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Find out on Good Bad Billionaire, listen on the BBC app or wherever you get your podcasts. Hello and welcome to Trump's Tariffs Explained with me, Ben Brown, here in London. And me, Sumi Somaskanda, here in Washington. We're going to be asking and hopefully answering some of the key questions about the Trump tariff rollercoaster of the last few days.
Yeah, why, for example, did he impose them with such flourish last week only to then put them on pause just a few hours after they actually came into effect? Was it a retreat forced on President Trump by the turmoil that we've seen, especially in the crucial bond markets?
Or was it his strategy all along, as the White House has been suggesting, successfully driving dozens of countries to the negotiating table? And there may have been a rollback on American tariffs for the rest of the world. But why has Donald Trump doubled down on China with even steeper tariffs? In fact, the White House confirming today that the tariff rate for China is now 145 percent.
staggering number. So are we now witnessing an all-out trade war that is escalating at dizzying speed between the two biggest economies in the world, China and America?
And if we are, which of them will blink first? So key questions to ask there. With President Trump changing up tariffs over the last few days, let's take stock, Ben, of where we are right now. That would be helpful, wouldn't it? The highest U.S. tariffs in a century have now been put on pause for three months, rolled back to a base of 10 percent for most of the countries in the world, except China, which now, as we just mentioned, has that 145 percent tariff on the products it
it sells in the United States. While in return, China has put tariffs of 84% on products coming in from America. By the way, the original higher tariffs of 25% on Mexico and Canada, we understand at this point, still stand. Also, tariffs of 25% are still in place on all aluminum and steel imported to the United States.
Well, as far as the European Union is concerned, it has now put on hold its planned retaliatory tariffs against the United States in return for the olive branch that was offered by Donald Trump. The EU has now held out an olive branch of its own.
When it came, President Trump's spectacular U-turn on tariffs did come as a surprise. But what forced him into that apparent climb down? Many financial experts believe it was the turmoil on the all-important bond market, which was dramatically increasing America's long-term borrowing costs on its national debt of more than 30 trillion dollars.
Well, let's talk to Darshini David then, who is our Deputy Economic Senator with me in the studio. Well, two questions really, I suppose, Darshini. What did force that retreat by Donald Trump? And what are we left with? Is this essentially now a bilateral trade war between America and China? Gosh, big questions there, Ben. And we've only got a little bit...
a time to answer them as well. Let's start with the first one. What forced his hand? Now, he talked about the markets being queasy. He meant the bond markets, of course, the bonds being the things that governments use to borrow money on financial markets. Now, they're normally seen as a very safe haven for investors in times of strife. So governments only have to offer a very low interest rate on them. What we saw happening in the last couple of days is a lot of sellers actually in that market, a lot of people
offloading those bonds, which caused some alarm and some questions about financial stability in the US potentially further down the line. So therefore, many are thinking that that actually spooked the president. Also, a big holder of those bonds is China. So was China actually retaliating in that way? So has he tried to calm the markets down by announcing this pause? You heard that phrase, it's all about the art of the deal. But let me tell you, when you talk to businesses out there,
What they actually say is that he's created this vacuum now in which uncertainty is thriving and therefore they're paralysed by fear and anxiety. Do they invest? Do they actually get the kind of machinery, upskill workers in the way the president wants to guarantee the long-term success of America? Or frankly, will they be wrong-footed in perhaps maybe a matter of not days, but hours? So it's
If that was actually his aim, then frankly, it may be backfiring. And on China, I mean, these tariffs were 125%. The White House say actually the total when you take into consideration earlier tariffs of 20%, it all adds up to 145. I mean, it's whopping, it's eye-watering, whatever numbers you look at. And we are in this trade war now between the United States and China, the two biggest global economic powers.
What are the consequences of that for the rest of the world? Huge, Ben, in a sentence, or in a word, rather. Do you remember that phrase, conscious uncoupling? I think it was Gwyneth Paltrow who used it about her divorce many years ago. This is what's happening here. China and the US between them account for a third of global goods rights. So you've got this...
