Deep Dive
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Hello and welcome to World Business Report from the BBC World Service. I'm Sam Fenwick. Coming up today, China and the United States ease tariffs in a bid to calm trade tensions. We hear from American and Chinese businesses about what the deal means on the ground and ask, is it a real breakthrough or just a pause in economic rivalry? This is basically taking us back to, quote unquote, Liberation Day.
It's still going to be tariffed and it's still going to raise prices at the end of the year. But...
at least people are able to make plans around it. We'll look at how the markets have been reacting and what could come next for global supply chains. Plus, the UK government has unveiled a tougher immigration policy, scrapping care worker visas and raising the bar for skilled workers. We'll speak to a care home operator in the northeast of England and ask whether Britain can really afford to close the doors to these workers.
But first, after two days of talks in Switzerland, trade negotiators for the US and China have announced a major de-escalation in tariffs, a move they say could ease pressure on businesses and consumers on both sides of the Pacific.
The US will lower those tariffs from 145% to 30%, while China's retaliatory tariffs on US goods will drop to 10% from 125%. Well, let's first of all look today at how investors have reacted to this news. Has their mood improved? Peter Jankowskis joins us today. He's Vice President for Research and Analysis at Harbour Financial Services in Chicago. He can talk us through the day's events.
Peter, how have things closed then at the end of Monday?
Well, it was a very strong day from the initial bell. The markets finished today pretty much on their highs, up 3.3% on the S&P 500. Very strong results for many stocks in the consumer discretionary sector. Not surprisingly, given that they were the ones most under the gun with these charges. Amazon was up 8% today. Mattel, the big toy maker, was up 10%. Yeah.
Athleisure brand Lululemon nearly 9%, Nike up 7.5%. Have these brands made back some of what they had lost after so-called Liberation Day?
Some of them have. Mattel is still down on the year, but Lululemon is actually up 8% on the year overall. So today was kind of their, you call it a black Monday, you know, going back to what we call Black Friday here when many of the retailers go ahead. It put them in the black for the year in terms of their stock price.
A happier Monday. Well, Peter, stay with us because we will come and talk to you again in a little while. So the agreement is being cautiously welcomed there by the markets and investors. But for businesses, the real question is what it will mean in practice.
Tath K is a Chinese exporter of personal care appliances to major US retailers and he is watching this very closely. My colleague Will Bain spoke to him and asked him what he makes of this pause in the trade war. This is basically taking us back to quote unquote liberation day. We're just a manufacturer of personal care appliances. I don't understand why we're caught in the middle of all this. 30%
It's still a substantial tariff. It's going to mean a lot of my customers who are the importers of goods into the U.S., their margins are going to be wiped out if they don't pass tariffs.
the tariffs onto the customers. This 90-day window will allow most people to get some goods in. It's still going to be tariffed and it's still going to raise prices at the end of the year, but at least people are able to make plans around it. If people were with us on the program last week, they'll have heard you really helpfully break
this down for us? Can you just sort of break it down now at the 30% level? You know, who is sort of making what, losing what in that example? For a goods that let's hypothetically say $10 that we sell as manufacturing price, the importer, the company who's bringing these goods in, selling it under their own brand and marketing the product, they would have to pay $3 in tariffs.
Unless they're able to pass it on to either the retailer, in this case, it could be a Walmart or a Target, they would have to take a loss or at least they would have to sell it at a loss just to keep the business. If they are able to pass some of that down, it would mean that Walmart and Target would have to add to their margins as well. So this isn't solved.
I don't think it's solved. And I think a lot of small to medium enterprises are still going to be under tremendous strain. What about at the other end of the trade as well? What about at home in China? What does it mean in terms of those operating margins for you and your colleagues exporting from big hubs like Shenzhen?
So in the short term, it means that we're able to start moving some of the goods that have been stuck in our warehouse for the past month and a half. Looking further ahead, though, in the past month, we have been making plans to move some of our production capabilities outside of China so that we have that flexibility to service our clients wherever they need the goods. In the long run, I don't see the Trump administration backing down from where they stand.
That was Tat Kay speaking to Will Bain a little earlier on. So what could this easing of tariffs between the world's two largest economies mean for global supply chains? The port of Los Angeles handles more US China trade than anywhere else in America, making it a perfect balance.
barometer to find out what's happening on the ground. And I've been speaking to Jean Siroca, the executive director of the port, to find out how this de-escalation might be affecting shipping volumes.
