The impact of Trump’s tax bill
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Hello and welcome to World Business Report here on the BBC World Service. I'm Rahul Tandon. Coming up on the programme, we're going to talk to a French wine importer in the US, how are tariffs affecting him? Interesting conversation there. And we'll be talking about the business, a very popular sport in North America, ice hockey. But we're going to start by talking about how much the world's largest economy is in debt.

Breaking news. We just got the estimate on how much President Trump's legislative agenda will increase federal budget deficits. Let's go live. Let's talk about Donald Trump's landmark tax bill now, because the Congressional Budget Office said on Wednesday that it will add $2.4 trillion to the U.S. debt by 2034. Those are numbers that are difficult to imagine, aren't they? That would certainly make it big, but maybe not beautiful, which is how President Trump has described his tax

bill. But not everyone agrees with those figures. Here's the White House Press Secretary, Caroline Leavitt. I'm

Unfortunately, this is an institution in our country that has become partisan and political, and we are very confident in our own economic analyses of this bill. There is $1.6 trillion in savings, and our Office of Management and Budget Director, Russ Fott, is a fiscal hawk. He is well-known in this city for being a well-respected fiscal hawk. He has tools at his disposal to produce even more savings. And as you know, the White House will be sending our rescissions package to Capitol Hill today.

You remember on the programme yesterday, we were talking about Elon Musk, Donald Trump's former advisers, comments on the bill claiming it would drive up the budget deficit and describing it as a disgusting abomination. Let's bring in Wendy Edelberry, who is a fellow at the Brookings Institute in Washington, DC, and spend some time looking at these numbers. Wendy, thank you so much for joining us. Can we just start by reminding our listeners that

Of the size of the U.S. deficit or debt, I mean, what are we talking about now, over the $36 trillion? We obviously have a very large debt.

uh as it you know the world we're currently in uh investors are very uh willing to lend to the u.s government i think the number that we really should be focusing on when we look at this bill is what it commits us to borrow over the next 10 years and

That number, using CBO's estimates, is about $24 trillion. So that's a big number. But what upsets me most about the debate that's happening right now in Congress is that the supporters of this bill are very obviously not reckoning with that fact. And we know they're not reckoning with that fact because they're...

Now going to they're going to they're going to hamstring Congress or the sorry, they're going to hamstring the U.S. Treasury to actually only be able to borrow an additional four trillion, five trillion. If Senator Rand Paul has his way, 500 billion. And that is obviously far short of what's needed to finance this.

the policies that they want to put in place. Can I ask you a wider question that a lot of people will look at and wonder? Those numbers that you talk about, trillions of dollars of borrowing, how long can this keep going for where the US seems to be constantly borrowing money to keep paying for things that it needs?

It can go on for a long time in so far as we have very low tax rates in the United States. And so investors in U.S. treasuries, you know, if they see...

that policymakers are responsible, that they are acting like grownups, they will know that the enormous wealth in this country can be tapped year after year to pay the principal and interest on this debt. So it's not the size of the debt so much that worries me or even its trajectory going forward. I think what would unnerve markets is

And put us at risk of a fiscal and thus a financial crisis is not just the size of these numbers, however big they are. It's investors in U.S. treasuries getting some new piece of information that that makes them think that U.S. policymakers are, you know, not.

not acting like grown-ups and no one's driving the bus. It's that kind of information shock I worry about. And that's really important. The U.S. Treasury is where, isn't it, that the U.S. raises money by people buying those treasuries and, you know, those long-term treasuries where they get paid back over a period of time. And I think, Wendy, this is an important point, isn't it? Because a lot of people will be sitting at home thinking,

Those numbers are scary, those debt numbers. But debt isn't always a bad thing. We've got economies like Japan that have been running a very high GDP to debt ratio for a long period of time, and they've been pretty successful. That's right. And, you know, the U.S. economy is really big. And if you look at revenues as a share of GDP, under the legislation that just passed the House, it bounces back and forth.

between 17% of GDP, 18% of GDP, those ratios are much lower than the typical rich country across the world, which suggests that if we needed to, it would be painful, but we could

to abruptly and significantly raise revenue if that's what was called for. Wendy, some people say, though, don't they? And there is a lot of debate about this at the moment, that at some point maybe cut spending or there is another way, isn't there, if you want to try and balance that budget a bit better. Let's hear from a former advisor to Donald Trump, Steve Bannon. He says taxes simply have to rise. Want to stop the dead bomb? No.

