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Hello and welcome to World Business Report with me Rahul Tandon.
Sometimes we just deal with one story on the programme because that story has such implications for the global economy and that is what we're doing today.
Some have described this day as a reversal of 75 years of global trade policy.
We are of course talking about tariffs once again, How important is this day?
Well, we're going to let our guest, the likes of Kenneth Roggart, former chief economist at the IMF, answer that question shortly.
But what has happened?
Well, President Trump has announced sweeping new tariffs on goods entering the United States from across the world.
What does that mean?
Well it means there's 10 % tariffs now on all imports, but there are higher rates for some trading partners in front of an audience of Cabinet members and workers wearing hard hats, President Trump explained what it represents.
In a few moments I will sign a historic executive order instituting reciprocal tariffs on countries throughout the world.
Reciprocal. That means they do it to us and we do it to them.
Very simple. Can't get any simpler than that.
This is one of the most important days, in my opinion, in American history.
It's our declaration of economic independence.
With the help of a large chart, later, when he was at the lawns of the White House, he spelt out what his administration saw as the tariffs and barriers facing American goods in foreign markets.
And President Trump rattled off the countries that will pay higher rates than that 10 % baseline tariff.
He started with China.
So we're going to be charging a discounted reciprocal tariff of 34%.
I think, in other They charge us, we charge them.
We charge them less.
So how can anybody be upset?
Vietnam, they like me.
I like them. The problem is they charge us 90%.
We're going to charge them 46 % tariff.
Taiwan, but 64 % Okay, that's a bit of what he was saying.
That there is a lot to digest. So here's our North of America business correspondent, or as we have renamed our tariffs correspondent, Erin Delmore.
I mean, this is truly a hugely significant day for global trade.
Try and sum up. What has happened?
I will take the title tariffs correspondent.
That does feel like the bulk of what we do these days.
So Rahul, what we know is that President Trump unveiled his plan to remake global trade.
And the way he says it, this is an economic imperative for the US he says the US has been ripped off by allies and enemies alike.
He says that it's a national security imperative that the U .S. not only restore some balance to trade, he talks about the word reciprocal, charging other countries what they charge us, but he says that foreign countries should pay for access to the U .S. market.
Now, what he is talking about today is imposing import tariffs.
Those are import taxes, taxes charged on goods that are imported into the United States that are country specific with different rates for different countries.
And in calculating those rates, it's not quite reciprocal.
Reciprocal would be we charge the country what they charge us.
Instead, he's taken into account what he calls barriers to trade.
So, maybe it's a tariff that they charge us.
Maybe it's, he said, currency manipulation.
It's a wide range of things he considers barriers to trade.
That's how the administration comes up with the number that they feel they need to counter.
And now you see new tariff rates going into effect for the U .S.'s trading partners.
And some of those trading partners, the big ones, like China and the EU, those tariffs are pretty high aren't they?
They are much higher than they were.
Now it's worth pointing out.
China, the EU, Canada, Mexico.
These are the major trading partners of the United States.
Canada and Mexico, we saw tariffs go into effect earlier, last month in late March. And you know, one of the big economic arguments here is, well, what happens when you impose tariffs?
And the economists that I've been speaking to say that the costs are bound to be passed on if businesses don't absorb them.
They will likely pass them on to consumers.
That's what is expected.
So we do expect the cost of goods to go up.
President Trump says that this will cause America to grow, become wealthier, have a stronger economy.
And he's conceded that some short -term pain will lead to long -term riches for the country.
What economists are projecting is that that short -term pain could lead to a stifling of economic growth and lowered growth in the US.
We, like you Erin, have spoken to people who have been close to Donald Trump in formulating economic policies.
A lot of them say that this is a negotiation that actually later on we'll see these tariffs beginning to come down.
Is that the sense that you have here?
What are one of the biggest things that jumped out at me today was when he said to people who are going to be calling me foreign ambassadors kings queens who will be calling asking for exemptions I say to them terminate your own tariffs drop your barriers don't manipulate your currencies that sounds like a negotiation to me he has said you know we've seen different reports leaking out in the media before this announcement today he had said no exemptions his administration his press secretary had said no exemptions but it looks here Like he has left them with a challenge on how they could meet
the moment and and make a different situation out of this Erin, go go back Analyze it a lot more because there's so much information in there It takes a long time to to wade your way through Thank you as always for for giving us your initial thoughts on what has been a pretty important day How significant a day is this for the global economic system?