Basically, this separation between the two of them getting deeper and deeper and deeper. And as a result of that, what you're seeing is disruption on either side. Now, we're hearing all sorts of reports about Chinese companies rushing to try and relocate production, for example, or figure out how much extra they can charge American consumers without compromising
frankly, going bust. And that can cause all sorts of disruption, given the global nature of supply chains, given that these companies sell all over the world to buyers around the world too. American consumers account for one in six, seven dollars of all of those spent in the world. So if they're not buying, other countries aren't selling. So
This may look like it's kind of slightly, you know, over there, thousands of miles away from many countries and there's a pause elsewhere. But let's not forget, there are some severe consequences that many are going to feel in the weeks and months to come. All right, Darshini, for the moment, thank you very much indeed. Darshini David there, our Deputy Economics Editor. All right, we have been watching the dramatic ups and downs of financial markets. So let's take stock of where things stand. Financial markets in Asia and Europe.
They have made gains reflecting relief at Donald Trump's decision to suspend those additional reciprocal tariffs for 90 days. This is how the key European indices have closed. In London, the FTSE 100 was up 3%. In Germany, the DAX index was up 4.5%. While in France, the CAC 40 was up 3.8%.
Here in the U.S., at times, the Dow Jones was down more than 5%. The S&P 500 is down more than 4.5%. The Nasdaq at the moment, more than 5%. And that fall contrasts with some of those really big gains that we saw made on Wednesday directly in response to Donald Trump reversing that decision to impose many tariffs on countries alike.
other than China. So let's take a closer look at how markets are reacting to all of the twists and turns. We can go to our North America business correspondent, Aaron Delmore, who is in New York for us. Aaron, we've been speaking pretty much every day about the market's reaction to the tariff policies. Can you characterize where things stand right now?
Sumi, gone is the euphoria from yesterday's trading session when we saw all three major U.S. indexes rally to highs, some not seen since 2020, some 2008. The Nasdaq, you have to go back to 2001. But, Sumi, today...
is a different story. And the sell-off that we're seeing on Wall Street actually cuts in half those gains from yesterday. I want to draw a couple of goalposts for you. So right at this moment, we're seeing the S&P down 232 points. Now at the session high today, it was down 103 points. At the session low, 341 points. So that shows you're sitting right about in the middle of the trading session today. But at
I want to point out, we saw an accelerated sell-off after the White House confirmed that China's effective tariff rate had gone up to 145%. There had been some question of whether the 125% increase was on top of the earlier issue 20% that the
the administration attributes to policing the fentanyl prices. And sure enough, those stack. So when we saw news that it was going to be 145% on China, we saw stocks sink even lower. Now, to hear the president talk about strategy, because, Sumi, that is what investors want to hear. What is the path ahead? He said that there was going to be a transition cost. He said that there were going to be even transition problems.
So investors want to know, is the transition problem the gains that have been sliced off yesterday's rally, or are there more to come? And that uncertainty has everybody on pins and needles here. So for now, the turbulence continues. Our North America business correspondent, Aaron Delmore, in front of the New York Stock Exchange there. Thank you, Aaron. Well, Darshini, David, our Deputy Economics Editor, is still with me. We were hearing Donald Trump talking to his cabinet about there will be a transition cost to all of this, his tariffs policies. There will be
transition problems. Well, we've certainly seen some of that. But on the upside, the White House is saying they've got all these countries queuing up to do business with America to do trade deals. Do you think that's true? Do you think that's right? Well, we do know that certain countries have approached the US. And we heard the Israeli Prime Minister there, didn't we, earlier in the week at the White House saying that we've had a chat about things we could do to try and bring down some trade barriers. So there is no doubt that many countries are having these
discussions. You've got to wonder how many trade negotiators there are in the US and if they're going to have time in these 90 days to actually sort much out. There will be things, concessions made. The question is, do we go back to where we were before? And the answer seems to be from all the architects of trade policy who've worked
With President Trump that I've talked to, the answer seems to be no. They say the idea of zero for zero, zero tariffs doesn't make any sense as far as the president is concerned. He wants to see businesses relocate manufacturing to the U.S. and jobs to the U.S. And he says unless you put some tariffs in place, that simply doesn't make business sense for American business.
