US Economy takes a hit
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Hello and welcome to World Business Report from the BBC World Service. I'm Leanna Byrne and on this edition, Nigeria signs off on sweeping tax reforms. The government says it'll boost growth and cut red tape, but not everyone's convinced. In my opinion, if you're going to increase taxes, then make sure that you're also creating an environment that businesses can grow, can expand and can do well.

In the US, economic data paints a gloomy picture. The economy shrank last quarter and jobless claims are climbing. And after 37 years at the helm, Anna Wintour is stepping back as editor-in-chief of US Vogue. We'll look at her business legacy and what it means for the fashion industry. But first, let's start with the world's largest economy, the US. New figures out today show the gap between what the US exports and what it imports widened sharply in May to 96%.

billion. That's the biggest monthly trade deficit in over a year. Then on top of that, President Donald Trump in the last hour told an audience that the United States has signed an agreement with China on Wednesday related to trade, but he did not specify what he was talking about. But first, let's talk about this trade deficit. Michelle Flurry is our US business correspondent, and she explained what's behind the widening divide.

This is at a time when you've got Donald Trump in the White House essentially saying that he does not like trade deficits. And a lot of his tariff policy and protectionist trade measures that he's introduced is designed to try and reduce that trade deficit. Now, there are experts who say, well, that's not true.

That doesn't necessarily always make the most sense because some countries are better at making certain products than others. And so it doesn't make sense, for example, for America to make everything it needs. You know, in the case of, say, certain agricultural goods, maybe it does make more sense in certain climates for them to grow up rather than U.S. farmers.

But that hasn't deterred the president. And that's why we are also focused on these trade deficit numbers, because it is this sort of metric he's using as he looks towards imposing tariffs and deciding what kind of punitive measures he wants to impose. What can we take away from those figures, though, as well? Because can we conclude that the US economy is starting to really feel the impact of Trump's own tariffs? You know, this week we heard from Fed Chair Jerome Powell,

talking about interest rates, but he was asked about when they would cut them. And the reason I bring that up is because he was talking about where he wanted to wait and see the impact of tariffs on the economy. And the assumption by him, you know, America's most powerful central banker, but also by many economists, is that you won't fully see the effect

until over and towards the end of the summer. But so far, if you look at the products where there have been price spikes, for example, and things like that, it's actually been much more muted, the effect, than people thought. So in that sense, I guess, you know, we haven't really seen at this point, it's too early to say the full impact

of some of the kind of trade rhetoric from earlier this year. There is still a lot of uncertainty, though, particularly around that July 8th, the 9th as well, tariff deadlines around then. So this is an ongoing story. Do you think that's making businesses in America, you know, take a little bit of pause and not necessarily make hires or, you know, future planning?

Absolutely. And I think, you know, there is definitely in companies a hesitation. For example, if you're about to invest in a huge factory, are you going to race ahead or are you going to wait to see how things shake out when you're trying to decide what country, let alone what, you know, what state, where you want to place something?

Those are the kinds of decisions that businesses are holding off. The other thing business leaders are considering is, you know, they're making investments over a 10, 20 year time horizon. This White House is obviously here for the next four years. Who knows what happens after that? So it has definitely led to uncertainty and a kind of hesitation from businesses, particularly

Meanwhile, for governments, for countries that are trying to negotiate with the White House, it's been very challenging. On the one hand, you've had Trump say that this July 8th and July 9th deadline was hard and fast. But just a few hours ago, Donald Trump said actually the July 9th deadline was not critical. So that's going to leave many...

particularly in the European Union, which is trying to negotiate right now, and who Trump has threatened to impose a 50% tariff on goods from Europe, you know, they're now going to be left scratching their head. Well, how much do we need to get done before July 9th? Maybe it's not so urgent. And interestingly, the dollar has hit a three-year low. On the one hand, maybe not a great look, but that could actually help US exporters, couldn't it?