Let's speak to someone who's played a big part in it.
Ken Rogoff was the former chief economist at the IMF.
Before we get into the details, in terms of how significant this is, where would you place it, Ken, at the moment?
Well, at 10, I mean, he just dropped a nuclear bomb on the global trading system.
We're talking about you have to go back 90 years during the Depression, they had this famous Smoot -Hawley tariff.
Yeah, I don't know where it'll end up.
Had he just announced 10 percent tariffs on everything, I wouldn't have agreed with it.
But the truth of the matter is for the United States, it's not such a big deal.
But of course, that's not what it was as your correspondents said, your tariffs correspondents said.
It was on the big trading partners that are the big tariffs and they are huge.
I mean, India and Brazil are the tariff champions among the big countries right now.
And the United States is just blowing past them.
So the consequences are just mind -boggling.
Let us have a little bit more of a look at what the possible consequences could be.
Have a listen to this.
This is somebody you know well, Robert Azevedo, former director general of the World Trade Organization.
You remember what happened in the 1930s, right, when the US raised those tariffs with the Smut Holi Act, and then other countries retaliated and there was an escalation of tariffs globally, and we lost two thirds of global trade in just five years.
So that is a scenario that we want to avoid.
We want to avoid that scenario.
Ken, we don't know how countries are going to respond, we're beginning to get a sense of that.
But, I mean, what sort of impact could it have on the global economy?
Could it force some countries into recession?
Well, probably the United States for starters, I mean the odds of a recession, they were I would have put them at 35%, now I'd put them above 50%.
If you stick to this, I mean we'll see if he does.
The thing is he says a negotiation, I don't want to get into the weeds but Europe's value -added tax is not a tariff on American goods, it's a different way they raise taxes.
When they sell stuff here, let me tell you, we charge a lot of taxes.
They're just charged in a different way.
So, if we're telling them their taxes from Donald Trump thinks it's a tariff, it's not.
The currency manipulation, I mean, the dollar is really high because there's been a tech boom and everyone wants to invest in the United States.
Yeah, I mean, if it were just a 10 % and that was it, I think everyone would have been very very common stock markets would have soared actually, but we did.
We just don't know where this is going.
We don't know what he's trying to do stay with us for a minute, because I just want to bring in Kelly Ann Shaw.
She's somebody who has been a former trade advisor to Donald Trump.
She was also deputy director on the National Economic Council.
Kelly, thank you for joining us.
I know that you've been taking in the announcement as well, and it was a long Donald Trump spoke for quite a long period of time, outlining many different What's your overall opinion of this?
Is this something that's going to protect the US economy, going to help grow manufacturing or going to cause higher prices for US consumers?
Yeah. Good evening from Washington and thanks for having me on.
I think that the markets and industry are happy to have some sort of outcome here and some sort of certainty, at least as with respect to what the tariffs will be on April 5th.
But really this is an opening offer.
The president has been clear for several weeks that these reciprocal tariffs are about matching US tariff and non -tariff barriers with those of our trading partners, and he's encouraged other countries to cut their rates as well.
So I don't think that this is going to be what the tariff rates will be for the long term.
I think this is the opening offer, and we'll see reductions over the coming weeks and months.
When you were there in the first Trump administration, obviously, this is something that you would have discussed.
I mean, do you agree with him that many countries, most countries are treating the U .S. unfairly when it comes to trade policy?
I mean, you only have to look at the bound tariff rates that we've had in place for the past 30 years to see that the U .S. has significantly lower tariffs than most of the world.
And that is something that the president has cared about, frankly, for the last 40 years.
And so I heard him talk about this quite a bit during Trump won, but it was also with the follow up of I would go to zero if they did.
I just don't think it's fair that other countries maintain significantly higher tariffs than the US.
