Hello and welcome to World Business Report from the BBC World Service.
I'm Sam Fenwick. Coming up today, Germany's economy shrieks again in 2024.
We'll examine which sectors were hit the hardest.
We'll also discuss how trade can be used as a bargaining chip from Donald Trump in the US.
I think what's interesting to most of the world to watch is he's using these tariffs as a national security mechanism almost.
To Mali, Bucafaso and Niger leaving a trading bloc established 50 years ago.
Which will be a de facto, we do not have to respond to your electoral timetable anymore.
We're free from it and we want to create our own mini regional world order.
Mali's former foreign minister tells us that the move could have significant economic repercussions.
That's all coming up here on World Business Report over the next half an hour.
Germany's economy, the largest in Europe, faced significant challenges in 2024, with its total economic output shrinking by 0 .2 % for the second consecutive year, new data shows today on Thursday.
Key sectors such as machinery and equipment manufacturing and the car industry saw a marked decline in production.
Manufacturing is crucial to Germany's economy, accounting for more than a quarter of its output.
It is also Germany key to Germany's exports.
In a moment, we'll talk through what all that means for the country.
But first, let's hear from a prominent German manufacturing company.
Roll the dice to collect extravagant assets, earn zillions and make your wildest dreams come true.
The richest among you will be the winner.
Big money from Ravensburger.
Ravensburger is a large German company and it's known for making jigsaws, board games and wooden toys.
Now, they experienced significant growth in 2024, booking the national trend in Germany.
Its turnover is over $800 million and says its aim is playful education.
The CEO, Clems Meyer, was at the Nuremberg Toy Fair today, which is where I spoke to him from.
We've grown by 18%, which is driven by us driving our international rollout and then also buy a new business area that we're building up, which is a trading card game that we've launched together with Disney.
Crucial to Germany's economy, accounting for more than a quarter of its output.
It is also key to Germany's exports.
In a moment, we'll talk through what all that means for the country.
But first, let's hear from a prominent German manufacturing company.
Roll the dice to collect extravagant assets.
Earn zillions and make your wildest dreams come true.
The richest among you will be the winner.
Big money from Ravensburger.
Ravensburger is a large German company and it's known for making jigsaws, board games and wooden toys.
Now, they experienced significant growth in 2024, booking the national trend in Germany.
Its turnover is over $800 million and says its aim is playful education.
The CEO, Clem's mayor, was at the Nuremberg Toy Fair today, which is where I spoke to him from.
We've grown by 18%, which is driven by us driving our international rollout and then also by a new business area that we're building up, which is a trading card game that we've launched together with Disney called Disney Locana.
So yeah, you know, counter to the market, we've seen quite a bit of growth.
But you have also talked about your efficient cost management.
Now, obviously, in a global market that we're in, with the price pressures that we're also facing, both from a consumer's perspective and from a trade perspective, cost efficiency is key.
I mean, we're competing with large American companies.
We're increasingly competing with companies that have most of their cost structure in Asia.
And so we always have to work on our cost structure.
Absolutely. And does that cost structure ever mean moving out production of your toys and products to places like China?
It actually doesn't for us.
So, you know, believe it or not, we actually do produce our adult puzzles in Germany.
We also do our logistics from there.
Obviously, that works because we have a high level of automation.
then everything that has less automation we do in the Czech Republic very stable very good works extremely well for us you know a lot of the toy industry normally is asia -based there are some products especially products around electronics that we too source in asia the gdp figures came out today for germany
there are fears that the country could go into recession how do you deal with that?
Yes I mean there is certainly and we see this across the market a price pressure and consumers are partially down trading energy costs that are high but we have bureaucracy that is too large that needs to be worked on we have to create a more entrepreneurial spirit but I'm always advocating a somewhat measured
response because I think we need to see the safety of what we actually have in our system.
So in terms of going to the polls in February what would you be looking for what what are you thinking when you cast your vote on who should run the country next um well i don't want to give a you know one direction political vote i do think that it is important that we get a government that you know
especially in the german system can actually act and we have seen you know that larger coalitions of very many parties aren't necessarily you know all that great.
So my hope would be that we get a pretty clear voting result and a mandate for the largest party to actually really act.
You're talking to us today from the Nuremberg Toy Fair.
Is that, you said, the largest toy fair in the world?
That is indeed the largest toy fair in the world.
And we have people from every country in the world here.
Of course, a lot of Asian countries all the europeans all the americans it's really great to see everybody here and our industry is an industry that actually lives on that social contact and togetherness and people people come here and it's you know always an exciting time of toys toys live on you know
consumer -centric innovation things that you know make kids eyes glow and there's a lot of that here So that was Clems Meyer, the CEO of Ravensburger.
