Carney announces ‘constructive discussions’ with the US
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Hello and welcome to World Business Report here on the BBC World Service. I'm Rahul Tandon. It's been another busy day for the global economy. Let us guide you through some of the stories that have been taking place

And we're going to start here. They are two countries with strong economic ties. But those relations have been strained since Donald Trump returned to power. We are talking once again, aren't we, about Canada and the US. The Canadian premier, Mark Carney, is in Washington trying to strike a deal with Donald Trump. But he had this strong message. It would really be a wonderful marriage because it's two places that get along very well. They like each other a lot. As you know from real estate, there are some places that are never for sale.

But never say never. Never say never.

There we go. A bit of Donald Trump and a bit of Mark Carney there as well. Let us bring in Sarah Ketra, Portfolio Manager and CEO at Causeway Capital Management. This was a really important meeting, wasn't it, Sarah? Thanks for joining us on World Business Report. Because we've had lots of economic tensions, tariffs put in place, withdrawn, those tariffs on the automobile industry as well. So lots of people will be hoping that they'll be able to start the process of striking a deal.

Yes, and speaking from a U.S. perspective, we agree. The two countries are interlinked from a trade perspective and also economically.

economically, socially, like there's the ties between the U.S. and Canada are very strong. And it appears that President Trump is particularly concerned about autos and steel. And then about 14 percent of U.S. vehicle imports last year did come from Canada. But if you add Canada and Mexico together, they make about 53 percent of U.S. auto parts imports. So Canada is

has been doing quite a bit to supply the U.S. automotive industry, and the Trump administration wants to take that back. Well, Sarah's going to be with us throughout the program, guiding us through some of those stories, but they're clear insights into how close those relations are when it comes to trade.

Within the car industry, we wanted to get a sense of what it's like for different towns and cities. So I've been speaking with the mayor in the US and Canada, who have both been directly impacted by the trade tariffs and looked at the impact that's having on their communities. In the US, we have the mayor of San Antonio in Texas, that's Mayor Ron Nirenberg, and the mayor of Quebec in Canada, Bruno Marchand. I started by asking Mayor Ron how important Canadian trade is for San Antonio.

A lot of people are surprised when we talk about just how much trade and infrastructure is between Canada and San Antonio. And in fact, one, I think it was a chamber of commerce in Canada, talked about the most vulnerable metro areas in the United States with regard to tariffs that might be placed.

On our allies, particularly Canada, we were the most impacted San Antonio, Texas was. San Antonio is geographically located about 200 miles from the Mexican border, but we were also the city in which the original NAFTA treaty was signed.

And because of our geography, we have become a big hub for manufacturing and the trade corridor in North America. So trade is a huge part of our economy. And so is the relationships between Mexico and Canada. Bruno, in terms of Quebec, trade across the border, I'm sure that's a staple of your economy as well. Yeah. Even though we're thousands of kilometers apart, we're so alike.

So we realized that even though we're apart, we need to learn from each other, but we need to do business together. We have already companies that are doing businesses, but now we're trying to develop that economy because there's so much thing that we do in common, we share in common. Okay, here's a question to both of you. And we're going to go alphabetically, so we don't have to choose between Canada and the US. So Bruno first, but Ron, if you want to pick up.

How has the relationship been affected? Because it must have been, because these are pretty tense times. And at the heart of it are tariffs, economies. So what sort of difference has it made? First of all, it made a lot on Canadians. When we first went in March in San Antonio, people from businesses, people from social services, people from our city, we were a delegation of probably 20 people.

And those people were so happy to hear what Ron had to say at that time. And he's still saying it out loud. It was kind of a relief because for them, the

The punch that had been delivered by the President of the United States, the relation, was kind of something that was totally not expected from an ally. It was quite a shock as we go into the Trump second term, hearing how he's really upended our strategic alliances all across the world.

And so what we have been doing beyond just establishing these symbolic friendships and trying to create exchanges is that we're trying to, as civic leaders, have a unified voice of how we approach our federal leaders and talk about the fact that so many people

Thousands of manufacturing jobs in San Antonio alone are dependent on these kinds of business to business relationships that exist at the local level. And are you seeing those being affected already? I mean, is there is there are people having to lay off staff? Absolutely.

Yes, we're hearing concern from businesses about even raising their voices about talking about the impacts because of the very clear willingness of the Trump administration to retaliate against businesses that disagree. There's a lot of uncertainty within the business community that they can't forecast payroll. They can't forecast benefits.

purchases of supplies and materials that are dependent upon bilateral trade between the United States and Mexico and really trilateral trade along the entire North American corridor. Now, Mark Carney is talking to Donald Trump. Should he have gone?