And so I think his point in taking this massive swing is that other countries aren't going to, out of the goodness of their heart, cut their own tariff rates and so the US has to do something to try to get them there.
Ken, a lot of people will be listening to this.
And they will have seen the president with his charts outlining the tariffs on the US.
And the fact that, you know, they charge much lower tariffs, according to him than everybody else does.
So is he right when he talks about reciprocity here.
Yeah, that's perfectly reasonable to talk about reciprocity and having a reaction, hoping you get to zero.
What bothers me is he's listing some things as tariffs that I don't think are correctly described as tariffs.
And the whole business about currency manipulation, OK, I mean, I certainly have seen it.
We worried about it at the IMF.
But it's not a major problem compared what he's doing and the level of chaos this is creating while you know instead of doing the negotiations he's throwing these tariffs onto businesses and there'll be this this week and something else the next week i mean the the uncertain the way he's doing it in the i just don't understand i mean i think it's very very destructive kelianne kelianne would you like to respond to that oh sure i think i think it cut out for No, that's okay.
Yeah. No, the president has a very unorthodox negotiating style and he is a consummate negotiator.
And he has often taken the view that I'm going to act first, negotiate second.
And so I think that's very clearly what you're seeing here.
He's taking a swing at the global trading system.
And that's going to break a lot of glass in the meantime.
So I think while we will spend the next 24 and 48 hours digesting the documents, analyzing the details of what this means and on the private sector side advising companies as to how this impacts their supply chain, I really do think that the test will be six months in a year from now.
Are Americans better off from these tariffs and what results from these tariffs and I think they will be.
Kellyanne why did you not put this if this is something the president believes so strongly, why did this not come in during the first administration?
Why is he waited, you know, to do it now?
Did you think about it in the first administration?
Yeah, the president did think about a 10 % global baseline tariff in the first administration.
But if you recall, we were doing quite a bit back in 2017 through 2019 in terms of shaking up orthodoxy towards tariffs.
And a lot has changed since then politically in the United States.
The Biden administration maintained most of the Trump administration's tariffs.
There's more political support for this.
At the time Trump was elected, you had 60 % of Americans who believe that trade is better for other countries than it had been for the United States, and 56 % of Americans who supported this idea of a 10 % global baseline tariff, which is different than popular support was back in 2017, 2018.
So I think he has more of a mandate behind him now, but that will of course be tested by consumer confidence and all their normal market indicators, and we'll see how the markets to respond over the next few days.
But I do think that six months from now and a year from now, this map and this picture and these charts are going to look a lot different than they do today.
Ken, your final thoughts?
The thing is, if you look at the global trading system and you started by saying that this is a huge change to it, one we haven't seen for many, many years, the US has done pretty well out of that global trading system, hasn't it?
It's the world's biggest economy.
Exactly. This has been a period, the last 20 years, where the US has ropped.
the US has just blown past Europe, Japan, everybody else.
I think there are legitimate worries about China, security questions, but the US has been winning at the globalization game and why we want to change it.
Lastly, bringing back manufacturing jobs.
You've got to be kidding me.
You're going to be producing manufacturing but by robots.
Ken, always a pleasure having you on the program.
Kelly, stay with us for a minute because I want to your thoughts on what we're going to hear now.
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With a lot of response coming in the Italian PM says US tariffs on EU are wrong and help neither side.
The Irish PM says EU reaction to US tariffs should be proportionate.
So let's bring you a voice from the EU now.
Julia Winkler is with Romanian MEP European Economist and a member of the EU Trade Committee.
Have a listen to this.
The European Union was signalled out fairly high on President Trump's list of countries that will pay above and beyond the 10 per cent import duty.
Here's what he had to say.
European Union, they're very tough, very, very tough traders.
You know, you think of European Union, very friendly, they rip us off.
It's so sad to see.
It's so pathetic. 39 % we're gonna charge them 20 % so we're charging them essentially half.
Yulio, thanks so much for joining us.
Pretty strong statements there from Donald Trump.
Pathetic is how he's describing some of the EU's behavior.
How do you think the EU should respond?
I think that we should stick to two main things when we are building up our response.