Yeah, it will certainly ease the pain. It's something that Trump has talked about. He said, you know, he didn't want such a high dollar. But, you know, what is driving all of this pressure on the dollar right now is another issue, which is what is happening at America's central bank. Trump has been a frequent critic of the

Fed Chair Jerome Powell saying he hasn't lowered rates fast enough compared certainly to other countries around the world. He's insulted him. And then most recently, overnight and in the last couple of days this week, we've seen a report in The Wall Street Journal suggesting that maybe he could announce as early as this summer the replacement for Fed Chair Powell, whose term ends next year. That would be sooner than normal.

And if that were the case, that would sort of potentially lead to the rise of like a shadow Fed where, you know, you have the successor perhaps opining on the direction of interest rates before he's even taken up the job. That has had the effect of helping to drive down the dollar even further. That was Michelle Flurry, our U.S. business correspondent.

Explaining a lot about uncertainty. Speaking of uncertainty, there's a couple of reports around circulating that President Trump said in the last hour that the US has signed some sort of trade agreement with China. He's offered no details whatsoever. Luckily, we've got Kerry Leahy, who's an economist and adjunct professor at New York's Columbia University.

Kerry, I mean, you know, we don't want to over egg this because we don't have any details on it. But given the current uncertainty around tariffs, global trade, how much does this kind of ambiguity affect investor sentiment and even business planning? Well, it's been very impactful. I would make the argument that some of the

what I would consider to be the more savvier traders have come to a conclusion that is referred to as the taco trade that Trump always chickens out. So I think the expectation is, while no details have been made available, that it will actually be whatever situation he proposes in the agreement will be better than the current situation with China, which is substantially higher tariffs. And if you really want to flip the logic, even if it ends up being a little worse than people are expecting, they'll say, well, there'll be another chance. And as you already understand,

mentioned earlier, the July 8th deadline went out the window. So these moving deadlines and the fact that if you have bad stuff that makes the market unhappy, Trump gets rid of that stuff. The market is taking about as rosy a posture about just about any new development by the Trump administration that will ultimately be a plus.

And that's even spilled over to the Middle East conflict right now, where what I would consider to be bad news in the last week has not been treated by the market as necessarily bad news. So are the markets looking for anything in particular out of this or would they be happy with anything at this point?

I think they'd be happy with anything that reduces the expectations, the effective tariff over the entire globe would be probably under 15%. That sounds like a big number, but it's a lot smaller than the numbers people were talking about. And I would say with China in particular, anything that ends up with an overall tariff rate of probably 25% or less would be considered to be a good outcome for the markets, since

since they were worried about numbers being much greater than 50%. He also said, we have one coming up maybe with India. Always scant on the details. But again, if there actually was a deal with India, how would you think the markets would react? Would it be the same? You know, a deal is a deal. I think they would take that more positively because this is an economy, and in some ways this is big, if not bigger than China. You could argue it's more...

free enterprise, there are a lot of issues about regulation in the countries. They probably take that as a positive as well. I think the whole point that you were already talking about earlier is that we definitely have a planning recession here in the States that people don't want to make any major plans. That has not yet translated into numbers that would say that the economy is in recession. Yes, there are

soft spots here and there. But there's nothing that would tell you that the economy's growth rate is going to be any worse right now than about 2%, which given all that's going on is not a bad outcome. All right. Well, Kerry, you stay there because we're going to move on to Nigeria, where President Bola Tinabu today signed a major financial bill to restructure the

Hello.

Oh, hi. Hello. A long pause, but delighted to have you. Tell me what was wrong with the old tax regime. Why did they have to change it?

The old tax regime has come across as something that, you know, did not have the results that it was expected to have. I could describe it as, you know, a very cluttered room and needed some arranging, that needed some arranging. So the president has, in a bid to get that organized, has

I think you're breaking up. I think we'll try and re-establish that in the line because we actually do have a clip to play for you because I spoke to a business that's grappling with these changes, Alezi Ake Akurapu, the owner of Nigerian women's wear brand Vigoroli Fashion and have a listen to her.

