Tariffs have fallen....but is the trade war over?
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How many great bosses have you had? Try counting them on your fingers. Your hand may well remain balled into a fist. It doesn't have to be this way. From The Economist, I'm Andrew Palmer, and I'm back with a second season of Boss Class. We've gathered management tips from the world's best performing companies, from Levi's to Lego to Google. To hear all of Boss Class, you'll need to be a subscriber. Search Economist Podcasts Plus for our best offer.

Hello and welcome to World Business Report on the BBC World Service. I'm Will Bain. Great as always to have your company on the programme. Today then, a 90-day trade truce. But the key question now, is this the beginning of the end for the trade tariff uncertainty or just that, just a pause? Over the next half hour here on World Business Report, we're going to try and explore just that, including a sigh of relief for some exporters, for now at least. Will?

Looking further ahead, though, this is only a 90-day reprieve, and I have no idea how things will shake out in 90 days. Yeah, we'll have plenty more reaction from China and from the United States as well. And we'll look at how it's impacting company shares and stock markets all around the world, because that too is a big part of the story, as we were hearing in the news headlines there. Bill Blaine of Shard Capital in London standing by to walk us through all of that and tell us

what we need to know. But let's get straight to the US because in the past few minutes, President Trump has been speaking. The talks in Geneva were very friendly. The relationship is very good. We're not looking to hurt China. China was being hurt very badly. They were closing up factories. They were having a lot of unrest and they were very happy to be able to do something with us. And the relationship is very, very good. I'll speak to President Xi maybe at the end of the week. We have some other things we're doing.

But one of the biggest things that we're doing, and I don't know if people realize this, but we made a great deal with China, a great trade deal.

More on who's feeling the pain shortly because we're going to hear from a Chinese exporter to the United States who's got views on exactly that. But first of all, our North America business correspondent, Michelle Flurry, is with us on yet another busy day. Michelle, let's come to the president's thoughts in a moment because I know you've been watching a little bit of that as you get set to speak to us.

But take us right back to the start of the day then. The big reveal, the grand reveal. And oh my goodness, as usual, it had to be a complicated reveal, didn't it? About what's going on with these tariffs. Try and walk us through it. Yeah, I mean, initially we got news that there was, you know, a huge agreement coming. Then we were all waiting to find out exactly what that meant because we've sort of been down this path before. And...

Everyone was very pleasantly surprised to hear that there was this 90-day pause on tariffs that the countries had slapped on each other, the U.S. and China effectively acting as a trade embargo at these levels. So to talk you through it, 145% is what the U.S. had imposed on goods coming into the U.S. from China.

That will now go down to 30%. These are the sort of 20% you had previously from fentanyl. There are also steel and aluminium tariffs and car tariffs that remain in place that are separate to this deal. Going the other way around, U.S. goods that had been tariffed at 125% going into China will now be down to around 10%.

But as you just mentioned, Donald Trump has been speaking and he was talking about the fact that he will speak later this week to the Chinese leader, said they had great relations. The other thing that came out, he also said that China had agreed to open itself up to American business.

That is something a bit different to what we've heard from the official statements from those involved in the trade talks. Somewhat sort of a different line to what officials have been saying about what came out of those meetings in Europe. Yeah. Talk us through again what officials are saying, because that sort of came before all the announcement. But that in and of itself was interesting to Scott Besant, the Treasury secretary, who had been leading those talks that we were previewing here on the programme on Friday.

Yeah. So Treasury Secretary Scott Besson and U.S. Trade Representative Jameson Greer were the sort of two figures on the U.S. side, the key kind of figures. And they basically came out and said that a deal had been struck with their Chinese counterparts to pause most tariffs and other trade barriers for 90 days. This is to allow more time for talks to continue in the coming weeks.