Because, you know, in the election, a lot of Canadians wanted him to take a pretty hard stance. He's gone very quickly to talk to Donald Trump and he seems to be softening his line a little bit. No, that was not the perception today. People in Canada were pretty proud about the fact that he said that we're not for sale. We won't become the 51st state of the United States. It is not something that we're looking for. It is not something

that will be good for us. So people in Canada are pretty proud of what they are. And since the 20th of January, when he was sworn in, we never felt in Canada that feeling of defending the Canada spirit, the Canada...

borderline, we feel it more than ever. In Quebec, there's a sense of solidarity to make business together, to make between provinces, to, I would say, lower the barrier in order to make more economic progress.

and we're looking to develop new markets in Europe, in Asia, in Africa. Whatever happens in the months to come, our premium partner will still be United States because they're close, because they're our neighbors, because not everyone thinks like the president. You know, we have seen Canadians boycotting American products. So, you know, some of the people in Quebec may eventually boycott some of Ron's products that are coming in from San Antonio.

Yeah, but we need, I think Ron is right, we need leaders to, even though there is action, there is economic action to provide us something like a barrier in those difficult times. We still need leaders to say that it is not for life. It is for maximum for three, four years. I agree with you, but Ron, on that point, Texans will be annoyed if Canadians are boycotting their products, won't they? I mean, of course, the markets are going to be impacted dramatically.

businesses will suffer. And there's an ever-growing number of U.S. businesses and civic leaders who are not part, who don't want to have any part of the terror policy. My biggest concern is the long-term damage to strategic partnerships, allies in the North American corridor, the same allies that have provided for the most robust security over a course of multiple

multiple generations this is all part of the consequences and the damage that trump is doing and i hope people wake up to that reality or or we will have a lot of work to do as we move forward even past trump final question to both of you do you expect that we will see a deal struck in the next few weeks between canada and the u.s bruno if you want to go first

I think the market is plunging. It is bad for every one of us. It is bad for our companies. It is bad for our people. So this is probably the strongest matrix that will help us to make a deal. I'm not sure it will be in the weeks to come, but in the months to come, I think it will happen. And I'll say that Trump has shown a callous disregard for

for the pain and suffering of average working families and businesses. But at some point, there are consequences at the ballot box. And as that grows closer for Republicans in the 2026 election, that reality will hit them square in the face, that if they continue to support Trump's economic policies, they will soon no longer have a job.

Fascinating to hear from a mayor in the US and a mayor in Canada, their towns, cities doing a lot of business with each other. We talked there about striking a trade deal. Well, a trade deal was struck on Tuesday. That was between the UK and India. Keir Starmer's government has signed on the dotted line and he had this to say. Well, this is a historic day for the United Kingdom and for India.

Because this is the biggest trade deal that we, the UK, have done since we left the EU.

and it's the most ambitious trade deal that India has ever done. And this will be measured in billions of pounds into our economy and jobs across the whole of the United Kingdom. The UK Prime Minister, Keir Starmer, Sarah Ketra, still with us on the programme. And that is what the US markets want to see, not a deal between the UK and India, but they want to see the US striking some deals with some of their trading partners. The

Rightly note that the UK and India can do a bit of trade, but it pales in comparison with the total goods trade that amounted last year to $148 billion between the UK and the US. And the UK exports...

machinery and transport equipment, pharmaceuticals, fuels. And the US is attempting to export more agricultural goods and there are some non-tariff barriers to trade. But all this politically is going to be quite difficult for the UK. And unfortunately, given it's not in the European Union any longer, it's not part of that massive trading bloc that

The UK is at a distinct disadvantage, so it may need to give more than it gets. Yep. Donald Trump said today, I think the United Kingdom, like every other country, they want to go shopping in the United States of America. Let's see if that means that deal happens sooner rather than later. So let us go to Europe now again.

Germany officially has a new chancellor at the second time of asking after an unexpected last-minute hiccup when he fell short on in the initial vote this morning. Frederick Merz of the centre-right CDU was finally confirmed in the post by a majority of MPs in the Bundestag this afternoon. It fell to the parliament's president, Julia Klockner, to make the formal offer. I ask you, Mr Merz, do you accept the outcome of the vote?

Mrs President, I thank you for your trust and I accept the outcome of the vote. Mr Chancellor, I congratulate you on behalf of the whole House on your election. I personally wish you much strength, much success and the fulfilment of your duties.

Earlier today, I talked to Peter Altmaier, a former Minister for Economic Affairs and Energy. It now all depends on the performance of new government. Will it be a performance by team, where the two coalition partners work closely together and achieve results? The thing is such that the required majority was not achieved in the first round, as so far has been unprecedented in post-war German history.

Putting that economic hat on of yours, what businesses in Germany need at the moment is stability. So the fact that the government gets off to this sort of start, that is not a message that businesses...

