US-China trade talks set to begin in Switzerland
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Hello and welcome to World Business Report on the BBC World Service. Will Bain with you today. Great as always to have your company. So, finally, the US and China seem ready to talk trade truces.

But what realistically can be achieved when the two sides meet for the first time this weekend? We'll be doing a little bit of expectation management here on WBR in just a moment. Also today, the boss of the global fashion chain, Zara, tells the BBC that the EU should close the tax loophole which allows Shein and Timu, Chinese exporters...

to ship low-value goods to customers. We have been asking for its 11 playing field in order to have the same set of rules for any single competitor. And we'll be in India to see what people there make of a postponement of one of the world's biggest sporting brands, the IPL.

My family especially loves this tournament so much that we even named our son Virat because of how much we love the game. But with what's going on between India and Pakistan, I get it. Safety comes first. Cricket can take a backseat for now. Yeah, and the big business of big sport, there's not many bigger than the Indian Premier League cricket tournament. So even if you're not a cricket fan, it's going to be a fascinating conversation today.

a little bit later on here on World Business Report. We're going to start today, though, looking ahead to those talks expected this weekend.

in Switzerland between Chinese and US teams trying to find a way to ease trade tensions between the world's two economic superpowers. The US President Donald Trump has already preempted the talks saying 80% tariffs on China seems about right in a poster, as usual, on his Truth Social platform on Friday. You might remember at the moment, tariff levels on most Chinese goods, 145% on those arriving in the United States. But the President went on to say...

Up to Scott B., otherwise known as Scott Besson, the trade secretary there, the top negotiator heading to Switzerland. Mr. Besson will be meeting China's vice premier and economic czar, He Li-Fang, this weekend in the first real sign that the two countries are ready to calm down their trade war a little bit.

It comes as the first economic data starts to trickle through, two after those tariffs hit, with official figures for April showing China's exports to the United States fell by more than 20% compared to a year earlier. We'll get a view from Asia in a moment and a trading block close to China and sort of seen as a little bit of collateral damage perhaps in all of this. But first of all, Mary Lovely is with us. Mary is a senior fellow at...

At the Peterson Institute, think tank and expert in US-China relations, she joins us live from Washington, D.C. Mary, great to have you back on World Business Report. Thanks for being with us. It's my pleasure. I said we do a bit of expectation management, so why don't you start there? What are your expectations for this weekend?

Well, it's interesting. The U.S. has organized this venture out to Switzerland and the Chinese have accepted the offer. So I think both sides are interested in what Secretary Besant has called de-escalation. So I think that's a good thing. I don't think we're going to see that much coming out of it besides de-escalation, but we could see some positive signs.

Right. And we saw this yesterday here in the UK, didn't we, as well? And listeners with us on Thursday's edition of World Business Report would have heard this as well in terms of the UK-US agreement, deal, whatever it was. It was really just a ratcheting down of some of the tariffs that were in place, wasn't it? Is that where you would kind of set the kind of beginning for these talks at the weekend? Yeah.

Yes, unfortunately, on many products from the UK, we're going to have to live with a 10% tariff, which is not good news for US businesses, US customers who buy these products from the UK. So in some sense, yeah, we're getting down to a new normal. There were some nice little benefits for the UK in terms of autos and steel, and perhaps something coming forward on pharmaceuticals as the US considers it.

across the board tariffs on pharmaceutical imports. So I wouldn't say it was nothing, but unfortunately, it reflects a new normal. But in terms of China, then, is that the type of thing, come Monday, if we had you on the program on Monday, is that the type of thing you might not be surprised about if it came out of these talks? Or are we not even at that stage yet in terms of taking the pace out of some of these tariffs?

I think we're far from that stage. 10% on China would be a shocker. I think that... Oh, sorry. I mean, I meant just even just reductions in the tariff rates that we see. Oh, yeah. Down from 145 to, you know, the president was talking about 80. I mean, would you expect that?

Got it. Yeah, I would. I would hope for. I don't think it's out of the question. I think both sides know that this is just really prohibitive rates. It's basically a complete decoupling at a time when neither economy is really prepared for that. So if we did see a rollback, say, to the, quote unquote, reciprocal tariffs that the president announced on Thursday,

quote unquote, Liberation Day, that would be a big win for both sides. And then they could begin to negotiate from there. So, yeah, if we saw, you know, a rollback of the tariffs and retaliation that were put on after the reciprocal tariffs were announced, that would be very good news indeed. Well, we will see. I'm sure we will have you on in the next couple of weeks again as well, Mary. Always great to get your insight. Mary Lovely, senior fellow at the Peterson Institute think tank.

in Washington, D.C. there. Well, I said we'd get a view from Asia as well. Many countries there are already looking at how they can shift their focus away from a reliance on exporting to the United States and closer trade links to home. That's what Nazir Razak has been telling us about. He's the chairman of the Business Advisory Council to ASEAN, the Association of Southeast Asia.