Well, it certainly is welcome news. And I know we have some importers, the 125,000 companies that import through the Port of LA. Some have already told us they've got cargo they want to bring in. 30% tariffs are a lot more amenable than 145%. But it's going to take some time to sift through what all the economics are going to mean with this change. And even though
we report on 30% tariffs, different commodities, different products each have different tariffs. And I understand some still remain pretty high, others have fallen. So it's going to take a little while to understand this from the importer side. Over on the export side, at 10%, I'm being told by some in the farming community and agriculture, that might just be enough to
to restart some of the shipments to the export markets. So we'll see people in the both sides of the ledger this week really evaluating what the understanding of the economics will be before we open up the gates to more and more cargo. How have these tariffs changed the flow of goods in and out of the port? For
For the month of May at the Port of Los Angeles, import vessel arrivals will be down by about 20%, cargo volume down by about 25%. Now, it's going to take some time depending on demand.
for the shipping lines to reposition their vessels in important ports like Qingdao, Shanghai, Xiamen, and Yantian in China. And it'll take a little while to load up and then two more weeks to come over to Los Angeles before we distribute throughout the country.
So, again, welcome news. Now on the operating side, there's a lot of work to do. And do you expect to see a sort of rush to move these products within that 90 day window? Because we saw, didn't we, in the run up to the tariffs being introduced, that there was a flurry of activity coming out of China.
Depending on the commodity segment, there may be a little bit more of a need than in others. Take possibly hospital supplies, syringes, IV apparatus, and...
and other products, ventilators, maybe they have to be moved pretty quickly too. But I think that what we're hearing is that some folks will take a wait and see attitude because for a more permanent framework, maybe that 30% can come down even further. I'm not hearing too many people. Now, mind you, we're 12 hours into this announcement and
I haven't heard too many speak about tariffs that could go higher after the 90 days. But there's a long way from here until August the 8th and trying to figure out how the two sides can negotiate and make sure that this rules based trade agreement meets the mark for both sides. Do you think President Trump is playing quite a canny game here?
Yeah, I think under the direction of President Trump and the work that's being done by the cabinet level members, that there's some real opportunities here. Opportunities to get American agriculture products into markets more often.
an opportunity to get American manufactured goods into overseas markets. It's interesting because in Los Angeles County, we support the largest employment base of manufacturing jobs with nearly 400,000 people working in that sector. Yet the companies they represent only export 1% of their products. So there's real discussion here on how we can boost American exports, American production, and American jobs.
That was Jean Siroka, the Executive Director of the Port of Los Angeles. You are listening to World Business Report from the BBC World Service with me, Sam Fenwick. Let's go back now to Peter Jankowskis. You heard there, Peter, Jean talking about the impact on supply chains, how supply chains might get mined.
moving again, what do you anticipate might be the cost of this movement and whether your shipping containers might, you know, increase in price? Is there any concern there from people who might be exporting and importing? I would suspect there is some concern. We could see the rise, but I think many of these shipping companies had taken capacity out of service. So they'll be able to meet the demand, um,
You know, more easily than, say, coming out of COVID, where the surge in demand was so large, there was just not enough capacity to sustain it. So there will be an increase in costs, no doubt, but I expect to be much more moderate than what we saw in the aftermath of COVID. Okay.
Well, another major announcement today, Monday, saw Donald Trump signing another executive order, this time requiring U.S. drug prices to match the lowest global levels, particularly there. What sort of savings might consumers in the U.S. be able to see?
Well, some of these prices that they're talking about in terms of price reductions are quite substantial. Some of the major drugs I've seen could potentially come down as much as 70%.
For the very newest drugs, though, they're pretty much selling at the same price around the world. So, you know, new miracle cures, if you will, they're not going to change much in price. But some of the more well-known established drugs could come down quite a bit. So we did see in India the shares of the stock of some drug companies fell on this news, didn't it? Yeah.
Yes, yes. The U.S. was kind of unusual, given that we had the positive of the tariff announcement at the same time. Most of the major drug companies today in the U.S. were actually up. A bit of a surprise. I think if we had not had the China tariff announcement, we would have seen them go down as well. And ultimately, who will cover the cost of this then? Will it be the drug companies? Will they have to absorb lower profits? Yes.
Well, to a degree, yes, they may see profits come down, but I suspect they'll manage their profits by cutting expenses. A prime one likely would be research. You know, if they don't see the potential to generate strong revenue from research, it provides less of an incentive to conduct that research. Peter Jankowski, thank you very much for explaining that to us.
We're going to head to Britain now where the Prime Minister, Sir Keir Starmer, has unveiled a tougher stance on immigration today on Monday, warning that the UK risks becoming, in his words, an island of strangers. Under the new policy, migrants will need to demonstrate longer-term economic and social value to settle within 10 years. Here's what Mr Starmer had to say. He said it will allow Britain to grow. So when you have an immigration system that seems...
almost designed to permit abuse, that encourages some businesses to bring in lower paid workers rather than invest in our young people, then you're not championing growth. You're actually contributing to the forces that are slowly pulling our country apart.