All right, Darshini, once again, thank you very much indeed. We've been looking at the economics of all of this. Let's take a look at the politics now and what's been happening inside the White House. President Trump's explosive announcement on tariffs last week caused shockwaves around the world, but it also seems to have ignited some tensions among key figures in his administration. We've seen the Treasury Secretary Scott Besson, for example, with some dissonance in his messaging compared to what the president has been saying.
And Elon Musk, the world's richest man and also a close advisor to Donald Trump, he clashed with another one of Donald Trump's senior advisors, the trade czar Peter Navarro. Mr. Musk, who advocates free trade, called Mr. Navarro a moron and, quote, dumber than a sack of bricks. While Mr. Navarro said Elon Musk isn't a car manufacturer, he's just a car assembler who wants to keep importing cheap foreign parts for his product.
So let's talk about the politics of all of this now with our North America correspondent, Anthony Zerker, who is following the latest. Anthony, very good to have you on. You know, we heard the White House press secretary say when asked about this spat between Elon Musk and Peter Navarro that boys will be boys. But what does this actually tell us about the tariff policy and how the administration, Republicans and the president feel about it?
I think it tells you that there is some conflict within Donald Trump's inner circle. And Donald Trump doesn't necessarily have a problem with that. Sometimes he actually encourages his advisers, people in his staff to kind of go at each other. He enjoys the conflict. He likes being able to float above it and then make
the decisions based on what he sees. But I think there are different factions in this White House, and some of them, including Scott Besant and others, are in favor of a more restrained trade policy. They want to focus on China. They don't want as big and sweeping across the board tariffs. But then you see other sides advocating a much more aggressive trade policy, Peter Navarro being one of the leading members of that group. And so the
Now, it seems like at least the folks who are preaching caution, the folks who are telling Donald Trump to take a step back and let the markets cool off a little bit, they have the upper hand. Anthony, we've seen at least two explanations for what we saw at the White House on Wednesday. It was either the art of the deal, as we've heard from the Trump administration, or a U-turn, as Democrats say, a climb down from the president.
What do we actually take away from all of this? Has any of this weakened President Trump's position? I think it was a dramatic reversal. And I think that fosters views that this administration is not being consistent. And one thing when you're applying these tariffs, if you want American businesses to start making decisions based on the
the moves of these tariffs, they have to know that they're going to be there, that they're not going to change overnight because they're going to be building factories, for instance, to produce things on American soil. And if the tariff policies change in the middle of that construction, it could leave them high and dry.
I think you did hear from members of the administration say this was an art of the deal. This is where they wanted to be to begin with. They were bringing people to the negotiating table, allies, South Korea, Japan, the EU, meanwhile, focusing attention on China as being the big villain here. But Donald Trump kind of undercut all of that yesterday afternoon when he came out and talked about queasiness in the markets and
People were getting a little bit afraid and they were getting yippy and that the bond market, what was happening with the instability in the bond market was one of the reasons why Wednesday morning he made the decision from his heart, he said, not with lawyers, but from his heart to dial things back. And that definitely undercut all of these, this was our grand plan type of explanations. And Anthony, polling generally lags a few weeks behind, so we don't always have a snapshot that's up to date.
But what can we take away from what Americans, average Americans, think of all of this? Well, we're starting to see some polls come out in the middle of this week that were in the field at the beginning of Donald Trump's move on tariffs. And they do show that the United States public is...
concerned is a little more apprehensive about what Donald Trump is doing. His overall approval ratings have dipped somewhat. His approval for his handling of the economy and tariffs in particular show that a majority of the American public don't like what he's doing. And then you have to remember that with these permutations, the gyrations in the stock market, over half of Americans own stocks
in their retirement accounts. They aren't Wall Street traders. They aren't folks who live and die by the stock market. But their retirement, their futures are based on stocks going up. And so they can't help but see, even if it's going to take longer for prices to go up and the tariffs to really take a bite, they can't help but see this affecting their savings and their long-term plans. Anthony Zerker, as always, thanks so much for that analysis. Well, we've been listening in to the
session of the U.S. Cabinet, actually. And let's just hear Donald Trump. He's there talking to his cabinet. Which is, you know, the area where there's massive. And I've looked at that during the Biden administration. You couldn't see a piece of that concrete. There were so many people on it. You couldn't if you had a helicopter shot, you couldn't see concrete. Now, this weekend, you had nobody there but a man with a broom sweeping it and
cleaning it up. Pretty amazing. It's really an amazing job. But it will be used for that. It'll be used for a lot of things. It'll be used by the Department of Justice for...
doing a great job. Pabst is doing a fantastic job. So it's going to be useful. So there's Donald Trump talking to his cabinet. And at the beginning of that session of the cabinet, by the way, he talked about his tariff policies. And he said, quote, there will be a transition cost and transition problems. But in the end, it is going to be a beautiful thing.