So there is no sort of talk about any special access for any industries or anything other than as they apply to this kind of removal of tariffs. And that's something that the American business community certainly had been pushing hard for, saying that at these levels, this was just a very serious event for them and one that wasn't sustainable. Yeah. And the president talking there in the clip that we just played as though,

This won't just be a pause. What's the wider political mood music do you sense, Michelle? Because that's kind of the important bit for next, isn't it, for what happens next? Look, I mean, I think if you're hoping that all uncertainty has been removed, well, then you're possibly in for disappointment there. We know it's a 90-day pause. We know that talks are going to continue depending on how they go.

who knows what could happen. And I think that's the thing to remember. This is a de-escalation, but it's not a kind of complete walking away from the position. And if you listen to Scott Besson, the Treasury Secretary, he has always kind of been pushing for a much more fundamental reset of trade relations. But I don't think they anticipated that it would be quite as disorderly as it had been. And so this is an attempt to

not to abandon that goal, but to sort of try and achieve it in a more measured fashion. And I think that is the danger. If you just look at the market reaction, people may get ahead of themselves in terms of the euphoria we're seeing right now from investors. Yeah, really interesting thought. We'll pick up that reset one later on. We've got Frank Lavin standing by as well. He's going to be on the programme. Frank, a former Under-Secretary

for international trade in the US Commerce Department to pick up on that. Michelle, thanks so much. Michelle Fleury there, our North America business correspondent, live from New York. Well, for a bit more on that market reaction, though, more immediately, as I say, Bill Blaine here in London, standing by from Shard Capital. Bill, great to have you back on the program. And great to be here. Certainly, people are getting carried away on the market, first of all, today, aren't they? Especially in the United States, stock market's up very sharply.

Yeah, let's just run through the key takeaways from today. First of all, you're absolutely right. Markets are all about the short term and they are massively overreacting because they can see upside. We have a market full of headlines that all the losses this year have now been resolved. And so this is all working. The reality, though, however, is that Trump blinked.

And the reason that Trump blinked is because somebody managed to get across to him just how damaging the effect was going to be on the U.S. economy of the effective end of trade with China. I mean, we had stories emerging the last couple of days that U.S. ports on the West Coast, Seattle is empty. There are no container ships in Seattle. 35% reduction in the number of ships expected to come into Los Angeles this month.

Now, that was going to create a cataclysmic recession, inflation, stagflation in the U.S. economy. They've managed to roll that back. But the fact that the stock market is up does not mean that we're not still going to see a pretty significant impact on the U.S. economy in the next couple of months, because this will take months to roll back.

Just in terms of individual stocks and shares, Bill, as well, just to expand on your point, I'm just looking at ones like NVIDIA, you know, the chipmaker. They're good kind of barometers of that sort of sigh of relief, but a cautious sigh of relief, perhaps. Yeah, but I think there's even a third thing for us to consider. And what does it really tell us about what the future is going to look like?

The fact is, this was going to be a trade war that America was going to lose whatever happened, because the idea that you'd be able to suddenly repatriate all this production into America was a nonsense. It just wasn't going to happen. What we were going to see was China become

become more and more efficient and take more and more market share in advanced goods in areas like AI, as they showed us with DeepSeek, but also in things like electric vehicles, where Chinese EVs are now massively outperforming anything that Tesla even imagined.

Now, if you open up the American market to Chinese EVs, I guarantee you that the longer ranged, faster charging Chinese EVs will outsell Tesla in California in just a few months. Now, I reckon this is the beginning of a fundamental switch that has been accelerated by Trump. There

that we're going to start seeing Chinese advanced companies outperforming the old myth of American exceptionalism. So there's a whole bunch of really bad things that came about as a result of today's surprisingly positive trade news. Well, one of those who was in the kind of eye of exactly the storm that Bill was talking about was Take. If you're with us on the programme today,

Last week, you'll know he's an exporter in Shenzhen, one of the great exporting hubs in China. Exports personal care appliances from China to the US that ultimately end up on the shelves of many of America's biggest retailers. He told us about his fears and frustrations last week at those 145% tariffs. And also, as Bill was saying, Tatke was also telling us about the impact he thought it would have on prices in America. So we thought we'd get him back on the program today to talk through what he made of this pause.