It's a large German toy maker.
Speaking to me there from a big toy fair in Germany.
Well, listening to that was Winfried Weber.
He's a professor of management at Mannheim University of Applied Scientists.
He joins us today from Stuttgart.
Thank you very much for joining us.
Now, you are an expert, aren't you, in these small, medium -sized businesses across Germany?
Some say they're the backbone of the economy.
They're called Mittelstand companies, aren't they?
And do you think they're having similar experiences to what we've just heard, or are they struggling a little bit more than the toymakers?
No, the toymakers are exactly part of the Mittelstand, of the German Mittelstand.
And it's a wonderful example where even in such a small market, well, hidden champions can grow.
So, for example, in Denmark, Lego or in Germany.
Thank you for joining us.
Now, you are an expert, aren't you, in these small, medium -sized businesses across Germany?
Some say they're the backbone of the economy.
They're called Mittelstands companies, aren't they?
And do you think they're having similar experiences to what we've just heard or are they struggling a little bit more than the toymakers?
No, the toymakers are exactly part of the Mittelstand, of the German Mittelstand.
And it's a wonderful example where even in such a small market, well, hidden champions can grow.
So, for example, in Denmark, Lego or in Germany, we had Playmobil.
And with a focus, like Mr.
Meyer said, about customer -centred products, that's the possibility and the backbone of, as you said, the backbone of the German economy, which is under threat.
Well, yeah. So which sectors are particularly struggling?
If toys are doing all right, which ones are in trouble?
Well, our main export markets like automobiles, mechanical engineering, chemistry, even some of the hidden champions, so the medium -sized companies that have 50%, 60%, 70 % export, they cannot keep up with some structural problems.
For example, energy costs and digitization, that's a problem for them.
But there are some solutions that might come within this decade if we keep on our strengths.
What are the solutions being proposed by the different candidates running in the election next month?
Well, they are extremely different.
So I think that the running party like the Social Democrats and the Greens will not have their agenda, will not be after the election in the end of February.
Probably the Christian Democrats in the polls are the leading party and they will make the main decisions in the economic politics.
We heard from Mr. Mayer talking about how he just wants to make sure that there is a party that has enough power to be able to make decisions because that has been a problem, hasn't it, in Germany with the various coalitions over the years?
Yes. To have like different to like the UK where the main party is running the government, we have more discussion on migration, which is for the voters important, but for the situation in our economy, in our society, much more important is the economy.
And as your question said, as the program of the Christian Democrats will be more, well, yeah, supply -orientated politics, we will need and more leeway to the entrepreneurial decisions of the companies.
Winfried Weber from Mannheim University of Applied Science, thank you very much for joining us.
Well, let's take a broader look now at the eurozone economy, because today the ECB cut interest rates by a quarter of a percentage point, and the region is going to struggle to get back on its feet, according to the European Central Bank President, Christine Lagarde.
the economy stagnated in the fourth quarter according to Eurostat's preliminary flash estimate it is set to remain weak in the near term consumer confidence is fragile and households have not yet drawn sufficient encouragement from rising real incomes to significantly increase their spending.
Nevertheless, the conditions for a recovery remain in place.
That was the president of the European Central Bank, Christine Lagarde.
Let's talk now to Susanna Streeter.
She's from Hargreeves -Lansdowne.
So what do you make of the very downbeat there attitude of Christine Lagarde?
Well, it was very much in line with expectations.
And so financial markets were mostly unmoved.
It's not really a surprise that she warned about the weak economy.
We know how weak it is.
And her suggestions that the bank has further to go in cutting rates was also expected.
It's not yet got to the sweet spot, the so -called neutral rate at which monetary policy neither stimulates or restricts growth.
So there's some way to go.
What was pretty interesting, I thought, in her comments was a comment she made on Bitcoin.
And she said that it did not have a chance of entering the central bank reserves.
A real change to what Donald Trump in the United States has been saying about how the US will build up a strategic Bitcoin reserve.
That's not going to happen in Europe, according to Christine Lagarde.
Well, thank you very much for that.
Susanna Streeter, we'll come and talk to you again in a few moments time.
You're listening to World Business Report from the BBC World Service with me, Sam Fenwick.
The military governments of Niger, Mali and Burkina Faso have formally withdrawn from the economic community of West African states.
It's a trading blog known as ECWAS.
It was established 50 years ago to promote economic integration and cooperation between its member states and to raise living standards and maintain economic stability.