Elon and the guys on Capitol Hill, you're going to have to raise taxes. The wealthy can't get an extension of the tax cut. That's got to go to the middle class and the working class. That has to be extended. It has to be made permanent at 40 percent of the top bracket or 40 percent. You pick them.

that's got to go back to 39, snap back to 39.5%, it'll go to 40%. The math simply doesn't work. The math simply doesn't work. Wendy, in the end, whoever's in power over the next few decades, is that going to be the question? You either cut spending or you raise taxes.

The way I think about it is different, which is we do a lot of our federal government does a lot of spending, spending that it would seem that people in the United States really value. There are essentially two ways that we can finance that spending. We can finance it with tax revenues. We can finance it with borrowing. If we do it with borrowing, we are just going to be poorer in the future. It's going to make our economy smaller in the future. It's going to raise interest rates. It's going to cause some pain.

Raising revenues causes some pain, too, but well-designed tax policy is a lot less painful for the economy in the long run than borrowing. And so at some point, we will presumably decide that we can –

look squarely at our fiscal situation and decide to do a more efficient thing, which is tax our way into financing our spending rather than borrowing. Well, it's a big question, isn't it? Let us see how

How it is solved, but I'm sure we'll be talking to you again about this particular issue. Wendy, thank you so much for joining us. Let's bring in Susan Schmidt, Portfolio Manager at Exchange Capital Resources in Chicago. And this issue, the reason we're talking about it is it's becoming an increasingly important one for the markets, isn't it, about this rising level of U.S. debt? Yeah.

Yes, investors care and they're paying attention because we do see an increase in the level of U.S. debt and particularly a topic of discussion right now as this big, beautiful bill, as President Trump calls it, starts to move through Congress and goes up for approval from the Senate. This is going to

add another $2.4 trillion per today's numbers from the CBO, Congressional Budget Office, to that $36 trillion of already existing debt. Those are very large numbers and investors start to get nervous because

just by the sheer size compared to how much GDP, gross domestic product, the U.S. is able to produce. Yeah, it's mind-boggling. Can we have a quick conversation about rare earths? They're controlled by China, vital for many manufacturing sectors, really at the center of a growing round between the U.S. and China. David Abrams is a rare metal expert.

There is real panic. If you're a restaurant that makes pizza and you don't have yeast, that might not be the most expensive ingredient, but you're not going to be able to make pizzas. And it's the same thing with these magnets in motors and cars. It can seriously slow down the production of these vehicles, which is a real pain point. But it also provides the way for countries to figure out how to collaborate because the pain points can be quite deep. And

And this is a real issue now, isn't it? We're seeing car manufacturing plants in Europe suspending their operations. It looks like we could be at the beginning of a crisis.

This is going to be a pressure point. And industry individuals and even government individuals recognize that rare earth does become a big issue for manufacturing here in the United States. We simply don't have these ingredients. We need to get them from somewhere. And tension with China means that these sources of supply have been cut off. No matter how much conversation is happening and some dialogue has started,

Any actions from the Chinese that have said, well, we'll get this going, seems to be going much slower than manufacturers and producers would like. We don't have access to the materials and industries are slowing down as a result. They certainly are. China controlling the processing of 90% of critical and rare materials in some cases. Right. A lot of people are talking at the moment about this group. Stop underestimating hackers. Meet Scattered Spider. Young, cunning and unstoppable. Let's dive in.