30% is 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 the tariffs on to the customers.

That being said, it's still better than whatever it was. And, you know, 145% would have been an extinction level event for a lot of my clients, unless we are able to help them move production out of China. So for now, I believe 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

at least people are able to make plans around it. If people were with us on the program last week, they'd 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?

Sure. Using the same example, you know, 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. Now, I know most of them work on somewhere between 20% to 30% gross margin. So after accounting for all of the cost of import, shipping, advertising, and warehousing, hopefully they'll have enough margins to make a profit. Well, this $3 is probably going to wipe out most of their operating margins. 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 and 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 a 30% tariff on our products would still represent you know five to six dollars in actual price increases in the retail space so this isn't solved

I don't think it's solved. I mean, right now we're still at 30%, which is 20% on the fentanyl related tariffs, and then 10%, which is part of what I believe the administration wants to apply to everybody.

So 30% is still not nothing. And I think a lot of small to medium enterprises that we service are still going to be under tremendous strain. What about the other end of the trade as well? What about 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, which is good news because a lot of our customers are also anxious for goods. They will still have to pay the tariffs, but at least we're able to have positive cash flow. And I think that is the most important thing. Looking further ahead, though, this is only a 90-day reprieve, and I have no idea how things will shake out in 90 days.

And it could very well be a path to a more normalized trade relationship under the new realities, or it could be just a 90-day ceasefire. And afterwards, or even before these 90 days is up, we're right back to the same level of insanity that we've experienced in the past month. Right now, there's very low confidence that things will actually be stable in the long run. And I think that is, from a planning and investment perspective, that is the big concern.

Chinese exporter Tat Kae speaking to us from Shenzhen. You're with World Business Report on the BBC World Service.

From The Economist, I'm Andrew Palmer, and I'm back with a second season of Boss Class. We've gathered management tips from the world's best performing companies, from Levi's to Lego to Google. To hear all of Boss Class, you'll need to be a subscriber. Search Economist Podcasts Plus for our best offer.

Well, let us know what you make, especially if you work in some of these sectors. I know many of you do who listen to the programme on both sides of the world. You can contact us on WhatsApp. It's plus 44 for the UK, 330-678-3033 if you want to tell us what you're seeing, the impact as you see it.

What next then is kind of the key question, isn't it? We're going to explore that not just for the US and China, but of course, for all the rest of us listening all around the world about what it means for the global economy. And Frank Lavin, as I mentioned, is with us. Frank's former Undersecretary for International Trade at the US Department of Commerce. And Ashley Dudaronek, founder of the China-focused research company. Chao Zhan is also with us. Welcome both to the program. Frank, first of all, just give us a top line thought, I suppose, about where we are today.

Well, the good news is that the markets are reacting positively because both sides have agreed to move away from friction directed activity to sitting down at a table. So the good news might just be symbolic, but at least it is a step in the right direction. But we don't know substantively. We don't know what the ultimate outcome is going to be. It's just the very first stages of

So we don't know if 90 days from now there'll be anything to celebrate it not. And we're still at a worse point in terms of tariffs being applied to Chinese goods from the U.S. or U.S. tariffs, Chinese tariffs being applied to U.S. goods. We're still at a worse point than we were last year. So we're going to see depressive economic effect. And I think we're going to see a pause in capital expenditure and business decision making. Yeah. Can you try and put your former kind of hat on? What do you think if

If you were sat in that American trade team now on the plane, perhaps back from Geneva or back at home, where do you think you've got to so far? And what are you hoping are the next steps from that perspective?

Well, I think the U.S. is going to look for several elements. One, historically, over the last 10 or 20 years, Chinese tariffs have been higher against U.S. goods than the other way around, meaning Chinese tariffs, average weighted tariffs are in the order of 4 or 5 percent against U.S. goods. U.S. tariffs are around 2. So one thing Trump is looking for is some equality in that space. So that's

That's a key goal. Second goal from Trump is purchase agreements. He tried this in Trump won. He got some kind of commitment from China for purchase agreements. But there's a widespread view in the United States that China really fell short of that commitment, didn't really honor it fully as expected from the U.S. And third, as I think your correspondent mentioned a minute ago, is fentanyl. He's getting some kind of commitment on the precursor drugs and better policing of the fentanyl issue. What is it that...

