Tariffs, trade wars and courtroom drama
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Hello and welcome to World Business Report from the BBC World Service. Namaste, I'm Devina Gupta. And on this edition, all about President Trump's battle in court to save his tariff plan. We'll hear from business owners on the front lines and the former

a director general of the World Trade Organization about what this could mean for the future of global trade. This is not a U.S. trade war. This is a U.S. war against the global trading system. Also, we hear about the new boss of the African Development Bank and why is France voting to remove low emission zones for cars.

But first, it's been a hectic 24 hours for US trade policy. Last night, the Court of International Trade ruled that President Trump didn't have the power to impose the sweeping tariffs under emergency laws, meaning his plans to impose a baseline 10% tariff on all nations, also the higher levies on certain countries, were temporarily blocked.

Now, obviously, this led to jubilation of sorts among small businesses that were fighting to have these Liberation Day tariffs removed. Representing one such group and a number of states, including Oregon, was Attorney General Dan Rayfield. Tariffs are something that are not just out there in the ether, right? They are something that we all pay.

They get passed down to us as consumers. They get passed down to small businesses, which impact us. Not only that, it impacts the trade relationships that we have here within the state of Oregon. We have products, when they get shipped to Canada, they're being pulled off of the shelves. Victor Obenschwartz is the founder of one of the five small businesses who brought the lawsuit. Living in the current environment, even when you think you're right,

Everything is so topsy-turvy.

The case was solid, and especially after spending the morning at the Court of International Trade, we had such a good case. But, you know, there's quite a chasm between knowing you're right and seeing it validated in court. So there was a bit of shock and surprise in a good way. You know, I saw it. I sort of couldn't believe that we really won and then won in such a big way, you know,

Yeah, it's been kind of unreal. But that feeling, unfortunately, was short lived for Victor because just a few hours ago, a federal appeals court has now reinstated Trump's earlier tariff plan. And this happened after the White House filed an appeal.

So what exactly has happened? Let's hear from Erin Delmora, business correspondent from New York, who joined us earlier. I'm actually in front of the Court of International Trade right now. This building had all eyes on it overnight and all day today because that court ruled that the president does not have the authority to impose tariffs as broadly as he has been. Now, that took into its sights a couple of very specific tariffs, the 10% baseline tariffs that we've seen, the reciprocal tariffs that the president put

forward for some countries and also some of the other tariffs that had to do with fentanyl, what the president linked to the importation of an illicit drug into the U.S.'s borders. And those targeted China, Canada and Mexico at certain levels. Now, it does not target all of the president's tariffs, but it did rule that that wide section of them are unlawful. And that makes it that was certainly headline making news. But it wasn't the end of the story today.

Yes, the twist is that all of it has now changed. So where do things stand? Right. So the Trump administration issued an appeal of this ruling. That's something that we could have expected. You know, the ruling itself was not in the administration's favor. And so it is often their play to and their right to appeal. And that appeals court decided to actually halt any changes to the tariffs while the appeal is being heard. Right.

We could get into more detail on how that works exactly, you know, but they basically said that the lower court's ruling in this case, the Court of International Trade, couldn't begin to take effect. That would have been the pause on the tariffs while the appeal is being adjudicated. And so to make this all less confusing for everybody, there are not any changes at this moment to the tariffs because the court is waiting to evaluate the appeal.

And that's very important because there's also another section of tariffs that weren't impacted and that essentially won't be heard as well, isn't it?

Yeah, exactly. You know, it doesn't really touch the sector specific tariffs. And that's what we call tariffs on things like steel and aluminum, cars and car parts, the things that have to do with certain goods or certain industries. Basically, there are different legal justifications for the tariffs that the president has put into effect. And, you know, not every court case covers everything at once. Right. And so therefore, this really just hit the three batches of tariffs that I outlined earlier. So we do see changes in some parts.

of what has been going on with the Trump administration's tariff plan, but nothing changes today. Nothing takes effect now because it is all being challenged on appeal.

That's BBC's Erin Delmo from New York. Let's get in Kerry Leahy, economist and who's joining us from Columbia University. Thank you so much for joining us, Kerry. So it seems things are status quo. There was a bit of roller coaster ride there for businesses and policy watchers. How do you view the last 24 hours for this policy of tariffs by President Trump?

It's a real mess, and it shows you how many different legal justifications can be used. And we're talking about two different separate court systems. I think from the big picture standpoint, right now, the current tariffs are at about 20% of total value of imports. Right.