Scattered Spider, also known as UNC3944. We're going to talk now about the impact that hackers are having on some of the world's best-known brands. North Face, Cartier, Victoria's Secrets are the latest companies to be targeted. A group called Scattered Spiders are getting a lot of attention. So what do we know about them? A question for Charles Carmichael, Chief Technology Officer at Mandiant Consulting. Scattered Spider is the name of a loose collective group of English-speaking threat actors who

that have been around for the last several years. And they gained a lot of notoriety a few years ago when they compromised two very large U.S.-based casinos. And it became mainstream newsworthy because a lot of folks that went to these casinos that were impacted didn't see the shiny, blinky lights on the slot machines, or they couldn't actually check into their hotel rooms. And so it gained a lot of media attention.

And in recent months, a lot of people have noticed the lack of inventory at some of these grocery stores in the United Kingdom. And this group has started to shift their focus on U.S.-based retailers over the last several weeks. OK, let's start by what do they want? Is this all about money? Is that what they're trying to get? And how much money can they get? Most financially motivated threat are

care about money. But this group isn't exclusively financially motivated. They like the bragging rights. They like the clout that they get when they have a large scale impact to very large organizations. You know, they tend to focus on particular sectors and

some of the top companies within those sectors. And they usually do that for about a month or maybe two months or so before moving on to the next set of targets in a different sector. But they definitely like the notoriety. They get really excited when they hear stories about them. How do they do it? Because you're talking about big retail companies here in the UK, like Marks and Spencers, big companies in the States that spend a lot of money on protecting themselves.

This collective group of people are very effective at socially engineering individuals. So what that means is they pick up the phone and they call people that work in IT shops or help desks or customer support teams, and they convince them to do something that those employees shouldn't do. And so most of these folks that are working with Scattered Spider, it's

speak English as their first language. And so they sound very convincing. They try to pretend to be IT support people that work at the organization or people on the security team. And they end up getting employees' credentials reset, or they get help from the help desk to enroll a mobile device into the company's multi-factor authentication solution. We know publicly about some cases, don't we, involving Scattered Spider. I presume you get a lot of calls from companies who are getting...

threats from them? And are there other groups out there? Scattered Spider, one of many groups? There are a lot of different threat actors that conduct intrusion operations. Scattered Spider is getting a lot of notoriety as of the past few weeks, just because of some of the high profile breaches against retail organizations. And then the actual physical outcomes that people see, you know,

But they're not the only adversary that's out there. There's other adversaries that look and feel somewhat like Scattered Spider, but are distinctly different. There are other groups that disrupt business operations and then extort companies. They're known as ransomware groups. There's other adversaries that conduct intrusion operations on behalf of the government.

So maybe they're trying to steal trade secrets or intellectual property from a very large multinational organization that has the latest and greatest research on building aircraft engines. Just in terms of Scattered Spider, we started the conversation where you said we know they're English-speaking. Do we know any more than that? I mean, are they a collective of people across the English-speaking world? Do we think they're Americans? Do we know any more about them? There are a number of operators that live in the United States now.

that live in Europe that are predominantly English-speaking individuals that will collaborate on intrusion operations. Now, what's interesting about a lot of these folks are there's a large community of folks that are fairly young that are in their teenage years or some folks that are in their early 20s or so that will facilitate attacks for scattered spider. And so it gets fairly complicated attributing these attacks to a particular group because the membership of these groups that conduct attacks

It'll change on a fairly regular basis. Because we've had quite a lot of coverage, haven't we, of some of the companies that they have targeted and have targeted successfully, we get a sense that they're more successful and that companies are struggling to deal with them. Is that a fair comment? The tradecraft that Scattered Spider uses is a very effective tradecraft because

to enable them to get some level of access into an organization. It is very hard for organizations to defend against some of the tradecraft that the Scattered Spider group and other groups that operate in a similar way employ. And so, yes, unfortunately, Scattered Spider has had a lot of success. There we go. A focus there on a group that is causing a lot of disruption to many big retail companies, which, of course, is Scattered Spider.

You're with World Business Report from the BBC World Service. We've been talking a lot, haven't we, about potential trade deals. Europe and the United States say progress has been made, but there were no breakthroughs during a meeting in Paris to negotiate a settlement of a tense tariff spat with worldwide economic ramifications. These, of course, are two of the biggest global economic powerhouses.