It's already a hostile environment, just generally doing business in Nigeria at this time, because everything's at an all-time high, you know. So, of course, it doesn't come as a welcome development. And when you say all-time high, you mean prices, inflation, that sort of thing? Exactly. So everything is way more expensive. I just did a price review last week because I had to adjust my prices, that's the word, make sure that I'm still in business and I'm making some sort of profit.

So just from these tax changes, do you know exactly what's going to change for you and your business because of them? Probably the VAT is definitely going to change. So if it's as it's higher, that means I would be paying more in VAT. This doesn't necessarily mean that business is even doing better than it was before. You know what I mean? What's the plus side for us as, you know, business owners, right? Because at this point, we don't necessarily even have access to loans.

On the last time I tried to get a business loan, the bank had said they're specifically not loans to my sector, which is fashion and retail, because I think they have a hard time getting their loans back or getting their payments back. So, you know, what's the plan? If we're going to increase taxes, how are we making sure that

businesses are staying afloat? How do we make sure that businesses have the type of funding that they're looking for? How do we make sure that businesses are expanding and growing as they should? Because at the end of the day, businesses in Nigeria is what keeps the company's economic situation going to a certain extent. I

in my opinion, if you're going to increase taxes, then make sure that you're also creating an environment that businesses can grow, can expand and can do well. Two of the things that stands out for me is that small businesses with an annual turnover below 50 million naira, rather, and that

that equates just over $32,000, you don't have to pay company income tax. Would that apply to you or would you be in the larger businesses category, which in fairness, they also will benefit from reduced corporate tax rates?

Yeah, so I think I would definitely maybe fall in the small to medium businesses category. If we do have an exemption, that would be great, of course. That way we're able to put whatever profits that we make back in the business and try to expand. So yes, I don't think that's going to affect me directly. Okay. Do you think the tax laws needed to be changed? Because there seemed to, there was an implication that there was a tax compliance issue as well.

To be honest, by myself, I do make sure that I pay my personal tax, you know, and I do make sure that my business is paying tax. However, just generally, I don't know that we have the database to make sure that everybody is actually paying taxes. So, and another thing is, in my opinion, if I'm paying taxes regularly,

It needs to pay off in some way. As I'm paying tax, is the infrastructure in place? Am I seeing growth? Am I seeing taxpayers' monies going into this? But then we don't necessarily really see that. But we also hear big budgets fly around on a yearly basis. However, there isn't necessarily any growth when it comes to certain things like infrastructure, when it comes to...

the health care system, when it comes to just general, you know, the road situation, everything. So I do imagine, number one, that we don't have the proper systems, right, to make sure that people are compliant when it comes to tax. And number two, even if we did, how can we justify that people's taxes are going into what they should go into? Because corruption is a problem for us in this country.

Ngailezi Akporu, the owner and creative director of Nigerian contemporary womenswear brand Vigoroli Fashion, speaking from Lagos. I think we still have our reporter Chiamaika Nendu. So go back to my first question. What was wrong about the old tax regime? And are people happy that there's a new regime going to be put in place?

The previous tax regime was definitely inconsistent and ambiguous. We had cases where there was multiplicity of taxes, same tax being paid at the federal, state and even local government levels by small business owners and Nigerians in general. It was definitely a

quite unnecessarily complex and largely inequitable over time. And yes, there has been reactions, you know, from Nigerians regarding the new tax. And from most of the reactions that I have gathered, Nigerians or small business owners are indeed excited about the new reforms, which does exempt, you know, small business owners from paying taxes and also personal income tax by, you know,

Nigerians who earn less than 800,000 naira annually are expected or will be exempted from paying taxes. So it is definitely a step in the right direction. Mixed reactions, obviously. Some people have talked about, you know, the timing, saying the timing is not, it should have happened sooner than now. And some others are saying that, you

that they want to see the implementation and not just a perfect document on paper. But definitely, this will help ease tax payment, especially for young, these small businesses and for Nigerians who are in the small income bracket.