There are fears now that the exit of these three countries will have an economic knock -on effect.
Among those sounding the alarm is Kasima Kamara.
She's Mali's former foreign minister.
And I spoke to her earlier today and she started by explaining what led to this point.
The ECOWAS really wants to ensure that the successes, the economic integration it has had since 1975 are preserved.
It's now the political aspect of that integration that didn't really work out, especially recently with a series of coups that we've experienced in West Africa.
But I believe that the economic integration is one that the ECOWAS really wants to preserve and is insisting that it remains the same, whether these countries are still formally part of the ECOWAS or out of it.
Why did these military governments then choose to leave the bloc?
This is a once -in -a -lifetime event where you have three military governments, three coup countries, where military governments are feeling the pressures to hold elections and hand power over to an elected civilian government.
and they're feeling that pressure at the same time.
And so they have decided collectively to leave the regional body, which will be a de facto, we do not have to respond to your electoral timetable anymore.
We're free from it and we want to create our own mini regional world order.
What do you fear the economic impact of it might be?
I think the free flow of people within the ECOWAS subregion was really one of the biggest successes.
A citizen from Ghana can travel from Mali without a visa, can go and decide to work in Mali without a visa.
It was the same within the 15 member countries.
Now that we have three countries that are out of the ECOWAS, how do we maintain this free flow of people within the region is, I think, still a big question.
And governments then choose to leave the bloc.
This is a once -in -a -lifetime event where you have three military governments, three coup countries, where military governments are feeling the pressures to hold elections and hand power over to an elected civilian government.
And they're feeling that pressure at the same time.
And so they have decided collectively to leave the regional body, which will be a de facto, we do not have to respond to your electoral timetable anymore.
We're free from it and we want to create our own mini regional world order.
What do you fear the economic impact of it might be?
I think the free flow of people within the ECOWAS sub -region was really one of the biggest successes.
A citizen from Ghana can travel from Mali without a visa, can go and decide to work in Mali without a visa.
It was the same within the 15 member countries.
Now that we have three countries that are out of the ECOWAS, how do we maintain this free flow of people within the region is, I think, still a big question.
And therefore, the impact on businesses who might rely on those people to work for them.
That is definitely, this is a big question.
But the ECOWAS issued a statement yesterday saying we are still maintaining all of that.
We're maintaining the free trade.
We're maintaining the free flow of citizens.
And we're giving time for us to continue a diplomatic dialogue with the three countries which decided to leave.
So on the side of the ECOWAS, there's definitely a will to maintain all of these assets.
But I suppose those that are still in ECOWAS would say you can't have it both ways, would they?
That is very true. But what the ECOWAS is also aware of is that none of these countries have held any popular consultations to know whether their citizens actually want to leave.
And the ECOWAS is increasingly wanting to sort of clear its image as being a regional body for the heads of states.
And so I think this is part of the demarche of the ECOWAS to demonstrate that it really cares about its citizens first.
It wants its citizens to maintain those advantages, irrespective of what their heads of states have decided.
And anyone that might do business in Mali then, they're going to struggle, aren't they?
They're going to be angry about pulling out of this organisation.
These three countries, again, are landlocked countries.
And they're also countries that are facing a dire security situation with a terrorist threat, which they have endured for over 10 years now.
So investors are already dealing with that security situation if you add the lack of facility to move around within the sub -region.
That was Kamisa Kamara, Mali's former foreign minister, speaking to me a little bit earlier on.
Now, in just two days' time on February the 1st, the first set of tariffs in Donald Trump's new term as president are set to take effect.
The tariffs of 25 % on imports from Canada and Mexico are part of Mr Trump's broader America First trade policy, aiming to address issues like unauthorised migration and the flow of illicit drugs.
Well, to get an idea of what corporate America thinks of these tariffs and the threat of these tariffs, I spoke to Ashley Davis.
Ashley is a seasoned Republican lobbyist for businesses who represents major US companies like Walmart and Boeing.
She's actively involved in Republican Party fundraising and has worked with President George W.
Bush. She's also been involved with discussions on tariffs since the end of last year.
She started by telling me about the efforts to prevent these tariffs being implemented.
From what I have been told, the Mexican government closed a tunnel that was open coming into the United States, that they feel confident that the tariffs will not be implemented this weekend.
I have not heard that from our government.
I've just heard that from the Mexican government.
And I know Canada is doing the same.
But there is still the chance that they will.
And, you know, businesses will be trying to prepare for that.
So how are they preparing for that?