It would be the biggest in about 75 years. And that compares to what would happen if they rolled back the tariffs and we were where we were at the beginning of the day today, which would be about 8%. I think most investors think that the U.S. could live with an increase in tariffs from effectively 2% five years ago to 8% today. But even moving to 20% or higher would put a real dent into people's outlook about corporate earnings and the like, which would probably be bad for Wall Street and obviously bad for the economy.

Well, you talked about how it might put a dent on corporate earnings, that is businesses being affected. Now, we've been hearing over the past couple of months, all these changes to the tariff policy has made it very difficult for businesses to plan ahead. And what about the latest court decision and the U-turn on it? We earlier spoke with Jessica Bettencourt, who's the president and CEO of a firm called Claymore.

Clems, which buys and sells goods such as hardware, shoes, and toys. So, Kerry, let's listen to Jessica first. She's based in Massachusetts, and the business has been around for 76 years. And this is what she told our sister program NewsHour's Tim Franks. I'm guardedly optimistic, but I think this year there has been so much uncertainty that I'm

not really going to accept it until we have a final decision. Okay. And in terms of the things that you buy and sell, I mean, presumably buying, a lot of them are imported. Is that right?

Absolutely. So I carry about 80,000 different products and they come from all over the world. So, you know, we've been focusing on Chinese products and trying to get ahead and order them in early to try and beat the July date.

But now, of course, we have the threat of the EU tariffs going up in July. So we're not quite sure what to do. So that's interesting. I mean, so in a sense, you've been trying to beat the tariffs by getting stuff in early, which I suppose will only worsen the trade deficit, which won't be great news for President Trump. But I guess the alternative could be just to, you know, not make any decisions on your inventory and just sort of hold fire.

In some categories, that's what we're doing. So in some categories, we're just, we're kind of determining, do we really need this product category? Really, fall and holiday is where we're seeing the biggest changes. So apparel and footwear and holiday trim and toys and all those categories are where we're seeing lots of changes. For businesses, I mean, certainty is

really is a key part of the ingredient to success, isn't it?

Yes, absolutely. The uncertainty this year has been very frustrating and has really stopped us from making some investments that we were planning on making. And now we're just not sure should we spend this money where now we have to spend it to order our toys in six months ahead of time. Now I don't have the cash to do those other things, nor am I confident in spending the money for those things. Yeah.

That was businesswoman Jessica Bettencourt in Massachusetts speaking to BBC's Tim Franks. But Gary, hearing this, there's so many businesses in a similar predicament. But at the same time, the argument for tariffs has been that it's needed for the big economic overhaul that President Trump is planning because somewhere those revenues have to come in.

Well, yes. What the president is trying to do is shift the focus of policy away from consumption and towards production and trying to find a world where we would produce goods here and that foreigners would find it so useful to move their factories here so you'd have more and more concentrated business in the U.S. But the transition cost of that is both expensive and very slow. I don't think you can expect –

any major changes for three to five years. And that's one of the stumbling blocks of what Trump trying to do is that businesses now are saying we're in a planning recession and we can't make any plans. So we have some certainty. And I think certainty is going to say, yes, you can do this. But if we make changes, it's going to be smoothed in over two, three, four or even five years.

Five years is a long time. And you're talking about a global supply chain that is being impacted. The future of global trade here seems quite uncertain as well. Let's unpack that with Pascal Lamy, former Director General of the World Trade Organization.

who I spoke to shortly before U.S. Appeal Court's judges had ruled that tariffs remain status quo. And we'll let you get some water there, Kerry. Meanwhile, here's Pascal Lamy. Without entering into too many details, there are different procedures for cars, for medicines, for across the board 10% tariffs. This does not pertain to the same legal basis.

But while passing this judgment, the three-judge panel also wrote that the court does not pass upon the wisdom of the president's use of tariffs as leverage to the U.S.

To be frank, we all know that among the reasons which Trump has to start this firework of tariffs, there are many. Some to reduce the U.S. deficit, some to reshore whatever production the U.S. would have lost, some to raise revenue, probably much more.

much lower level than what he ever expected, and some to rightly arm twist, like taking hostages, some countries into doing things with the US want them to do under the threat of punitive tariffs. This is part of the element. And I can understand why a sort of judge who believes that tariff is a tool of trade policy

And the use of tariffs should be geared by economic rational arguments in order to raise a tariff. I believe that this sort of overall, all across the board, country per country tariff system is not in the spirit of what a custom tariff is meant to do. Well, you've been at the helm of the World Trade Organization and...