Okay, thank you so much. Chia Miaka Anandu, our BBC reporter from Business West Africa, who is joining us from Lagos. And you're with World Business Report from the BBC World Service. ♪

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Now still with us is Kerry Leahy. Kerry, what can you say about the US economy right now? There's so many data points flying around. I saw that there was jobless figures earlier on today. What have they been saying?

Well, the jobless figures are showing these weekly claims figures are about half the ledger. It's telling you how many people have been laid off and have applied for benefits, which are partially paid by the federal government and run by the states. The other side of the equation, the amount of openings that are out there have also softened. So the market is soft, but the net generation of jobs in the last few months has still been

pretty darn good. Anything over 100,000 workers a month net is a good number. I think what is particularly confusing right now is that the GDP figures are suggesting the economy might be in a recession because the numbers were around zero. But that's a statistical artifact due to the way imports are being treated in the account. So not to worry our listeners too much, but just remember the important thing to look at is what is the underlying demand in the economy. And in the

So far this year, it's probably running at 2% plus. So if underlying demand is there and isn't too shaky, it's hard to talk about an economy that will be much worse than 2% this year unless the tariffs really come in and sort of rip things apart. But right now, consumption looks shaky but okay. Imports are rising. The import balance is accelerating very dramatically, and the labor market is softening. So I wouldn't say there's any one number that's telling us that the economy is really –

sliding into perdition, so to speak. What about that GDP number shrank by half a percent in the first quarter? Is that a genuine slowdown or was it just a blip? No, no. The underlying demand is probably closer to 2%. This is the way they handle the accounts. I know it gets complicated, but what effectively people like me are saying, if they have enough time to explain it, is that there's a mismatch between sectors in the economy. What I mean is that

The GDP number is saying that the economy was quite weak because imports were strong and the imports are not produced in the U.S. And all we care about with GDP is production. But if we had gotten an equivalent offset in inventories, it would have zeroed out and the number wouldn't have been zero. It would have been probably one and a half to two percent. So if you just got the inventory statisticians to talk to the GDP statisticians,

You probably would clear things up, but that's not the way the world works. There's not just one statistical agency in the US like there is in Canada. So you have this kind of problem. So I think five years from now, we'll end up having a real GDP figure of around one to one and a half percent. But that's five years in the future. And who cares about the GDP number in 2025 and 2030? Maybe people do. Really quickly, results from Nike are out. Expected to post a fifth straight quarter of falling sales. What's that saying?

Well, that's a company that produces a lot of interesting products. Some of them must be – are very price sensitive. I think it's just telling you that right now the typical person that goes out and makes a fairly hefty expenditure for one of those products is probably thinking twice about it. So I would say a net –

There aren't that many consumer related companies which are providing what is referred to in Wall Street as favorable guidance, meaning, hey, yeah, we had a bad quarter, but next quarter is going to be really good. Very few retailers are saying that. All right, Kerry, thank you so much for your time. Always a pleasure.

Now, Mexico's peso is holding steady as investors wait to see if the central bank will cut interest rates later today. Most are expecting a half-point drop and it comes as the country is facing rising uncertainty, tariffs from the US, softening global demand and questions over how Mexico's new government plans to deliver growth.

But David Razulazar, who runs Afore 21 Banorte, Mexico's largest pension fund, says the long-term outlook is still strong. Pension funds were designed for the long run. So this volatility that we can see in a given year or maybe even a couple of years, it should not be a problem if you have all the

proper risk management tools in place. And right now, Mexico is actually one of the best countries to be investing in. That surprises me that you say that because obviously you've got those 25% tariffs. Also, the country is facing its largest budget deficit in decades. So how are you so optimistic? That 25% tariffs is only for the goods that are not within the USMCA agreement.

I think that's over 50% though, isn't it? From what goes out from Mexico, that's over 50% of all goods. Yeah, over 50%, which that's what's happening right now.

A lot of other goods and services are actually aligning to the USMCA requirements. So I think what's going to be happening is actually, you know, our trade with the US is actually going to end up increasing over the next few years. Now, the OECD says investment into Mexico is actually trending downwards. So what do you think about that?