Asian nations. The 10-nation trading bloc, which represents more than 600 million people, includes the likes of Indonesia, Vietnam, the Philippines, Thailand,

and Malaysia, from where Mr. Razak spoke to us from the capital, Kuala Lumpur. We're all extremely anxious. This is a period of extreme uncertainty. The reciprocal tariffs were at levels we never even contemplated. And there is the bilateral relationship between countries in the United States, but there's also the relative relationships, right? Where some ASEAN countries had higher tariffs than others. We're meant to be one team, but this is kind of dividing the teammates.

I was going to say, have you seen that? Anecdotally, I was talking to an exporter the other day who was talking about exactly that. I'm looking at where I could move my production, but I'm not sure quite what's going on. And there's nervousness at the other end as well, saying, oh, well, hang on a minute. If we have one of these companies from one of these countries come in and invest in our country, does that make us a target as well? How complicated has that been? Yeah, it is. When you talk about tariff relativity, it's between ASEAN countries and also

So between other competitors, we look at, say, rubber gloves. They're really two significant producers. It's either Malaysia or China. So as it turned out, even though we had very high tariffs, 24%, in relative terms, our glove producers did very well.

In terms of that relativity going forward, presumably that's not good news for anybody regionally because presumably it causes people to press pause on plans, investment decisions, deals. There is wait and see everywhere. And you look at what's happening in the warehouses, you can tell there's front loading of imports. You're seeing that already? Yeah, for sure.

How important then this weekend that the two kind of central sides, I suppose, in all this, the US and China, are going to talk at some kind of level, it seems? Well, of course, we're very happy that conversations are beginning. But as Scott Besson said, this is the beginning. It's going to take some time before this lands. And in terms of that time, then, I've been trying to get this sense from people over the past few weeks. You know, when does it go from being inconvenient and...

and wait and see to seriously threateningly painful because there is a moment, isn't there, where we pass from one to the other? Yeah, but I think don't forget that we're really focused on the relationship or the trading relationship with the United States. There's stuff to do elsewhere. And that's one thing we have to focus on, our trade relationship to other parts of the world. Just within the block too, within the ASEAN block, has it kind of refocused mind? Yes. And what I've been saying is that, look, we've always been good at talking.

Now it's time to really get things done. You know, if we can't turbocharge integration under these conditions, when can we? And where do you think that you could go quicker and deeper, I suppose, within the bloc? Well, I think there has to be things like greater policing of non-tariff barriers or non-tariff measures. As you know, we have an ASEAN free trade area. So 99% of goods are already tariff free. But there's quite a good correlation between reduction in tariffs and an increase in non-tariffs.

And we need to deal with that. Non-tariff barriers are all sorts in terms of things like visas, all sorts, right? So we need to have ASEAN, the ASEAN regional organization, have some teeth in order to bring down non-tariff barriers. I think that's very important.

I think some of the rules and regulations with regard to movement of people, outsourcing operations between borders, etc., can be brought down. But it requires painful discussions. And that's a big push at my business advisory council this year. Specifically, I've got this push to introduce something called the ASEAN Business Entity, where if you are labelled as an ASEAN business entity and operate in multiple countries across ASEAN,

then you get, you can have these flexibilities about movement of people and movement operations, et cetera, within your company. And I think this is getting more buy-in because of the operating conditions. Mark Carney and Ursula von der Leyen at the European Union, Mark Carney, the new prime minister in Canada.

have talked about trade being completely changed, completely rewired because of this, that nothing will ever be the same. There's no going back to the status quo again. Is that how you see it now? Has global trade been rewired, whatever happens this weekend in Switzerland? Yes, I think so. I think there's also long-term impact in terms of how we look at

the United States in terms of dependability. The US has every right to choose whatever party wants to choose. But we've always assumed a certain part for the US. That's changed. And I think that has long-term implications on the world economy, on the dollar, as well as trade. And if long-term those implications, as you've been talking about, could be exciting, could be new opportunities, are the medium and short ones

still choppy kind of things to try and navigate? There will be short-term pain, for sure. I mean, we are already, our government's already signalling a slowdown in growth, for sure. Just the period of uncertainty and kind of slowdown in investment decisions, etc., will impact the growth numbers, for sure. You sound confident, though. Well, I think so, because, you know, we always look at a crisis as an opportunity as well. We always think positively.

