Trade Talks: US and China meet in London
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This is Andrew Peach with World Business Report. Good to have you with us. Today, with trade tariffs slowing down growth in China, the US wants to talk about rare earth minerals. We'll have the latest on trade negotiations taking place in London. We've also got lots of food on the programme today as we meet meat producers in Spain who are concerned about US tariffs. Spain is the largest pork producer in Europe.

It's the third largest producer in the world. Iberian ham is one of the most iconic gastronomic products from Spain. And we'll hear how the cost of butter is soaring in New Zealand, even though much of it is made there. There have also been schools that have been doing fundraisers. You might usually do like a cake stall or something. A school down in Christchurch has instead decided to sell butter.

Let's start, though, with those talks in London between negotiators from the US and China trying to defuse the trade war. Trade restrictions are hurting their economies for sure. China's export growth slowed to a three-month low in May. US companies want Beijing to resume exports of rare earth minerals that they need to manufacture things like cars. China has indicated it's going to resume such shipments to the EU and Japan in a bid to try and pressure US President Donald Trump.

We are doing well with China. China's not easy, just like your home country is not easy there. I think we're doing very well.

Let's go live to Sarah Hsu, Clinical Associate Professor at the University of Tennessee, live from Knoxville on World Business Report. Sarah, thank you for being with us. Just before we discuss the talks, can you put into context the damage being done by this trade dispute, particularly to the Chinese economy? What do we know?

Yes, there's a lot of damage. China's economy was already suffering for years because of slowing structural change and ongoing low domestic demand. And the export pain hasn't really helped at all.

China has been experiencing deflation, which while in the U.S. as we experience inflation, we think that might be a good thing. But in fact, deflation is also quite bad for the economy as people are purchasing less and less and demand is slowing.

Right. So there is impetus on both sides to try and achieve something. And we were talking on Friday on the programme about the phone call between President Trump and Xi Jinping that's brought this negotiation about in London. Do you think that the political will and the economic impetus will be enough to get them somewhere?

Well, I think that they will get somewhere on a tactical level. I think that they're both going to come in with some concessions they're willing to make. In terms of the U.S., there may be some willingness to relax export controls on things like mid-tier chips. For China, there is likely going to be some willingness to reduce the backlog of exports

license approval for magnets with some rare earth, but yet there are items that will be withheld. Um, so on the part of the U S there's a likely not going to be, um, exports of high end, um, semiconductors and on the part of China, um, um, rarer, if you will, rare earth, things like, um, samarium that are used for military hardware, um, might also be withheld. Uh,

So that could be a remaining point of contention. And are we going to get a big handshake moment between the two leaders, do you think? Is the result of this going to be significant enough to warrant that?

Well, I'm sure there will be a handshake, but it's going to be something that is short-lived, a celebration. I'm sure it'll bolster the markets here in the U.S., at least for a little while. But in the end, you know, the U.S. and China are locked into tensions that are ongoing. And really, the main targets are the semiconductor industry and

And shipments of those products in the U.S. to China and for China, it's the rare earth. And those two industries are inseparable. They're also industries that take quite a long time to start up and are very difficult industries.

to create entire supply chains around. So really the ultimate pressures will come from those lingering forces, those industries.

whose supply chains remain intertwined among countries that are strategic competitors. Just thinking about sort of pressure from business, we know Donald Trump likes to be popular and we know he wants the economy to perform well under his presidency. President Xi doesn't have to worry about an electoral cycle, but are businesses able to bring any pressure to bear on him?

Yes, certainly. He does face pressure, especially from companies that are in China's export sector, as well as local officials. And, you know, companies in China are under pressure, especially private firms and technology and manufacturing. They're trying to pressure Beijing to help stabilize the U.S. trade ties because they're undergoing many of the same

forces that businesses in the U.S. are undergoing, which is trying to get access to markets as well as to technological materials, which are critical for trade.

Sarah, thank you. Sarah Hsu, live with us from Knoxville, Tennessee, live to Chicago now. And Peter Jankowskis, who's the Vice President of Research and Analysis at Arbor Financial Services. What do you make of these talks and the fact that they're happening in London rather than, I don't know, in the US or China or anywhere else?

Well, certainly you would expect it to be at a neutral site. Neither party is going to concede the leadership of the talks by by having allowing the other side to hold it in their home country. You know, I think it's positive that they're they're talking. But at the same time, I also have very low expectations for them to make any substantial progress on this.