Well, here in the UK, the Prime Minister, Sir Keir Starmer, has said that trade talks with the United States are at an advanced stage and making progress. But he also said that any trade deal with the United States would not be the end of the challenge. Let's talk about that with Nick Watt, who's our political editor for BBC Newsnight, and also our World Affairs editor, John Simpson's with us. Nick, first of all, tell us more about what Keir Starmer's been saying. And these trade talks, because we know that Donald Trump is saying these countries are all queuing up
to get access to him, to come to the White House, to do deals because of his tariff policies. But I suppose the UK was looking for that for quite a while. Yes, so what the UK has is obviously the lowest tariff, that 10%, which is now the one that everyone apart from China has. But we also have this extra 25% tariff on steel, aluminium and car.
So what we're trying to do is the UK would like that 25% figure to go down, but they'd also like the minimum 10% figure to go around, although the White House thinking at the moment is, no, no, no, that 10% is not moving. The negotiations are over wider trade deals that countries would potentially be having with the United States. I mean, what Keir Starmer has been saying from the beginning of all of this is we'll be calm, we'll be cool, calm.
Let's not sort of, you know, tweet energetically as some European leaders did when obviously there was that bust up in the White House on the separate issue with President Zelensky. But behind the scenes, they're pretty nervous. They're nervous because it's a moment of peril for the UK, a potential trade war. But it's also a moment of peril for the world.
and they know that you have a very unpredictable president you mustn't offend him and it's interesting we saw that cabinet meeting in the White House it's been going on for about an hour the cameras are in there every cabinet minister going around that table Mr. President you're doing so well Mr. President you're transforming our country I mean cabinet ministers in the US are always pretty deferential to the president
but this is at another level. You mustn't offend Donald Trump. So we're trying to be very careful. And that, in a way, John Simpson, our World Affairs editor, is the other side of the coin from China, isn't it? Because they are saying they'll fight to the end. For them, is this a sort of sense of national pride, that they're not going to just roll over to Donald Trump? They are going to fight these terrorists. I think more than even the national pride, I think, honestly, Ben...
The Chinese see this as the future of the world.
of China and of Europe, perhaps, but China versus America. And for three, four years now, Chinese officials, top figures, have been saying openly that China is the dominant power now. And here we have the test. President Trump has set it up, which might seem to be perhaps a bit unwise, but
The China Daily, which speaks specifically for President Xi, says caving into US pressure is out of the question.
They're putting it all on the line. There's no possibility of backing down from that. If China does cave in to American pressure, then President Xi Jinping himself will pay the price for it. And that's how they see it. I think that President Trump in some ways sees it in the same way as being an all-out attack between China and America. But
I think he believes that the US can win it. I'm not sure that many outside people would say that. I've heard it said that Donald Trump has got the watch, but China's got the time. In other words, it's big enough and its political structure, essentially a dictatorship, means it doesn't have to worry, President Xi doesn't have to worry about midterm elections or anything like that. He can wait this out. He can be patient. Yes, as long as he wins...
But, you know, every Chinese leader and Xi Jinping more than anybody else has to remember that the stability of China comes first and the danger of an all-out tariff war with China, OK, it's 3%, 4% of world trade.