Nazir Razak there speaking to us from Kuala Lumpur, Malaysia. He's the chairman of the ASEAN Business Advisory Council. Shanti Kellerman with us as always on Friday to look through what's moving financial markets. Shanti, of course, the chief investment officer at M&G Wealth. Shanti, great to have you with us.

Just pick up on a couple of things that we've heard through the top of the program then. Markets look pretty flat as I was trying to sort of refresh them on the right-hand side of my screen to a minute ago ahead of these talks this weekend. Where's the kind of expectation management from market analysts like you?

I don't think we're expecting anything dramatic this weekend. It's probably the start of negotiations. One interesting piece of data we got out today was that China's exports were actually up quite strongly versus the previous year.

But less going to the U.S. and more being routed through other countries. So I think that probably maybe puts China in a slightly better negotiating position going into the weekend saying, hey, you know, we can still sell to other places in the world. Right to the point we were just hearing from Nazir Azak, right? That if not now, then when in terms of that push and that that push is happening from people like him in the region. Yeah.

Yeah, and there is a big opportunity. There had already been kind of more trade going from some of those Southeast Asian nations into the US and a lot of companies setting up factories in those areas. So yeah, there will be some losers, but also winners as things reshuffle. Yeah, one of those losers potentially, or was this tariffs related, did you think? Panasonic, big Japanese electronics firm, saying it's going to slash its headcount by 10,000 around the world. How much was that to do with all of this?

I don't think it was that related. So Panasonic, they do a lot of different things, hair dryers, TVs. They do batteries for Tesla, which is probably they're quite well known for. So basically they're saying they want to get out of some of those kind of more peripheral things and focus their business a bit more on data storage, data centers, power generation, etc.

The shares were up a bit on the news, so it was taken fairly positively by the market. Yeah, a company that's kind of been feeling around for what it is in the kind of modern electronics world a little bit as well, isn't it? One, we better do a bit of an up as well, haven't we? Because Germany's DAX, the main stock market there in Frankfurt, ended on a record high today. Was that all kind of finally got a government stuff? No.

I mean, I think that helps. It helps with sentiment. But the DAX is actually a very concentrated index. So the biggest company in it, SAP, which is a IT firm, is actually 16% of the index. So that company had some good earnings. So that kind of gave it a boost. You can see that. Yeah.

Yeah, there's also a lot of industrials in that German index, and that's gotten a boost from what the government's planned with more infrastructure and defence spending. Yeah, really interesting. SAP, one of those payment systems, ordering systems used by lots of companies all around the world. Fascinating company. Shanti, thanks as always. Have a lovely weekend. Shanti Kellerman there from M&G Wealth here on the World Service. You're with World Business Report on the BBC World Service.

Hey, Ryan, that was a fast trip. It was like you teleported. Yeah, just got in. I'll get all my expenses logged, I promise. Oh, no, you're okay. SAP Concur uses advanced AI, so your expense report will practically write itself. Quite the breakthrough. It's like we've been teleported into the future. All right. So, just curious, would you give us written permission to convert your matter into energy patterns and reassemble you at, say, random travel destinations? Margaret, are you building a teleporter? No.

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And we're going to head to the world of big fashion now, I think. Yeah, yeah, yeah.

Yeah, the sound of staff and sewing machines at, when I say big fashion, one of the biggest in the world, the Spanish headquarters of the global fashion giant Zara. For its 50th anniversary today, the BBC's Emma Simpson has been given exclusive access to the HQ. And Emma, when we say exclusive about a company like this, I saw one of my former colleagues from the BBC talking about this on LinkedIn saying, I can't believe you got in there. I mean, this is not a company that throws its doors open very often, is it?

No, I've only been waiting about 15 years for a glimpse inside. But I think this moment for them today, 50 years since that first store opened, was just a little door opening for us to come and have a look and see how they do it.

Yeah. And what did you find then? Because obviously we've been talking about tariffs already on the program, lots of competition from China in the kind of fashion and the kind of sector of fashion that Zara occupies, particularly those direct to consumer Chinese brands, the Cheyennes and the Timus that we've talked about a lot before as well. So what did you find in terms of that competition?