And, you know, it could give a small lift to the markets eventually. But long run, I don't I don't see much change coming out of these talks. I mean, there might be some will to, you know, avoid continuing to damage each other's economies. But on the other hand, all the issues that led to that are still there, aren't they? You know, Donald Trump spent months saying China's been ripping us off for decades.

It is. The issues are still there. And I think this time around, China has really dug in its heels and they're willing to take a fair amount of pain to get a better deal than they got the first time around from the first Trump administration.

More with Peter on the way. Now, it's coming up to three in the afternoon in Los Angeles, where fresh protests are getting underway against Mr Trump's immigration and deportation policies. Some have turned violent in recent days. Now, the Attorney General of California is suing the president for deploying the National Guard without the state governor's permission. In LA for us, the BBC's Regan Morris.

This city is a mess. I mean, the graffiti is everywhere. The remains of bullet casings, from rubber bullet casings and broken bottles and just debris everywhere. There were more than 100 arrests overnight.

And it was pretty hectic. But this demonstration I'm at now is quite peaceful. I wanted to focus on California's agricultural sector, which has long relied on undocumented migrants, the people Donald Trump's wanting to get rid of, to bring in the harvests and do work of that sort. Jamie Fannous is policy and organising director for the Community Alliance of Family Farmers Inc.

Jamie, thank you very much indeed for being with us. From the point of view of agriculture, is there a problem with undocumented migrants or is this a system that's working well from your point of view? You know, in California, you know, and certainly in this country, we are nothing without immigrants. Right.

That's especially true in California and in agriculture. Millions of our skilled farm workers and farmers are immigrants themselves and are children of immigrants. So without that community, our agricultural system is in danger. And so we're deeply worried about how these raids are impacting our communities. They have been since January. The first raid happened

was in Kern County. It was in our rural communities where over 80 people were arrested. That includes skilled farm workers and day laborers. But there's a huge difference between immigrants, people who've legally migrated and established a life in the US or any other country for that matter, and people who are there with no papers.

Yeah, of course. And the reality is that we protect both in California because people have a right to work here. And the reality is that certainly our system isn't perfect, but the

the agricultural community and California as a whole relies on both immigrants that might be here with papers and undocumented immigrants. The over 75% of skilled farm workers in California are considered undocumented. And so without them, we know that our agricultural community is at a fundamental risk.

In other words, if the president is successful with the policy that he's outlined, that he's carrying out, that, to be fair, he put before the electorate and won a mandate for, if he succeeds in carrying out that policy, Californian agriculture will grind to a halt by the sound of it.

Yeah, I mean, look at today, for example, we're in the middle of strawberry season. Over 90% of the country's strawberries are grown here in California. They're delicate and they require handpicking from skilled farm workers. And so it's fair to assume that if we dismantle our system overnight,

Those strawberries won't be picked. That industry will cease to exist. I mean, it's fair to assume as a result of what's happened over just the last week.

that hundreds if not thousands of workers didn't show up today purely because they are afraid of being separated from their families and their children. This is going to have a devastating impact on our communities, both rural and urban in California. Could there not be a system where people who are in the US, who are doing good work, who are needed in the economy, could be there officially and be documented?

I think that we could have a full conversation for hours on immigration reform, which is essential and so needed in California, because the reality is that these skilled workers are perfect and are willing and able to

to fulfill this work that is needed. They just need the protection and the opportunities and a pathway to documentation because they are part of the fabric of California. They are part of our communities and we need to find ways in order to support them and to create a pathway for them. It's very interesting to hear not only your explanation as to what's going on, but also your passion for the system such as it is that's been in place. Jamie, thank you very much indeed for being with us.

Thank you so much. Appreciate it. Jamie Fanous is from the Community Alliance of Family Farmers in California. This is World Business Report with Andrew Peach here on the BBC World Service.

Countries around the world have been unsettled by Donald Trump's US tariffs in the European Union. A blanket 10% on foreign exports was followed by threats to raise that to 20% or even 50%. And in member states like Spain, which exports a lot of food to the United States, developments are being watched really closely. Reporting for us, here's Guy Hedgcoe. It's lunchtime in a bar in the southern city of Seville. And

and three legs of jamón ibérico, or Iberian ham, are sitting on a table, ready to be carved and served. This is one of Spain's most emblematic products, made from free-roaming, acorn-eating pigs, and the industry exports nearly three-quarters of a billion euros each year. But the ham sector, like many others, is concerned about US trade tariffs.