Such bodies have actually helped in global cooperation and resolving disputes between countries about trade. But is this now changing? With a country like the U.S. unilaterally first imposing and the president there using emergency powers to invoke tariffs and the judiciary being forced to step in, is that now forcing a change in global institutions like the World Trade Organization and their effectiveness?

No, this is not a global problem. This is a U.S. problem. And U.S. is 13%, 1-3% of world imports. The reality is that the U.S. have distanced themselves from the WTO.

for the last 15 years, step by step, including in not participating in the upper level of the dispute settlement. So this is a US problem. It is not a global problem. If EU and China have a dispute in WTO today, it will be adjudicated according to the rules of the World Trade Organization. So one of the best economists...

of trade on this planet says this is not a US trade war. This is a US war against the global trading system.

This is a U.S. problem. And what's the result of that then? Because then do you see the global trading system being divided with one bloc which has no U.S. in it and the other bloc which is trying to negotiate their own separate deals with the U.S. like India and Japan are doing at the moment? There has always been a possibility to negotiate multilateral WTO deal with

or regional deals or bilateral deals. This is not changing. What is changing is that you have one member of the global community, which is the US, who has decided not to play by the rules. As long as the rest of the countries agree that they play by the rule, this is not a global disorder.

This, again, is a US problem, which, by the way, and I've said that many times, including

on the BBC, this will mostly backfire with the U.S. in raising the price of goods in the U.S., which at the end of the day will, of course, reverberate given the size of the U.S. economy with bad news on the global economy. But as long as the rest of the trading system

does not let itself be contaminated by this Trumpian tariff fever, this is not a change of paradigm. Pascal Lamy there, former director general of the World Trade Organization. Kerry, your view on this? Is it going to backfire for the U.S.? Is it a U.S. problem?

Well, it is a problem for the U.S. more than other countries. But one of the many questions Trump's asking that needs to be asked is how can we deal with these huge imbalances when countries like the U.S. run large trade deficits?

But China and, like you said, Europe run big trade surpluses. And how do you fix that without having some kind of tariff mechanism is an excellent question. But I think net-net, what we're going to have is a world of – where each major block is going to have more control over their trade, but they're going to be a much less efficient system because you're going to be, in some sense, polluting or making the supply chains less efficient. But they'll be less efficient, but they'll be under greater governmental control. Okay.

Gary Lee, we leave it there. Economist at Columbia University. Always a pleasure speaking with you.

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To France now, where lawmakers have cast a crucial parliamentary vote that could decide on the future of ultra-low emission zones in Paris and 14 other cities. Led by Marine Le Pen's National Rally Party, the motion was passed by 98 to 51 votes. It looks to overturn a law introduced by President Macron in 2019 and ban the green areas in the city.

And if it becomes the law, the government will have to reimburse over 3 billion euros to EU funds that they have spent in creating these low emission zones. Here's a Paris correspondent, Hugh Schofield, who explains why moves to scrap low emission zones have gathered momentum.

Well, they want to scrap it because it's unpopular, and it's unpopular because it arguably discriminates against people who can't afford to buy better cars. So you have in this vote an alliance of people on the kind of hard populist right, Marine Le Pen, her National Rally Party, allied with people on the hard left, who, I mean, of course, normally they hate each other, but the hard left and the populist right agree that ordinary working folk

who don't live in posh houses in the middle of Paris, can't afford now to come into town with their vehicles, and they can't afford to do what they're being constantly urged to do by the government, which is to invest upwards, get an electric car, get one of these super-duper things, think about the environment. They can't afford to do that. So it's a very social issue, this. And people who want to sort of tap into that vote...

are mindful that if you come out against these low emission zones, you'll get the support of a lot of people in the country who feel that it's a kind of rich person's privilege to be able to indulge in this way, cutting emissions and so on, by discriminating against poorer people who can't afford to have anything other than their old cars. So what happens next?

Well, this has hit the headlines, this story, because it's quite a reversal. The direction of travel in France and elsewhere, and in Britain particularly, has been more of these low emission zones. And they're a big deal in Britain too. And now suddenly the French parliament is saying, no, stop, let's go back in reverse, which is maybe a sign of our times, the growth in power of the populist parties, which tap into the interests and concerns of poorer people. But

But I have to sort of say, hold it a sec as well, because this is a vote in Parliament and it's by no means definitive. What's happened is that there's a wider law going through Parliament at the moment, which is a law on simplifying bureaucracy, simplifying people's lives. And what's happened is that, as so often happens in the democratic system here and elsewhere, of course, is that various parties have decided to tack on an amendment to this bill, which has really got nothing to do with low emissions. And they've tacked on this amendment to stop the low emission zones.