Well, you're right. It is such a fast-changing industry. And if you go back a few decades, well, of course, it was Zara that upended the market because it was able to get the latest trends into the shops far more quickly than its rivals. And of course, it's now grown to a business that has over 1,700 stores in 97 countries. In fact, it's even opening a store in Iraq this summer, would you believe? But of course...

now being disrupted by Sheehan and Timu. And whether you love them or you hate them, they're doing things faster and a lot cheaper. So I asked Oscar García-Materas, he's the chief executive of Zara's parent company, Inditex,

he was troubled by Sheehan and Timo. And he basically said Zara's focus was on quality, style and affordability. In fact, fast fashion isn't a label Zara's really keen to be associated with these days. But he did want a fair market for,

saying that Europe needed to follow the action already taken in America in closing the tax loophole that allows the likes of Shein and Timo and other retailers to send their packages direct to consumers duty-free. We consider that the growth of the group would keep on relying basically in spotting the trends and executing the model and adapting to any new circumstances.

Our ambition and what we have been asking for is a level playing field everywhere in order to have the same set of rules for any single competitor. But the opportunities to keep on growing should rely on the execution of the model and of course keeping that mindset of innovation and flexibility. So just to be clear,

I read that as actually saying, you know, we agree that actually the de minimis rule should be changed to create a more level playing field. Level playing field, I guess that this is something that should be common to any single sector and anywhere. And this is what we have been asking for.

A good reminder, if you're not a podcast listener on WBR, you should be and you should be a subscriber and go back. We've done lots on De Minimis, but obviously these packages under a certain price coming into different countries in that loophole being potentially closed off. On the subject of action being taken, Emma, in the US, tariffs. We can't go on an interview without talking about them, can we? How are they affecting Zara?

Well, it is the talk of the moment, isn't it? So interestingly, the US is Zara's second biggest market. It's got 99 stores there and it's a country which has been a big priority in terms of growth for them. But Mr. Mathias said that Zara was big enough, diversified enough to cope with whatever changes were planned and it wouldn't affect what they were going to do re-expansion.

But I did ask then what it might mean for prices. Our approach in terms of pricing relies on the commercial decision from our teams. So we keep on identifying the added value for any single customer of the full price of any single garment.

and that will remain in place. Of course, in specific countries, in some specific circumstances, we are adjusting the prices, not across the board, identifying line by line and adapting our pricing policy, but not forgetting what's the added value for any single garment to customers.

Amazing access, really rare access. You can hear much more of it. Emma Simpson and the team have put a piece together for Business Daily. It's well worth a listen. It's fantastic. It was listening on the way into work this morning. Business Daily podcast, wherever you get them from, or just stick it through Google and you will find it online too as well. You're with World Business Report on the BBC World Service.

Let's talk cricket now. Much to the delight of our editor, James, today. The Indian Premier League, though, less to his delight, is going to be pressing pause. One of the biggest entertainment franchises ever.

In the world, if you're not a cricket fan, let's give you a little bit of context about it. The broadcasting and streaming rights for a two-month long tournament were sold for more than $6 billion for the 2023 to 2027 period. Per match, according to Jeffries, that works out at $16.8 million, which is the second highest amongst any

any major sports league in the world. And yes, we're talking about the NFL, the NBA, the Premier League in football as well. Brand Finance reported that the league's value rose to $12 billion in 2024. And now, as we were saying, suspended by the country's cricket board with two weeks until the end of the season. So really ramping up in competitive terms because of the growing tensions around

with Pakistan that we've been talking about right across the world service. Here's what people in Mumbai made of the decision to press pause. I feel the BCCI has taken the right decision because you can't be playing a game of cricket when armed forces are

As an RCB fan, I am thrilled with the team's performance this season and postponing the matches is disappointing. However, desperate times need desperate measures and I completely understand the priority on protecting every individual. IPL is my go-to entertainment and especially this year I was hoping RCB would win but unfortunately not to be. Honestly, as a massive IPL fan, it is really disappointing to see the tournament being suspended.

My family especially loves this tournament so much that we even named our son Virat because of how much we love the game, the vibe and everything all the years. But with what's going on between India and Pakistan, I get it, safety comes first.

cricket can take a back seat for now. Name then, son, Virat, if you're not as big a fan as our editor James of the cricket, Virat Kohli, the long-term Indian cricket captain, big star of the IPL. What does it mean? What does it mean in money terms as well? Because this is way beyond really a sporting competition. It's a massive entertainment franchise, as we were saying. So,

If you're not even interested in the sporting aspect of it, it's got advertising, TV and everything rolled up in it as well. And we're going to try and discuss all of that now with Rob Wilson, Professor of Applied Sport Finance based here in the UK. Rob's been researching the finances of IPL teams for some time. Robert Sheffield Hallam University and Sharda Erger is also joining us. Sharda, cricket journalist, one of the best known across India.

based in the southern city of Bengaluru. Welcome both. Sharda, first of all, clearly not a decision that gets made lightly this, given the scale of this competition. Hi, Will, did you ask me a question? I was just going to say, yeah, clearly not a decision that's made lightly, given what we were hearing from those people there on the streets of Mumbai as well.