The companies that I work with are actually not doing anything right now in case these go into place.
they're kind of doing the wait and see.
Is that sensible? If anyone that was around during 2016 to 2020 when Trump did the tariffs with China the first time, they understand that he's very serious about this.
I think that they don't know what to prepare for because they don't know what the level of tariffs will be.
Is it a smart thing to do or not until we know what we're up against?
And if you look at Mexico, Canada and China, They account for more than a third of goods and services that are imported into the U .S., supporting tens of millions of American jobs.
So in terms of lobbying for lower tariffs.
It really happens, to be honest with you, in regards to jobs.
People didn't lose jobs last time.
It was more some of the products went up in price.
So to be able to change the supply chain to Vietnam, say, for example, they had to build new factories.
to do new trade agreements with, you know, these various countries.
I probably drove up some of the consumer prices for some of these products, but jobs weren't lost.
And this is why he kind of called bluff on some of these companies that were saying that that would happen.
The tone I'm getting from you is that actually this might not be as bad as some have made out U .S.
businesses. I think the reason that he has not come out with the EOs is he wants to make sure that this does not impact inflation it does not impact our economy he's going to do it and has very smart obviously his cabinet is just starting to get confirmed the treasury secretary is now confirmed he's
now at the office working on this the trade representative has not been confirmed yet so he's going to make sure that the u .s economy is not going to tank over these tariffs but he's also going to do it probably strategically which is why you hear now that Do these tariffs happen but do they happen
in steps and so it doesn't sink our economy?
What he's not going to do is the sky is falling before anyone even knows what's going to happen.
And believe me, again, it's exhausting.
It's really hard and complicated.
He's going to point to what happened four years ago and say everything you guys told me that was going to happen didn't happen.
We're going to make exemptions for things.
But on that 1st of February deadline that is fast approaching, he surely can't go back on that, can he?
Oh, I think if Canada and Mexico have really put in place these security measures that at least Mexico is saying that they have, he will consider that a win.
And I would think back down a little bit.
I don't know what he's thinking.
I don't know if anyone can predict right now, but I think that he could pull back if he can say he has a win on the border.
You have to remember, the border and China was the two biggest issues that Americans voted for him on in the elections in November.
Anything he can do to claim wins on that, I think that he's going to do.
So maybe he doesn't put 25 percent in on Saturday and say, you know what, they're doing a good job right now, so I'm going to delay this for another month.
And I think what's interesting to most of the world to watch is he's using these tariffs.
And he said he was going to do this during the campaign.
So none of us should be surprised because he campaigned on this.
He's using the tariffs as a national security mechanism almost.
That was Republican business lobbyist Ashley Davis.
She was talking to me a little bit earlier on.
Let's have a chat with Susanna Streeter now.
She joins us today.
She's from Hargreaves Lansdowne.
What can we expect to see perhaps with the share price of some of these companies that are reliant of imports from either Mexico or Canada come the 1st of February, assuming that the tariffs do come in?
Well, we've already seen an impact on certain stocks, for example, General Motors.
It fell sharply, around 10 percent yesterday because of these concerns, because of this threat to tax key materials needed for building vehicles and also on Canada and Mexico, which are integral to the U .S.
auto supply chain. Now, General Motors has recovered slightly, but I expect if these tariffs are imposed, there you'll see fresh volatility in the share price.
Although I do believe it's a negotiating tactic and it's probably unlikely that we will see these imposed in the very near future.
Do you think you're sort of agreeing with Ashley Davis there that possibly if Donald Trump thinks that what's happened on the border in Canada and Mexico is enough, he might delay them?
Yes, potentially. But it's the unpredictable nature of his presidency that has been rattling markets.
And it's causing investors to seek out safe havens.
For example, gold has reached record levels.
It's considered to be a safe haven, but also a hedge against inflation.
Because, of course, if these tariffs are introduced, they have the potential to push up consumer prices in the United States and then keep interest rates higher.
And all of that is concerning for investors.
And so it's little wonder that they're seeking out these kind of safe havens in parts of financial markets where to put their money.
And just before we go, Susanna, might we see a little bit more reshoring, do you think, over the coming years?
Yes, it's very likely.
Companies will already be looking at those options to bring production closer to home to avoid these punishing tariffs.
But the problem is that this type of process takes a long time.
There is no quick fix.
And so that's why you're seeing some of the companies suffer.
Susannah Streeter from Hargreaves Lansdowne.
Thank you very much today for joining us on World Business Report.
The producer today was Isabel Woodford.
I'm Sam Fenwick. Thank you very much for listening.