The government plans to raise the salary threshold for skilled roles and scrap social care visas. Here's the BBC Social Affairs editor Alison Holt with more on that. In a care sector which has struggled to find enough staff for years, international recruitment is viewed as a lifeline. Even with it, there are still an estimated 131,000 unfilled care jobs in England. The visa scheme was introduced after the pandemic when staff shortages were most acute.
Burnout and the soaring cost of living led to many staff leaving. They could earn more, for instance, working in a supermarket. Most social care is paid for by financially squeezed councils and wages are often low. The government wants more people in the UK to work in care.
The government says it will introduce a fair pay agreement for care staff and an independent commission has just started work on plans for the future of social care. Solutions which care groups say will take a long time to make a difference on the ground. Well, in a moment, we will hear from a care home operator in the north of England.
Mike Padgham. But just before that, I want to ask Peter Jankowskis from Arbor Financial Services, who is still with us. In the US, haven't we, we've seen moves to tighten immigration. From your vantage point, how do you see this affecting American businesses?
Well, it has different effects depending on the business. I think many of the technology companies are squeezed somewhat with getting the help they want, but they have access to some alternative routes,
and ways to bring in the skilled workers that they need. Potentially, I think we are likely to see a greater impact on some of the lower wage areas, agriculture, potentially care for individuals as the UK is bound to experience.
So it varies depending on the sector and the wage. Because there has been some issues, haven't there, within the administration, sort of notable arguments between Elon Musk and Donald Trump over this.
Yes, indeed. And I think it does come from those differing perspectives. I think a more nuanced approach is certainly warranted to bring in the workers, particularly for areas that the domestic economy doesn't produce the workers that are needed.
There simply there isn't a competition for those those jobs that that's being stifled by allowing that immigration. Well, let's bring Mike Padgham into the conversation. He runs three care homes in the northeast of England. What proportion, Mike, of your staff are currently from overseas? About a fifth of staff and many of those are nurses. And quite frankly, if we didn't have them here,
And you will have heard...
Peter Jankowski is there just talking about the situation in the United States where there aren't enough workers, so there isn't as much competition for jobs. Are you finding that that's the same case here in the UK?
Yes, I am. And I think the issue is, of course, we lose some staff to the NHS. In the summertime, we can lose care workers into hospitality, and that's challenging for us. But with the population growing, which is something to celebrate in terms of being older, then we need more carers. And the figures in the UK say by 2040,
We need over half a million more care staff in this country to deliver services. So, again, that's another challenge for the future. 2040 is not that far off. The government says that employers like you should focus on hiring British workers.
Why hasn't that happened? Well, I've been in the sector three decades. Recruitment's always been an issue. We are constantly recruiting. We do take some from this country. We would like to take more. But sadly, as your piece has shown, the pay in social care in England is not fantastic. And that is an issue. It's the elephant in the room that needs to be addressed. We could get more in. We need to pay more. But as Alison Holt said,
Local authorities are financially squeezed. If we put our prices up, local authorities can't afford to pay for it. So this is why we want the reforms that Prime Minister promised to come forward much quicker. And my view is bring the NHS and social care into one body and pay the staff in social care the same as the NHS.
then we might get somewhere. Thank you very much, Mike Padgham, for coming on. Mike Padgham there runs three care homes in the northeast of England. Right, we're going to move back to our top story now. The US and China have agreed a major reduction in tariffs for the next 90 days, significantly in easing travel.
trade tensions. US tariffs on Chinese imports will fall from 145% to 30%, while Chinese duties on American products will drop from 125% to 10%. Let's now talk to Eswar Prasad. He is the former head of the China Division at the International Monetary Fund and a senior professor of international trade policy at Cornell University. Thank you very much for
with us, to be for being with us. Now, we've heard that these two leaders, Xi Jinping and President Trump, will speak later in the week. How do you expect that conversation to go? It's not going to be an easy conversation. Certainly, the two sides seem to be in the mode of de-escalating tensions on trade matters. But the reality is that there is still a gulf between the two sides in terms of what each of them wants in terms of a better trade environment.
And what unresolved issues do you think there will be to discuss between the US and China? Now, the tariffs are, of course, the immediate concern for each country because these have not been good for the economies or financial markets of either country.
But what the U.S. is trying to accomplish through the use of tariffs as a policy tool is to get China to open up its markets more to American businesses and financial institutions. And as the U.S. sees it, to play fair by the rules of trade, such as by not subsidizing its companies in a way that gives them an unfair competitive advantage.
President Trump has also talked about other issues like trying to get China to control the flow of fentanyl and other illicit drugs into the US. So there is a range of issues that the two sides want to discuss. And who economically benefits more from this current short-term ceasefire, Beijing or Washington?