The European Union's top trade negotiator, Marius Sefcovic, met in Wednesday with his American counterpart, US Trade Representative Jameson Greer, on the sidelines of a meeting of the Organisation for Economic Co-operation and Development in Paris. For US importers of goods produced in the EU, the outcome of these talks, well, is extremely important. I've been speaking to Robert Hurley, the president of Cynthia Hurley French Wines, which is based just outside Boston in Massachusetts.

You know, it has a bad impact and it is on multi-dimensions.

Right now, we do have a 10% tariff, which is, of course, new. There was no 10% tariff in a couple of years previously. So that's an extra cost. But, you know, the cost is a little higher, more than just the absolute extra cost, because we have to pay the tariffs up front. You know, we can't even receive the product until we've paid the tariff in full.

We don't even do that with a product we're importing. When we import the product, generally we have some terms with the seller and we have 90 days sometimes, 60 days to pay for it. So that's a lot of cash up front. So that's a problem. And then there's all the downstream things of how are you going to recover that money? Because...

we need to recover the money. That generally means raising prices. Is that what you've done? Have you had to increase prices? And what sort of impact is that having on demand? You know, in principle, this raises our cost of goods, all of our goods, because all of our goods come from Europe, by 10%. So that's a lot of money. And we have to recover that somehow. And

there's been some speculation that maybe the suppliers, the shippers, you know, would eat this. And in my experience, that's not happening. The importer is paying the tariff and the importers got to figure out how to recover that money. And, you know,

you know, logical way to do that is you raise your prices to recover. But it isn't that simple because you raise your price, you sell less. We would have raised our prices before if we could have done that, right? So we have to raise our prices, which means we're going to sell less, which is not good. And then the second thing is, of course, the uncertainty of the tariff. I mean, if I know it's going to be 10%,

I don't know how I'm going to necessarily recover that. But if I don't know if it's 10 or 30 percent, that's a really kind of tough thing to deal with. It is, isn't it? And you're in that situation at the moment because those talks, they were taking place today, weren't they, between the EU and the US on these tariffs. Do you think some days...

I better get some more wine in because maybe if those talks don't work, those tariffs could be a lot higher. You know, that's a pretty risky game. And it costs money. You've got to pay for the product if you bring it in. We have warehouses that we have space in, so we've got to pay for that.

That's very risky. And you've got to have the money to do it. You know, we're a small business and there's millions of small businesses, sure, that are important. And they all don't have unlimited capital. And generally, they're kind of narrowly focused. So they have one source of supply. They can't go someplace else or two sources. And it's...

real challenge they don't have another stream of business that they can put all the effort into they're in the running shoe importing business or the watch importing business or the wine importing business i imagine you've been sitting and trying to crunch some numbers is there a tariff at which point it becomes impossible for you to continue this business you know if it's 20 percent do you have to say look this isn't going to work have you looked at those sorts of numbers yeah well

We have. I don't think with great science, because you're just speculating on what the impact is going to be and how much you can raise your prices. But clearly, 20% would be devastating. And at that point, you say, right, I'll move from French wine and maybe move to Californian wine. Is it as simple as that?

That's impossible. I could say I'm now going to be in the California business. I don't have any suppliers. My customers aren't buying that from me. I don't have any reputation in there. I mean, yes, I would probably look at that, but that's not going to happen overnight. That's not going to happen over six months. Do you as a business now find yourself watching the news a lot more now?

These talks are taking place today and you sit there thinking there's going to be an announcement that the EU and the US have made a deal and bye-bye tariffs and that's good for my business. And I exclusively look to the BBC for that information. Well, thank you for that. Thank you. I'm not sure we can give you much good news at the moment. Of course, you're highly...

you know, focused on these things because they impact our business, you know, such a great deal. A final thought from you. Tariffs were there, weren't they? Initially, we all thought to bring back manufacturing to the US. You're not in that industry. Do you sometimes sit and wonder why have I got caught up in this? Well, everybody's caught up in it, aren't they? When you tax everything, yeah. Don't speculate too much on it because there's nothing I can do about that.