Depends on what you see. If you see the first quarter of the year, you're going to find out the FDI reached an all-times high.

So I think it's going to keep pouring in. I understand the perspective of the OECD, but I think that we have very positive announcements of investment from very big corporations. We have AWS, Foxconn, that are coming into even in the tech business. And we have Plan Mexico. For anyone who doesn't know that, that's Claudia Schaumbau's six-year strategy to attract billions in investment and create 1.5 million jobs.

But can you point to anything tangible that's actually already underway under that plan? Or do you think that's largely still aspirational because people can throw out figures or numbers all the time, right? Yeah, of course. President Sheinbaum has been in power for less than a year. But all of the plans have been laid out. And I see, I can tell you, I see a lot of interest from people.

not only in Mexico, but foreign capital. Plan Mexico, it's, you know, focused on replacing Asian imports. Would you be worried about that, though? Because in the long term, you want it to be trading globally, don't you? Absolutely, yes. Plan Mexico, one of the things it relies on is the fact that we have 14 trade agreements with 54 countries. Mexico is one of the most open economies in the world. And I think the government wants it to keep being open. Of course,

There are going to be some restrictions that are going to come because of our belonging to the North American free trade law. And that's going to impose some restrictions, of course. There are going to be rules of foraging. And the thing is, this is also, in my view, actually good news for Mexico because what's going to be happening is we're going to have a lot of knowledge transfer from other countries, even from Asia, so we can start manufacturing ourselves. But at the

At no point, trade is going to be closing. I don't think that's the idea in Plan Mexico at any point. That was David Razú Aznar, who is running Mexico's largest pension fund. Now, it's the end of an era. Dame Ana Wintour is stepping back as editor-in-chief of American Vogue after 37 years.

but she isn't going very far. She'll stay on as Global Editorial Director and Chief Content Officer at Condé Nast. Wintour took over US Vogue in 1988 and turned it into a cultural and commercial powerhouse. Amy O'Dell, author of Anna, the biography, summed it up in her...

Anna Wintour is the most influential and powerful fashion editor of all time. And her influence doesn't just apply to fashion. It applies to entertainment, to technology, to politics, to sports. So there's just it's hard to think of an industry that she doesn't touch.

Under her leadership, Vogue very much became a global brand, didn't it? So when she started out, what has been the changes since she's been in her role? Vogue is a totally different publication in many ways from when she started in the summer of 1988. When she started, there were not websites that had to be maintained and flooded with content. When she started, there was no Instagram, there was no social media, there was no YouTube. Now she has to oversee all of that. I

The demands are much more relentless in a way than they were when she started. So it's just totally different. And then also, you know, Conde Nast never really bounced back from the recession of 2008 as a business. And Anna, for much of her career there now, has been managing a decline. So I have to imagine there might be some relief for her in stepping back from that.

from the struggles of running a media company day to day, just a bit, you know, because she's still going to be working at Conde Nast, obviously. So you think that's why she's leaving? No, I don't know. I don't know why she's leaving. No, I don't know. She's 75 years old. She can't, you know, nobody can do any job forever. The way that she's gone about this, where she's leaving American Vogue, but staying on at Conde Nast, that suggests that she wants to handpick her successor. She

She wants to have some influence over the Vogue that she might leave behind when she does eventually leave Connaught and Ass. But I don't have any information about exactly why she made this decision. But she has seemed to be a bit in legacy building mode to me in recent months. We won't hold that against you. But the thing is, Vogue's advertising revenue, its brand partnerships, even its income, like the Met Gala, it's very much tied to Wintour's personal brand, isn't it?

Absolutely. She's the face of the Met Gala. She's the face of Vogue. She's the face of the fashion industry. And it's an extraordinary moment. It's a really extraordinary moment, even though she's staying on at Vogue. That was Amy O'Dell, author of Anna, the Biography. And of course, we cannot forget how her management style inspired the book,

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