But nevertheless, it's an enormous amount of world trade. And somebody was saying yesterday, somebody on Wall Street was saying that 80% of the trade between China and the US can be affected by this. But I suppose, Nick, a lot of the goods that China currently sells to the United States, it could dump...
on other countries like the UK, potentially cheap imports that they could sell around the world and in Asia as well. It's got alternative markets. It's got its own domestic market, actually, hasn't it, which is massive? Well, yes. Is China going to build up its own domestic market? And there has been that fear that we could, in this country, be victims of dumping. Obviously, now that we have the same tariff rate as the European Union, that is obviously going to be changing those calculations. But it's interesting that the World Trade Organization put out a pretty bleak statement yesterday,
When it was assumed that the tariff on Chinese goods going into the United States was 125%, it's now 145%. They were talking about how that's, as you say, 3% of global change. It could have an enormous impact. And talking about the danger of the world splitting into these sort of geopolitical splinters,
And that could take, they say, 7% out of world GDP. You're into that sort of territory. You're way beyond a recession. You're heading in depression territory. So, yes. And it's interesting. There was great happiness after. There was that Donald Trump announcement yesterday. The stock markets were up. What's the story been in the last few hours? Stock markets down because people are thinking we've got
the two biggest economies of the world, basically unable to trade with each other. And interestingly, at the end of his statement yesterday, Donald Trump was saying, I know President Xi, I think he wants to have a deal, but he doesn't know how to do it. You suspect it. Actually, it was Donald Trump saying that...
He, Donald Trump, wants to have a deal. But he, Donald Trump, may not know how to get out of this. It's all mind games. Thank you very much, Nick Watt and John Simpson. Pleasure to talk to both of you. And just before we go, let's go back to Wall Street outside the New York Stock Exchange. Our New York business correspondent, Aaron Delmore, is still standing by for us there. Aaron, we keep hearing that markets and businesses don't like uncertainty. What are traders there telling you about how they are managing expectations for the days and weeks to come?
They're treading carefully, Sunni, and that's because they don't know what to expect out of this White House. Now, what investors want to hear is a concrete plan forward, what the strategy is. What they're hearing are the tactics President Trump and his inner circle plans on negotiating with some 70-plus countries.
but they're not hearing what the strategy is to get to the end game. And Sumi, I'll remind you, consumer spending powers 70% of the U.S. economy. It's an overwhelming number. So this fear that goods coming into the United States could cost more because of tariffs, then businesses would either absorb that cost or pass it on to consumers, which could suppress consumer spending, that is top of mind for every business leader thinking about the health of their firm in the months and the years to come even.
So investors on tender hooks at the moment, still feeling jittery, a bit yippy as President Trump characterized it yesterday, and trying to figure out what concrete plan and strategy they can hear from the White House. And what about the impact, Erin, beyond Wall Street on Main Street, as it's often said here? Do we have a sense of how all of this will impact average Americans with the possibility of prices going up significantly?
So when I ask that, I get a couple of different reactions. And a lot of it does depend on where people sit on the political spectrum. President Trump's broad narrative about being tough on China, about leveling the playing field, about making sure that other countries are paying to be in the U.S. market, are having fair, he calls fair deals of trade with the United States. It's probably popular among his base. And people are willing to, as the president puts it, take a little bit of pain for long term gain. But
There are a lot of folks in a lot of circles who are concretely worried about the price of goods rising in the United States on the heels of inflation that has really been an issue for households trying to balance their budgets since the COVID pandemic. And hidden today in the economic news was CPI data that came out at 8.30 Eastern this morning, showing some pretty encouraging data points, both the core inflation number, which strips out volatile food and energy prices, and the headline inflation number, which takes everything
for the Consumer Price Index actually came in better than expected, showing a trajectory on inflation that Fed officials would cheer. The question is, what happens next? Because immediately that data is backwards looking and it's not really a trend line that we can account for if we suspect that these tariffs will stay in place and raise goods for average consumers. Erin, really interesting. Great to talk to you as always. Thank you, Erin. And thank you so much for joining us for Trump's Tariffs Explained with me, Sumi Somaskanda in Washington. And me, Ben Brown in London.
On our podcast, Good Bad Billionaire, we explain how the world's billionaires made all their money. Pop stars and tech titans, founders and filmmakers, inventors and investors, we cover them all. And for the first time, we're talking about a video game designer. Yep, we're talking about Marcus Persson, the Swedish coding king who programmed the world's most successful game, Minecraft.
He made a billion, but is he good, bad or just another billionaire? Find out on Good Bad Billionaire, listen on the BBC app or wherever you get your podcasts.