Both economies were being pretty badly hurt by this, although I think Beijing was somewhat more vulnerable at the moment. The reality is that the Chinese economy hasn't been doing that great in the last two or three years. And most of the growth that they've seen has come from a building of factories rather than consumption. So China is creating a lot of stuff, including a lot of things like electric vehicles, and they're not being consumed domestically. So they really need exports to grow. But
But from the U.S. side, the concern is that China is trying to grow and increase its presence in high technology industries, which are precisely the industries where the U.S. right now has the competitive advantage. So I think much of this is really about trying to dominate the industries of the future. There are concerns, though, within the Trump administration that actually this policy is impacting how Donald Trump is seen by his voters in the U.S.,
That's correct. It's not clear that this is the right way to accomplish what Trump really wants to accomplish. And the tariffs would almost certainly have driven up inflation, because especially when you talk about very high tariffs, some of those are inevitably going to be passed on to consumers, especially when there are no alternatives to China as a source for those imports. So that would certainly not have played well in the hinterland.
OK, well, thank you very much. That was Eswar Prasad, former head of the China division at the IMF and a senior professor of international trade policy at Cornell University. Let's talk now to Steve Greenspon. He is the founder of Honey Can Do International. Now, it's a homeware brand which imports things like drying racks and plastic bags.
bin's storage units from China and he sells these across the US via Amazon. Steve, thanks for being with us. You import a lot then from China. How has this 90-day reprieve been for you?
Are you having a party today or perhaps less so? It's hard to celebrate, Sam. Thank you for having me on. But the 145% is ridiculous, but you'll have to excuse me if I'm not going to celebrate 30% tariff on all goods from China.
It's certainly an improvement. It's good to see the parties talking and that they understand the need to do something quickly. The issue is – the two issues. One is 30 percent is still significant, and it's going to lead to inflation, and it's going to lead to lost sales and consumers not buying the products. And also it's 90 days, and we don't know what's going to happen after 90 days, so it's impossible for companies to pivot.
Are we going to invest millions of dollars and many resources to go to another country when we don't know what's happening there? So, yeah, it's a difficult. You have you did move some production, didn't you, to Vietnam, I think, after the first Trump administration.
Absolutely, Sam. After the 2018 tariffs, we moved more production to Vietnam and Taiwan, and we've started investing more in Cambodia and Thailand as well for future production. Now, Mr. Trump might say to you, why don't you source your goods from the U.S. or why don't you manufacture them in the U.S.?
So these are low-priced housewares goods that require, in many cases, heavy labor. They require a number of different manufacturing processes, a number of different materials. And the infrastructure does not exist in the United States to make these products.
at a price that American consumers would want to pay for them. And also the U.S. has so many regulations in terms of manufacturing. There's a lot of outputs from the manufacturing that the U.S. just will not allow as well. And the cost of labor in the U.S. makes it nearly impossible to make these products here. So you still would have to import them, whether it's a 145% tariff or a 30% tariff?
It's going to come from a country other than the United States for these types of products. There's no question about it. What do you do if this isn't resolved in 90 days? Yeah.
If we know what the plan is, we can pivot. If in 90 days they say the tariff in China is X, the tariff in Vietnam is Y, then we know what to do and where to invest and how to proceed. But if it just becomes another pause, another extension, then it's impossible to know what to do. And the uncertainty is the biggest issue because we can't resolve it. And then everybody's just sitting on our thumbs at this point.
What are you doing? Are you having to lay people off at the moment or are you managing to keep hold of them while this uncertain period hopefully kind of irons itself out?
These are small companies that are being impacted by this that don't have a lot of resources available and a lot of cash available. So unfortunately, we're laying people off and other companies within the houseware space in the U.S. are laying people off, reducing expenses because, you know, as it is.
So we've had within the last, since the tariffs were announced on Liberation Day, we've lost, I'm going to say about 10 people or so. Gosh, Steve Greenspoon, thank you very much for joining us today on World Business Report. That's all we have time for. Just enough time to say thank you to the producer today, who is Lexi O'Connor. And thank you to you for listening. Thank you.
Hey, it's Ryan Seacrest for Jewel Osco. This spring, refresh your spring personal care items and earn four times points on all your favorites when you shop in-store or online. Earn four times points when you shop for items like Pantene Shampoo, Gillette Fusion 5 Razors,
Secret body spray, Always Pads, Love's Diapers, Pepto-Bismol, and Nervive Nerve Relief Cream. Then use your rewards for discounts on groceries or gas. Offer ends May 20th. Restrictions apply. Promotions may vary. Visit Jewelosco.com for more details.