First of Overall, I think that we have to stress again what we have been stressing in the last weeks and what our chief trade negotiator, Commissioner Shevchovich, has just said a few days ago in Washington, that the European Union is open for dialogue and negotiation.
I mean, if there are some problems, then let's sit down, let's make the list of problems and let's find a list of solutions.
solutions. So, first of all let's negotiate.
But just on that list of solutions, let me give you one that Donald Trump said quite openly in his press conference.
He said US tariffs on EU automobiles 2 .5%, EU tariffs on American automobiles 10%.
So there's something that you could change very quickly.
Yeah, sure. But for this we have to sit down and we have to negotiate.
I mean, now we are in a situation that we have to contemplate twenty percent tariffs, so I mean President Trump, I think he said also something about friends and foes and foes being worse than friends or something like this.
I mean that's not so nice to hear in Strassburg now, in the European Parliament, in Strassburg, France, and I think that's not so nice to hear from this strategic ally of the European Union.
Of course, President Trump says that the US wants to re -industrialize, and of course, European Union, as you know very well, also we are in the course of re -industrialization.
And if we contemplate the transatlantic relationship as being one -third of global trade, 40 % of global GDP, 1 .5 trillion US -EU trade.
I mean this is something that is worth to keep, to cherish, to try to repair if something is not working well.
So I was listening quite hopefully your dialogue in the last few minutes, because all the partners in this dialogue seem to agree that this is the starting moment of a Well, yeah, let us see if that is the case.
Thank you so much for joining us and giving us that instant reaction there from the EU Trade Committee to what we've seen.
And Kellyanne, that is a fair point, isn't it?
Surely you can't. The US is not going to look at the EU and China in the same way when it comes to trade.
Well, I'm not so sure about that.
What I would say is the fact that the President is moving forward with tariffs on a particular country does not necessarily have anything to do with the national security relationship between the United States and that country.
What I mean by that is clearly he's imposed this 10 % across the board tariff on allies like Australia, Canada, Mexico, and so many others.
Really, this is about separating the two.
It is about saying, even if you are a national security ally and our friend, that does not mean that we cannot address some of these economic disparities.
and that was really the hallmark of Trump 1 .0 it was it shaking up at the Orthodox and that's what we're seeing play out again here in Trump 2 .0 and so I understand from the European perspective it's conflated on that side where it's you know why would you terrify us we're your ally, but from a U .S. perspective it's more like well why would you being an ally stop us from terrifying you so it really is just a different perspective.
Kelly -Anne thank you so much for joining us on the program giving an idea of some of the tariffs Chinese goods will now face its up to 54%.
Susan Schmidt portfolio manager exchanges capital resources, always a market reaction to these sorts of announcement.
Susan, what do we see?
Always a market reaction and the market reaction, as the speech was happening, was negative.
Investors were hopeful that clarity on this would remove some of the questions and doubts around business profitability going forward. That did not happen as President Trump announced percentages of tariffs that were much higher than the market expected, this is going to continue tomorrow.
And I think a lot of investors are sharpening their pencils trying to refigure valuations now that these tariff rates are much higher than were initially anticipated.
We have heard, haven't we, a lot about Donald Trump's close attention to the markets.
Is the market quite surprised that he doesn't seem to bother as much about what they're doing as he did in his first term?
This time around is completely different than his first term.
And if you look at how many times Donald Trump mentioned the levels of the markets in his first term, at this stage this many months in, it was 150 -plus times in his first term.
This time around, he's mentioned it a handful of times, the stock market levels, if that.
And so, a very different perception from the market on how seriously the president is watching the trade levels and the stock market levels.
So very I would say wide awake eye -opening experience for investors this time around as they watch those stock prices change and Donald Trump doesn't seem to be paying attention Susan stay with us because I want to get some more thoughts from you but as we've heard throughout this program, these tariffs are designed amongst other things to protect US manufacturers So let's hear from one now.
I've been talking to David Rashid his company works in the auto industry industry.
He's executive chairmen of Pluess & Endelman.
In the absence of tariffs, my business would no longer exist. What I came to learn over time was that the industry I'm in, which is auto parts, has been a focus of, you know, CCP economic daycraft for some time.