Yeah, no, it's not a decision that's been taken lightly, but it's been taken fairly quickly as compared to what happened when, you know, there was COVID a couple of years ago. So I think there was pretty much, particularly last night, there was a game that was played in Dharamshala up in the Himalayas in Uttarakhand.

by the hills and the game was literally shut down because they had the sign of blackouts in the northwestern region of the country and people got a bit apprehensive and nervous so the decisions come I think it's been possibly with advice from the government as well that other than the fact that it's dangerous to be playing it also the optics of it are bad as well and right now it's just a pause right that the competition has not been cancelled completely as far as we're aware

Yes, at the moment it's just a pause. They say it could continue, it'll sort of resume at some point in time. They've just given themselves a week's breather. But

But because the IPL window is so tight, you don't know when the competition could be completed. I heard a lot of the RCB fans who are from Bangalore, where I live, RCBs never won a title and they're very sad, but they understand where this is coming from. They're saying it's a breather and it will continue at some point in time. They'll find a window for it. Rob, put some of the numbers to it for us. We had a few of them in the queue there, but this goes kind of beyond sport, doesn't it? And the reason we're doing it in a business and economics program is that this has been...

a major kind of entertainment, tourist, business, advertising, however you want to measure it, hit? It's massively significant and really demonstrates that interconnectedness, I guess, between sports, finance, and in this instance, geopolitics and the impact that issues like we're seeing over in the Indian subcontinent can actually have. I mean, in terms of money, look, it's one of the biggest franchises on the planet, the IPL. It rivals...

competitions like the UFC and WWE is essentially bigger than the Premier League and almost matching the NFL in terms of its revenue. Look, if they end up cancelling the competition, you're talking about, you know, what is it, 12 plus games being cancelled. That is going to cost at least $300 million to

probably a little bit more. You're talking about broadcasting revenue loss. You're talking about a reduction in sponsorship and advertising. And of course that all important franchise value for those teams in the IPL, which,

And Rob, do we have a precedent with that? I mean, we saw it with the Premier League here in the UK during COVID and broadcasters getting itchy feet. I know we're very early and we're speculating here, but presumably there's contractual rights to that kind of stuff. There are contractual rights. The real challenge with this is, unlike what we saw with COVID, is that the cricket season is the very, very...

close together. So you've got other competitions, you've got test cricket going on, you've got a release players because of the franchise nature of them. So the window of, of being able to play these games actually reduces day by day. And whilst they've given themselves a week, they really don't have that much time to get the games in. So, you know, it's going to be hugely costly, whatever happens, whether that is,

is in terms of player wages or indeed those franchise valuations because the broadcasters will be able to back out some of their costs. And Sharda, that's the big question and the big conundrum here as well. I'm looking at a tweet from the former England cricket captain Michael Vaughan asking, speculating out loud whether it could be moved to somewhere else like Australia or the UK. I guess all of that stuff is feverishly being worked over by big bosses right now.

Yeah, I couldn't hear you very, very clearly, Will. I just wanted to, you're asking about moving the event, right, to another place, right. So, you know, that would have been considered at some point in time. Normally, sort of Dubai is the place where they go. But oddly enough, the Pakistan Super League is on its last three, four games. They also have a rival league. It's not a rival, it's a parallel league.

league that runs in Pakistan. Yes, that's one of the great ironies of all of that, isn't it? That it's a Pakistan-based competition that is there as well. Not many options, as the guys were saying. Thanks so much, both. Thanks for listening to World Business Report. Hey, let's talk about your expense report. I didn't submit an expense report. You will. Custom saddles and dog training services are not within policy. What are you talking about? SAP

SAP Concur uses advanced AI to audit and automatically detect out-of-policy expenses. It's the breakthrough I needed to focus more on our future. These are my future expenses? Yes, and self-defense classes are out-of-policy. I'll need self-defense classes? You will. For what? It's a big dog. SAP Concur helps your business move forward faster. Learn more at Concur.com.