No, it is not the message we all had hoped for, but the new government still has a chance to encourage business and to improve the conditions for competitivity, even outside Europe and worldwide.

But this is not an easy job. We would need some tax relief for companies and private entrepreneurs. We would need some reduction of bureaucracy. We will need a strong voice in European Union institutions when it comes to free trade deals and trade policy. And all this depends.

on the consensus that can be achieved between Friedrich Merz, the new chancellor, and his vice-chancellor. The fact that the coalition agreement negotiations have been concluded within record time is encouraging, and the fact that Friedrich Merz is genuinely pro-European, pro-NATO, and pro-market economy, in my eyes, is encouraging too.

As you said, though, the challenge is huge, isn't it? And Donald Trump's tariffs have made that challenge even more difficult. Some economists think it's inevitable that the German economy will move towards recession now. We have a difficult economic situation. Nevertheless, in the first three months, the situation was bittersweet.

better than expected. Much will depend. Much will depend on the development and evolution of world global economy. And this depends largely of Donald Trump's unilateral actions in the near future. We should not forget the high tariffs on many regions, including Europe, have not been abolished. They have been suspended for 90 days.

And nobody knows what will happen after the 90 days. And this is, of course, not a good start for the global economy. And it is for an exporting country like Germany, a heavy burden as well. So I hope the European Union and the United States

will be able, together with partners worldwide, to agree a better deal. And it has to be a deal where free trade is in the center and is not reduced.

We already have the tariffs, don't we, on the car industry, which of course is a big part of Germany's economy. We've seen the UK strike a deal with India today. Cars are a big part of that deal. Are you hopeful? Are you confident that the EU can strike a similar deal soon? And how important could that be for Germany? Well, I'm advocating wherever I

can inside EU institutions and that we should try to build a coalition of the willing when it comes to free trade and cars. And there are partners worldwide and India could be one partner. We should not forget that China over the last couple of years has been part of this

free trade coalition. The European Union, Ursula von der Leyen, I think will take the initiative and I hope that Germany will back her the utmost. Peter Altmaier there. You're with World Business Report from the BBC World Service. Let's stay on the sort of geopolitical, geoeconomic theme of the programme. Donald Trump has been talking a lot about striking a deal with Japan. He keeps saying that it's getting a little bit closer to

But reports from Japan say that a sticking point is that the Japanese seem reluctant to buy more American products like rice. Glenn Fukushima is a former U.S. trade official. He was also head of the American Chamber of Commerce in Japan. Glenn, thanks so much for joining us on the program. We're all trying to work out when this trade deal is going to happen. Enlighten us.

Well, the second round of trade negotiations took place last week between Minister Akazawa and Secretary of Treasury Besson in Washington, D.C. Right now, the two sides are loggerheads, and it appears that because the Japanese side

has an upcoming election around July 20th. And I think the Japanese side is very reluctant to make any major concessions before that. So I think the outcome is it's not likely that there's going to be a major breakthrough before then.

There may be some kind of interim agreement reached, but the two sides really are still far apart. On that point that we've sort of been hearing quite a little bit about in terms of the Americans want to sell more products, don't they, to Japan to close that trade deficit? But the Japanese don't seem that keen on buying products like cars and rice. How easy is it going to be to convince them to do that?

Well, it's going to be difficult because the U.S. side, President Trump in particular, has for the last 40 years focused on the bilateral trade imbalance. But it's a very structural issue. It has not actually that much to do with

Japan's lack of willingness to buy from the United States. For instance, automobiles is something that the U.S. and Mr. Trump has been focusing on for years. Now, last year, Chevrolet sold 518 cars in Japan. Mercedes sold 52,761 cars. Now, that's not because the Japanese don't want to buy cars. It's just that the Americans don't

produce the kind of cars that the Japanese want to buy. And so that issue of automobile imports into Japan is a very difficult issue that's been around for a long time. It has, isn't it? And just so to interrupt here, but it's one that Donald Trump seems quietly, quite obsessed with, doesn't he? He brings it up continually.

Well, I think since the 1980s, he has this worldview developed around that time. And I think cars is a major part of that. On agriculture, Japan is actually a huge importer of about 20 percent of Japan's agriculture imports are from the United States. And so Japan is one of the best customers in agriculture.