There we go. Fascinating to hear the thoughts there of a small business, Robert Hurley there. And Susan, an example there of the impact that this uncertainty is having on businesses across the globe, but particularly those bringing in products into the U.S.?

Yes. It causes a giant question mark for business operators because they don't know exactly how this will impact their prices, the costs that they're going to have to absorb and attempt to pass through. Some level of cost is going to have to end up in the price of that product. And it also changes their cash flow, as you just heard mentioned. Now he has to put cash forward up

front, whereas before he would have terms directly with the supplier to manage that cash flow more easily and potentially wait for him to sell the product through before having to pay his full bill. So it does...

drastically change some of these business models and that puts undue pressure on the merchants in those businesses. Yeah definitely as we heard there as well ice hockey was hit hard by the COVID-19 pandemic empty arenas and financial losses proved a real threat to the sports future.

Five years on, though, and North America's National Hockey League has come roaring back, not only with crowds packing stadiums, but also a broader fan base. In a few hours' time, the Florida Panthers and the Edmonton Oilers face off for the first game of the final series of this year's Stanley Cup. Millions of people will be glued to their screens watching it. Sam Gray looks at how the sport is about to enjoy a record-breaking season with predicted revenues of £6.

Welcome to game night in Toronto and a sport being driven by new teams, new technology and new fans like Selena. I am a big fan of the professional women's hockey league. So I'm also really excited for that. And that starts next week as well. But definitely with the women's league coming up, I've definitely started getting more into like the men's league because of that.

This evening's game is a Pride Night, one of many themed evenings across professional hockey, promoting diversity and inclusion. I got my Pride socks on. I think it's absolutely great. queer people have always been in sports and I feel like games like this really bring out the energy and the excitement for that. Everyone's welcome. And like things like tonight show that everyone is. I think that's really important.

From the stands, it's not hard to see why this fast and furious game is so popular, with big hits and late drive. But as the packed crowds make their way out of the arena, it's a visual reminder of how far the sport has come since 2020. The NHL just announcing that they are pausing the season due to the coronavirus. Nick Eves saw the impact firsthand.

as Chief Operating Officer of NHL side, the Toronto Maple Leafs. Every one of our revenue sources dried up. Obviously no ticketing revenue, no food and beverage revenue. It was a terrible couple of years of no revenue being generated and lost time. 4,000 kilometres west across North America, the NHL's newest franchise was taking to the ice for the first time. And tonight...

We are finally ready to open Climate Pledge Arena as the Seattle Kraken take the ice for the very first time. Chief Marketing Officer Katie Townsend says the team and the league has come a long way since then. I feel incredibly proud of the brand that we launched. And the work off the ice has inspired new audiences to get involved in the sport too.

We have a female assistant GM, Alexandra Mandrycki, who was actually the first member of our Hockey Ops team. And now really the kind of forefront of this is Jessica Campbell, one of our assistant coaches, who is the first female coach coaching behind the bench for an NHL team. And I think that's important. It's important that people see people who look like them within the world of hockey. It's important for the growth of the fan base. It's something 22-year-old superfan Selena agrees with.

I feel like a lot more women have been looking to the game. I think it's Seattle that has their first women coach in history. And I think, you know, that's really big. That's really showing the world that, you know, women are part of the game. As does Dr. Anne Peguerrero, Lang Chair in Sports Management at the University of Guelph in Canada.

I think that a lot of the new money coming into sport has to do with probably the increasing ability of the NHL to demonstrate a diverse audience, both demographically in terms of age and demographically in terms of racial makeup and gender. So we've got several different factors, I think, that have all come together to bring a booming business back to the NHL.

Suddenly seems to be booming, doesn't it, with those revenues predicted of $6.6 billion and certainly many different people now coming to watch that game, as we're seeing with lots of different sports across the world. That report there, of course, was by Sam Grewitt. You can hear the rest of Sam's report on Business Daily. Just search for the programme, of course, wherever you get your BBC podcasts. We will be back with Business Matters in a couple of hours' time. We're going to be having a little focus on Germany.