And they've put it on and it's been voted through. So two things have to happen now for it to become law. First, the overall law has to be voted through. And then if it is voted through with this clause in it, it's quite possible that there'll be a challenge at the French Constitutional Council, which is the body which rules on the constitutionality of law.

laws. And the challenge will be based on the argument that this low emissions clause has got absolutely nothing to do with the overall purpose of this law on simplification, and that therefore it's what they call here a rider, a rider bill, and it should be struck down. So I don't know what's going to happen, but it's not necessarily the case that this will become law. BBC's Hugh Scofield there.

Now, Africa Development Bank has elected its ninth president, a former Mauritian economy minister, Dr. Sidi Ota. And here's what he said at his inauguration speech. I also feel compelled to thank everyone who supported my candidacy, directly or indirectly. I cannot name everyone right now.

Now let us go to work. I am ready. Thank you. Lots of cheers there for the winner, Dr. Taha. Earlier I spoke with Zawadi Mudibo in Ivory Coast and asked him what this could mean. The African Development Bank, its core mandate is to promote economic and social development in African countries. And this it does through financial and technical assistance.

And so speaking about the new head now, he faces a new reality in terms of debt distress, because this has been the undoing for most African countries. We have about 22 African countries that have either defaulted or are in

debt distress. And these are the likes of Zimbabwe, Zambia, Ghana, Ethiopia. So that is the reality that he now faces. And he really needs now to be looking at how to address the issues around the cost of borrowing, diversify sources of financing, apply debt on returns that generate investments, as well as pursue what we call blended capital opportunities.

So the bank has been in existence for over 60 years, and it does have what it calls a 10-year strategy, which was renewed last year. And these are focused on five issues. The outgoing president, Dr. Deshina Akinomi, calls them the high fives. So this is

to power and light up Africa, to feed Africa, industrialize Africa, integrate Africa, and of course, improve the quality of life for people on the continent. So his success can build on these initiatives. Anyone who has worked in a large institution knows what you do is really much a function of how you do it.

So the FDB, as it's called, needs to begin to proudly do business in an African style and in particular and do the conventions inherited from Bretton Woods institutions, which is the IMF and the World Bank.

But this job will get even more difficult, isn't it? Looking at, we've been talking about tariffs on the program in the U.S. and then the repercussions of that around the world. The bank is also facing half a billion dollar worth of funding cut from the United States. What would it take for Siddhi Taha to now prepare for this?

What are the strengths that Citi Tower needs to prepare for this kind of macroeconomic scenario? Yeah, you're right. The tectonic shifts in global development finance are shrinking. And that means that concessional funding is also shrinking. Cuts from wealthy countries like the U.S.,

and most of Europe, who are also significant financiers of programs of the bank. So it really means that Dr. Sidi could now begin to draw from his experience and networks in the Gulf states where he's worked and led for over 10 years. And so look at the Gulf states to find partnerships that

he could use to grow the pool of money, granting the institutions the ability to lend concessional loans. He also has a golden opportunity to tap into the special drawing rights to access cheap financing from the IMF, for example, and be able to lend and support programs that can support the sustainable improvement of lives and livelihoods.

So it's really, I would say, a complex time that he gets onto the helm of this institution. But I think it's also an opportunity for him to show leadership and really draw people's attention to what he has promised over the last couple of months in the campaigns. But we're looking at a consortium of nations. It's a continent after all, and not everybody will have the same outlook. What would...

What will be these internal challenges for Dr. Taha? There are many geopolitical issues that will come to play in the election itself. As you know, not every country, not every shareholder supported his election. And however, it is a majority decision. And now that

means it is in everyone's interest to support him because his failure would be the failure of everyone else or all the shareholders and countries. It is in the interest of everyone now to pull in the same direction. In fact, he says there are four issues, in his opinion, that need to be addressed. And these are some of the issues he's talking about, reworking the financial system, consolidating the bank's financial capacity and attract investors.

private sector co-financing of programs. He's talked about formalizing the informal sector, which employs over 8% of Africans. That was Zawadi Mudivo from Ivory Coast. You've been listening to World Business Report. Thank you so much for being with us, from my entire team, Glenn, Neil, Luke, Stephen, and me, Davina. We really enjoyed having you on with us. See you next time. Namaste.

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