Now, rice is a particularly sensitive issue. It's been an issue for decades now between the U.S. and Japan. But on other products, Japan is a huge buyer of agricultural products. But the obsession about the trade imbalance, it used to be that Japan was number one. Now it's number seven, $63 billion a year trade imbalance. But that is something that the president is very, very focused on, and he believes that

Japan only exports, it doesn't import, that it manipulates its currency and so forth. These are views that I think he formed back in the 1980s that persist despite changing realities. Glenn, it's been a pleasure talking to you. We look forward to talking to you again as this story continues to develop. I want to go back to Sarah Ketra briefly, if you don't mind, Sarah. A big day tomorrow for the U.S. economy with that decision on interest rates by the U.S. Federal Reserve. What do the markets think is going to happen? Mm-hmm.

likely to see a rate cut only because of the very significant impact of tariffs on prices. And many of your guests have talked about cost increases. We see this across portfolio companies, across sectors and industries that prices are going up. Tariffs are a tax and they add to cost. So it may be quite difficult for the Fed to

to be accommodative in that, facing that sort of inflationary headwind. It certainly seems to be the case, doesn't it? Now, if you watch any sports on the television, you're sure to hear all about what website to go to if you want to place a bet on the outcome of the result. Well, as 133 cardinals convene in Vatican City on Wednesday to begin the process of choosing a new pope,

It turns out you might be able to go to a similar website to place a bet on who will be the next leader of the Catholic Church. Let's go to Texas again. This time to Austin, where reporter Andy Ulla has been asking people about whether they're putting down some cash on the outcome of the conclave to get a sense of what that says about the growth of these prediction markets. Thank you so much. Austin, Texas loves to lean into the city's motto whenever possible. Keep Austin Weird.

I showed up at a brewery in northeast Austin last night hosting an interesting event, the World Championship of High Fives. My name is Josh Verduzco. We're at the Austin Beer Works Sprinkle Valley locations. So I was here for the High Five World Championships, the first annual, and unfortunately it's been rained out today, so we're not going to see those high fives that we wanted to see. Bit of a disappointment for sure.

The venue was prepared to give out $500 to two participants with the best high five, as judged by a panel of three. I heard some folks were even taking side bets on the outcome. And I figured if Josh was here for something like this, surely he'd be interested in betting on who the next pope would be.

Betting on the Pope to me is the last thing I would probably bet on. He says this is just outside of his wheelhouse, but he's not opposed to the idea of putting a little money on real-life events. I think there is something to be said for, you know, having some skin in the game, having some money on something. You pay more attention to it, and I think it could make people more interested in current events or a little bit more tapped into the world at large.

And that's actually part of the reason Jack Sutch says the company that he works for, Kalshi, launched.

People debate all these different types of things, scream on Twitter about this political thing or whatever. But the way that you can prove you truly believe something and that you were truly right about it is put your money where your mouth is. Though it feels similar to betting on sports, a prediction market isn't like wagering on a sports book or a poker game at a casino. A better isn't trying to beat the house. Users buy and sell contracts with a specific payout when an event comes to pass. Now, an example might help us here.

Will there be a recession this year in the United States? That's an active question on Kalshi. If you think yes, you'll pay $0.60 on the dollar for that contract on Kalshi, which represents a 60% probability. If a recession happens this year, you win a dollar for every contract that you hold.

So you're netting $0.40. But it's not really Kaoshi who's paying you that $0.40, even though it'll end up in your account balance. It's another user who held the other side of that contract, the no side at a cost of $0.40, that $0.40 that's now yours.

Kalshi makes money by charging a fee on each trade. Such says one typical prediction market participant is the topic-specific user, someone who just knows or at least thinks they know more than everyone else about a given thing. For our purposes, a papal historian or somebody who lives in Vatican City betting on the conclave.

Now, that's something that John Holden, an associate professor of business at Indiana University, says has been going on for a lot longer than prediction markets have been around. Betting on the Pope has been going on for 500 plus years. This has been something that's happened for a long time. It's just now with all the technology that we have that I think a lot of people are realizing that this is happening.

But Holden says who will be the next pope is not really a large betting market. He notes that the market on CalShe for the next pope is just over $6 million. It's $17.5 million on PolyMarket, an American cryptocurrency-based prediction market that's actually been banned in the U.S. since 2022. For a bit of context, Holden says that's significantly less than what we might see wagered on a regular season American football game.

We could see a hundred million, a few hundred million dollars being wagered on an NFL game in the regulated markets alone. So, you know, what we're seeing with respect to the Pope market is really sort of very small. That said, the 20 plus million dollars on prediction markets is by some estimates, some 50 times more than what we saw in 2013 when Jorge Bergoglio of Argentina became Pope Francis. The current favorite to take the papacy, you ask?

Pietro Peralin. But it's not like he's a runaway. The odds the Italian cardinal becomes the next pope? Still just one in four. And you're with that report there on Texas on those prediction markets which are becoming ever more popular. We will be back with Business Matters at 5.

Midnight GMT. We'll be continuing the conversation about those relations between the US and Canada. We'll be taking a closer look at what happened in Germany and the implications that that will have for the global economy as well. And we will take a bit of a closer look at that trade deal between the UK and India. Why does it take so long to get those trade deals in place? But that is it for World Business Report.