President Trump has already introduced a 10% tariff for most EU products exported to his country, and he's threatened to raise it to as much as 50%.

Spain is the largest pork producer in Europe. It's the third largest producer in the world. Iberian ham is one of the most iconic gastronomic products from Spain. Jaime Fernandez is international commercial director at Grupo Osborne, which includes the Iberian ham producer 5J.

United States is one of our top priority markets. So the uncertainty is there and complicates our medium and long-term planning, investments and commercial development. It is a lot of uncertainty.

The Spanish economy has been outperforming most of its European neighbours lately with strong growth and unemployment at the 17-year low. But there is an awareness of the potential for outside shocks to the economy. I'm outside Spain's central bank in Madrid, which recently warned of extraordinary uncertainty due to the international panorama.

Javier Dia Jimenez, a professor of economics at the IESE Business School, believes that if US tariffs are not uniform, that will create what he calls trade diversion, sending products along the cheapest route to America. If Spain...

has a 20% tariff, and Morocco and Andorra have a 10% tariff. All the products that can go through either Morocco or Andorra, many of these agricultural products, will do so, and they will be first exported to Morocco or to Andorra, and from there they will be re-exported to the United States with a 10% tariff. And it's going to be really hard to make sure that these olives originated in Andorra and not from Spain. ♪

It's still not clear whether further tariffs will be imposed on the EU, let alone how much they could be worth. In the meantime, the companies that produce the ham and olive oil that's sold in markets like this one here in Madrid are crossing their fingers.

Clive Hedgecoe reporting back to Peter Jankowskis now in Chicago from Arbor Financial Services. There's a big story about Warner Brothers today, which is splitting into two different public companies following a trend in US media. Just explain that to us, if you would, Peter.

Well, there typically is a feeling that splitting the companies up can lead to greater value for the shareholders as separate companies. Companies involved in streaming could be able to capture more capital in the marketplace for their projects.

And, you know, that's the general motivation. And it's a very competitive market right now. So many firms are trying to segregate out the streaming portion or the content portion of their businesses so that the remaining business can be valued separately. Right. It didn't make any sense to me until you said that. So you can attract more investment by being a bit more niche, by being a bit more clear about what this business is.

That's correct. Yeah, it makes it easier to value is another way to look at it. When you make the business less complicated, analysts can go in and do a better job of determining what the business is actually worth. We've been talking about the health of the U.S. economy in the context of these trade talks with China.

One real good indicator is the bond market. And we've got some 30-year treasuries coming up for auction on Thursday, which everyone's going to be watching. Indeed. The last time we had an auction, it wasn't for 30 years. It was for 20 years.

It went a little bit weaker than people were expecting, and bond yields shot up fairly dramatically, several points on that news. The 30-year is a more difficult test for the market. 20-year demand can be a little bit light. Not a lot of people focus on that particular length of bond, but the 30-year is definitely a bellwether. So if this auction does not go well,

it could shake up the broader bond market. And this is about the confidence of people buying US debt, which ought to be the gold standard for the entire world. But in more recent times, people have been raising an eyebrow at least at that idea.

Indeed. Basically, we have been increasing our deficit at a fairly rapid rate now for a number of years, and there doesn't seem to be any willingness to slow that rate down. It certainly caused the rating agencies to downgrade, the last of the rating agencies to downgrade U.S. debt just last month.

and investors around the world are taking notice of that. Peter, thank you very much indeed. Now, extreme heat can have a huge impact on people's lives. The Spanish city of Seville has carried out a pilot aimed at naming heat waves in order to raise public awareness of them and better prepare local economies. It uses an algorithm or formula that forecasts heat waves and categorises them based on the potential impact they might have. Let's get more from Ashish Sharma.

In the summer, this city is one of the hottest in Spain and this has an impact on many local businesses, especially in tourism. Daniel gathers his group of 12 international tourists.

They're about to go on a three-hour bicycle tour of the city. We've been on two tours and the guides even say that the place shuts down in July and August. They were telling us that, saying there's nothing open, there's no point coming, it's 45 degrees.

