in Europe right now that some of the movement towards more free trade agreement with different sets of countries—think about Mercosur, the agreement of the EU with South American countries, which used to face very strong opposition, for example, from France, Poland, and some other countries—I do see some convergence happening, and people realizing that's the way we have to go.
So, sticking to the message we have learned now, we have to be diversified.
We can't just depend all on China, all on the US, and of course, the Germans learned the lesson about not depending on Russia for energy, that needs to be moved ahead now, and that pressure actually to keep going might help us in the long run.
Chris, in terms of the markets which have been a lot more stable, they will though, we have this 90 day period that Donald Trump put in place to strike those deals.
They're going to want to see some deals in the next few weeks, aren't they?
Absolutely. And look, Governor Waller, one of the Fed governors, talked about this in a speech this week where he imagined a forecast under a high -tariff regime and a low -tariff regime.
The low -tariff regime, as you might imagine, much more palatable.
So I think it's imperative they get some of these deals done and get them done quickly.
We're running out of time.
There's 90 countries.
There were 90 days.
We're down to 80 now Final thoughts from you Rick chief executive of learning resources.
What do you do now?
Then you obviously can't pay that huge tariff bill You obviously can't move your production in a couple of weeks.
How does your business survive?
Well, we have to evacuate from China because we can't bear the risk that China is walled off forever However, the time that it takes to put these deals together are extremely consequential to us.
Even the rules on the pause that there's 80 or 90 days left is up in the air.
We aren't even sure and there is no certainty as to whether they're referring to when the goods arrive or when the goods are shipped.
We feel like the time is kind of up, so we're reestablishing a supply chain outside of China and setting it up as quickly as we can.
It's almost like an evacuation.
I can't overemphasize the disruption, this is far greater than an inconvenience.
This is a complete rewiring.
Is this more difficult than the pandemic?
This is pandemic 2 .0.
Rick we're going to keep in touch with you if you don't mind and see how things develop over the course of the next few weeks.
Thanks so much for joining us.
Ulrika, thank you as well so much for joining us.
You're with World Business report from the BBC World Service.
Let's talk now about one of the world's best -known fast -food companies, KFC.
In Pakistan, at least 60 people have been arrested after a series of attacks and protests against branches of the fast -food outlets.
The authorities say there have been at least 11 incidents in which outlets were vandalised by armed protesters.
Here's our correspondent in Pakistan, Azadat Mashiri.
It's hard to travel around, even when you're going from smaller towns, without seeing a KFC.
It's hugely popular.
In fact, when I first moved to Pakistan and I was in Islamabad, I think it was the meal I had on the second day when we were on deployment.
It's extremely popular, and a lot of locals inside the store.
It's Pakistani staff, men and women.
To boycott such a hugely popular franchise, one that's owned by Yum Brands, which is still an American fast food corporation, it's still owned by them here in Pakistan, it's significant.
Now, neither Yom brands nor KFC have actually addressed this issue, but it's been several days of serious violence, police are saying that they need to add extra security to all these stores, so it's significant.
So why are these attacks taking place now?
Here it is, as you do again.
What they've said is that they can't connect all these incidents to anti -Israel sentiment, But given the amount of protests and attacks on these stores, they told us they are investigating a pattern.
And this is all happening as influential figures in Pakistan are continuing to condemn the war in Gaza, urged people to boycott products that are perceived to be linked to the war.
But in light of these recent incidents, they've urged people in Pakistan to protest and boycott peacefully.
We will continue of course, on the BBC World Service to keep across that story.
A host Most of new Star Wars films and TV shows have been announced at this Celebration Live event in Japan including one of Hollywood's biggest stars taking a lead role in a new movie.
That is the director of the film Star Wars starfighter Sean Levy bringing Ryan Gosling on stage at the event alongside Marvel.
Star Wars of course is one of the biggest franchises of all time but is it still gonna make the business enough money.
With us now is the media reporter Kristian Sill, are you a big Star Wars fan yourself Kristian?
Yes indeed I've been a Star Wars fan for pretty much all my life actually.
Yeah good good. So Ryan Gosling in Star Wars Starfighter on the big screen, we've seen Disney have a lot of sort of Star Wars spin offs on the small screen on streaming, why the move back to cinema?
I think realistically Disney, a few years ago, its Chief Executive Bob Iger returned to the helm of the business.
Soon after he returned, he said that the company was going to pivot back, to use his words, pivot back away from streaming back to an end for the releases, largely because the cinema chains are amongst Disney's biggest customers, generating a significant amount of revenue for the company.
Realistically, in the wake of the pandemic beginning to recede, streaming subscriptions began to decline and the emphasis came back on to more onto cinemas and you know in the past certainly in the past two years box office receipts have uh managed to rebound they're not up to pre -pandemic levels but they're heading in the right direction Star Wars is a name that that means a lot to to people probably my generation but a younger generation does it still have the same impact with them is it a franchise that's going to continue to do well do you think I mean I think that's the big question really
because I I mean, essentially what Disney has been trying to do since it bought Lucasfilm, the rights holder to Star Wars, must have been just over, I think it was 2012.
They've really been trying to reinvigorate it and essentially reshape it.
Initially, they started out, gradually, with Force Awakens, which had the majority of the original cast, and then a new cast along with it.
and then, they phased out the original actors and now it's kind of like standalone, essentially the new actors, the likes of Ryan Gosling in the upcoming film, and we had Jude Law in a TV series, a streaming series, the end of last year, and I think this is what it's all about.
It's what you say, it's trying to make it relevant to a new audience and really they've had a few hits, Mandalorian being one of them, and they've had quite a lot of misses as well, so the jury's out on that one.
It certainly is. Let's bring in Chris Lowe here.
Ryan Gosling in Star Wars Starfighter, will you be heading off to the movies to watch that because he was Star Wars fun Oh, you know it's one of the first films I remember seeing as a boy, so I'm afraid I won't be able to miss it.
I hope it's good. Like who's your favorite character in Star Wars?
Well, it's all the old ones who are gone, but you know that there there are some fun new New ones I do quite like Rey No, you do you do that and and then the old ones are you Darth Vader Skywalker?
Oh No, it's got to be Luke right?
And and of course Leah and Han Solo the original crew Chewbacca they are 2d2.
It's all good stuff Christian and what about your favorite Star Wars character?
Well, I mean as well, I think we're talking about Luke and of course Harrison Ford's Han Solo I mean, yeah, these are the iconic characters that that aren't around anymore Thank you so much, Christian, for joining us.
Thank you so much as well for joining us.
As always, we were a business program, but we had a bit of fun at the end of it, didn't we?
That is it for World Business Report.
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Energy is at the heart of Africa's development.
With a burgeoning need to expand energy sources for a growing population, organizations must work together to increase access to affordable, reliable energy.
At the inaugural African Markets Conference held in South Africa, business leaders, policymakers, and government representatives came together to discuss what is needed to enable innovation and growth in the energy sector.
To find out more about what is required for a just energy transition in Africa, visit StandardBank .com forward slash CIB.
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