That is the Chinese Communist Party, isn't it?
That's right. You know, I was I was reading way back in early 2000s, the Chinese government financed a lot of acquisitions of German and U .S. businesses in order to learn how to become competitive in these industries.
And then the Made in China 2025 program was very focused on creating both, putting tariffs on products where they wanted to develop them domestically, and then at the same time they were subsidising these industries to make sure that they could become competitive globally, and so my competitor is one of the beneficiaries of this Made in China 2025 programme.
And so there's no way I could compete.
I wasn't competing on a level playing field, and it was impossible.
You talked before about you bring in supplies from other countries.
So whilst the tariffs on China could help you and could protect your business, tariffs on some other countries could have implications for you cost implications.
Absolutely, and to be quite frank the tariffs on China haven't helped me that much because my competitor who was based in China began transshipping through Thailand and so today the tariffs those Chinese tariffs don't even apply to my competitors goods.
Because basically they take those products and just bring them in from another place and now if we have wide ranging tariffs on many countries could that put an end to that sort of behavior do you think?
I would hope so I mean I'd have to look at the differential is between China and Thailand and determine whether you know those Thai tariffs if in fact they are implemented are at a level that help protect us, I don't know.
But in principle they certainly could and the President has talked about much higher tariffs on Thailand but your point comes to an interesting one in that we can have policies, trade policies to protect US trade, but it's not just about having the policies, it's about enforcement because the countries you're putting them on will try and avoid them, won't they?
Absolutely. You know, I've been able to talk to many in my situation who are suffering whether they're in the automotive industry or whether they're in the kitchen cabinet manufacturing industry or whether they're in the steel pipe.
I mean, every industry you can think of has been impacted by tariff cheats.
It's rampant. A lot of people are saying this is a day that could change global trade.
As somebody who's a business, do you get that sense today that this is an important day?
It certainly is, I just don't think it's the last important day.
So, you know, we'll have to wait and see, you know, what the president says about the permanently, His intentions are as far as how permanent these will be or whether they're subject to negotiation.
So I think a wait and see a situation for us at this point.
Wait and see that is what a lot of people that's a phrase you can hear a lot I think over the next 24 to 48 hours, that was David Rashid there's somebody from the manufacturing sector in the US Susan Schmidt.
Still with us isn't explained to our audience you know they'll be sitting at home thinking hang on a minute if this is good for the US economy good for manufacturers why are US shares going down so much?
What's the big fear here?
That's right so it increases costs it's going to increase prices so when tariffs come in that means that price goes up and ultimately the consumer is going to end up paying that cost that takes more money out of the consumers pocket ultimately investors are concerned that this is going to slow economic growth in the States, and that's where investors are really concerned.
A year ago, investors thought, pre -Donald Trump, without any talk of tariffs, the economy would be floating along into a soft landing.
Now, investors are increasingly concerned that this shock to manufacturing costs is going to cause us to have a recession, not that soft landing.
30 seconds, I'm afraid that's all we've got left, but isn't it possible that, you know, U .S. manufacturers could fill the gap here?
It is possible, but in the timeframe allowed it's unlikely that US manufacturers will be able to make these adjustments so quickly.
That's what the market's really fair and that's something that the administration isn't talking about.
That length of time to implement these changes is certainly more than a quarter or two, which is where we'll be looking to GDP numbers in the coming months.
And that's what will make the difference for investors.
Susan, it's been a busy day for you.
Thank you so much for joining us here on the programme.
I'm sure Susan, like most of the other guests on here, will now go through some of those executive orders, look at it in a lot more detail.
We'll be doing that as well and we're going to be back with you with business matters in a couple of hours' time where we'll be continuing our analysis of a day that could possibly just change global trade forever.
Michelle de Crete, sir.
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World Book Club, Saturday at 11 PM GMT. In half an hour, Health Check with Claudia Hamand.
We'll hear about a new device which can pick up the brain signals from people who are paralysed to allow a computer to speak for them in real time.
And the first in a new class of antibiotics is approved for urinary tract infections in 20 years.
This is the BBC World Service, the World's radio station.
Asking the right questions can greatly impact your future, especially when it comes to your finances.
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