The pilot scheme, the first of its kind, was called Prometeo. By the time it ended last year, several severe heatwaves had been identified and named in Seville. My name is Adriana Llanos and I'm the manager of Sea by Bike. So during wintertime and summertime, we focus on doing office work because we don't have many bookings. And during high season, as spring and fall,

We are usually only focused on tours because we have lots and lots of customers. So during summertime, what we do is changing our tours. So instead of starting the tour at 2.30, we start at 9 a.m. For us, it would be very useful to name the heat waves. That would mean that we are talking more about the heat waves. That way we could organize easier the changes we have to do and never cancel. We always stay in the shade. I know every single shade in town.

Really?

Heatwaves don't have names unlike storms or hurricanes, which are also categorised. But for all natural weather phenomena, they can have the greatest impact on people's lives, on overall public health and the local economy. The algorithm was established by the Atlantic Council and worked upon in the city by the University of Seville in cooperation with the local government. Jorge Gastelamundi is the Senior Director of the Atlantic Council's Climate Resilience Centre.

In Seville, people usually assume, you know, I'm used to hot, this is nothing new. But the fact that they were named alerted them that this was something probably different to what they were used to. We also found that women were more attuned to the fact that they needed to take action similar to more wealthy neighborhoods, as well as the elderly.

Were there any aspects of the project which you looked at afterwards, which you realise really could serve companies or local economies in some way? We realised that this same algorithm that connects all these different factors could be used for the insurance sector because they need triggers. They need to understand when they're insuring a particular route or service that they will have the right data to understand when they need to pay or when they don't need to pay. ♪

Heat waves are silent killers. They catch out the vulnerable and quietly devastate the economy through their impact on health. Finding ways to combat them, be it by naming them or categorising them, could be one answer to deal with the future in which our urban centres become even hotter.

Ashish Sharma reporting. Now, New Zealand has about as many cows as people. It has a huge dairy industry, and yet it's suffering from a surge in butter prices, up two-thirds in one year.

The problem for New Zealanders is that their butter is in a world market. Most of it is exported, so in general, if you're in New Zealand, you still pay the world price, even if the cow's around the corner. And world prices are going up and up and up. My colleague Lucy Thomas has been finding out more.

Butter at a local supermarket in the country can cost you on average seven New Zealand dollars and 42 cents for just 500 grams of butter. With the average price for a block of butter in New Zealand surging 65% in the year to April, it's caused a huge stir amongst dairy businesses and consumers.

especially since New Zealand is the world's top dairy exporter, producing a third of the world's dairy trade. I've been speaking to Anna Rawhitty-Connell, a senior writer at the spin-off A Current Affairs magazine based in Auckland. I asked her what are the factors driving this price surge?

The main one is the global dairy market. So the price for dairy products and butter is at an all-time high around the world at the moment.

It was about, in pounds, just over 2,500 pounds per metric tonne in 2020. It's now about 5,760 pounds per metric tonne. So it's essentially doubled in price in the last five years. What have the reactions been? I mean, what are businesses doing because it's so expensive? So in New Zealand, businesses...

starting to resort to using dairy brokers essentially, which means that they just buy butter from wherever it might be most cost effective to do so, which means that for a country like New Zealand that produces a lot of dairy, we export 95% of our dairy overseas and

We now have a scenario where businesses in New Zealand are importing butter from places like Australia. Because we produce so much dairy and it is such a core part of our economy, the idea of paying a premium for products that we make in this country breeds quite a lot of resentment. There is a lot of talk about the idea of feeding the country first before buying

we go on to export all of our produce to the rest of the world. Pragmatically, that's not economically sensible for a country like New Zealand, which is a trading economy, and dairy and food produce in particular are a really big part of our economy. But you can understand that

why people, especially in the face of cost of living crisis, why people get really angry about the fact that those products are essentially cheaper overseas. I mean, we were reading about all of the people who are churning their own butter. Have you tried this? Is it economically worth it? I have tried churning my own butter and I worked out that it would have cost about 28 New Zealand dollars to

based on the amount of cream that was required to make 500 grams of butter. So it makes no fiscal sense at all. How are people responding in supermarkets? The trend has been to maybe downgrade to a kind of different kind of spread. So margarine, there have been instances of

going in and buying a whole lot of butter and then essentially kind of delivering it around the country. So almost building a kind of cottage industry out of buying butter cheaper, you know, at wholesale prices in bulk and

and then supplying it to other people. The cost of butter in New Zealand. At bbc.com slash news, all the latest on those talks in London between the US and China over trade and also what's happening with those disorders in Los Angeles as well. bbc.com slash news for the latest on our live pages. From me, Andrew Peach, thank you for listening to the programme.