The US is hoping China buys more of it. Is agricultural products the obvious area there? Because we hear analysts like yourself, Frank, say that a lot, but there's not a lot of, as we've heard, you know, this kind of epicenter of this story, right, is that American manufacturing has shifted massively in the last 30 years. What is it that the US is hoping to sell more of to China?

Well, first of all, on agriculture, I would argue that it's the U.S. trade friction that has pushed China away from the U.S. market towards countries like Brazil. Yeah, exactly. Right. Exactly. So, in fact, we've kind of taken a step backward on agriculture, if you will. I think there's, again, two two components of this. One is just getting the tariff rates down a bit.

And two, there were purchase agreements last time. It was machinery, it was automobiles, it was airplanes. So it tended to be industrial goods. U.S. does well in the consumer sector and the hospitality sector, but in the heavy industrial goods is where China has more nationalistic industrial policy. And it is tougher for the American firms to make it. But the issue there is the one that Bill Blaine was talking about, isn't it? That China has excelled. It's starting to lead the world in a lot of those areas.

Yes, it is. It is a challenging market. But by the way, I would turn that argument around. I'd say China is very strong in those areas, but that's all the more reason that China can now afford to lower its tariffs. It's, it's traditional argument for higher tariffs was always that infant industry argument. You've got to give us breathing space till we mature a bit. All right, fellas, you're there. Let's try to play fair. Now it's not a bad counter argument. Well, Ashley, that seems a good place to bring you in as well, actually to Daronek. Uh,

of Chou Zhan. Same question, I guess, I asked to Frank at the start. Ashley, where do you think the Chinese negotiating team, perhaps on their plane back from Geneva now, think they've got to at this point? I think they are quite cool. The reaction is a lot cooler because we see that markets are obviously very excited and, you know, commodity prices are starting to trend up and all that. But

And we hear all these messages from President Trump. But when we talk to Chinese manufacturers, Chinese importers, you know, Chinese general public letter on social media or even the government announcements, they are a lot more cool and in reality unpopular.

I do not think that people really believe that this is the end of the problem. They believe that this is some breathing space. And a lot of Chinese people actually feel that they understand President Trump quite a bit. They know that something that's said today can change tomorrow. So they factor that in and they just keep on doing what needs to be done. And ultimately, what needs to be done is change.

You know, there are three things, supply chain restructuring, there's speeding up this diversification away from the US, domestic market expansion, etc. So all these things keep on being top of people's agenda. That supply chain restructuring we heard from Tatke there, didn't we as well? And when he was with us on the program last week was illustrating this more clearly.

trying to do that, trying to refocus, but with the tariffs potentially coming in in lots of other different areas in East Asia, for example, as well, he's not sure about where to put that investment because it might be the wrong place at the end of it. There's still all those sort of very awkward questions for people like that, aren't there? Absolutely. But we also need to understand that for the Chinese, let's say manufacturers, this tariff war has not started a month ago.

The tariff war itself maybe did, but the trade war has been there for a few years. So many of them have actually started moving out their manufacturing to Cambodia and Vietnam and India. And right now, as everybody is affected, they still want to restructure and see what they can do on a more global scale, not only for the US, but also for the future. And when it comes to diversification away from the US, this is just...

kind of happening faster. And in fact, both countries are going to continuously reduce dependency on each other when it comes to high tech or any other areas of business. While that journey is happening, though, Ashley, I mean, we focused a lot on the potential impact in the US, but there's no question, is there? I mean, everybody on both sides has said this all along. There are no winners in a situation like this. There is still going to be even at this 30%, as we were hearing from Takei,

pain at home, job losses, as that restructuring happens. Absolutely. And in China, I think what's very interesting is that

As China went to defend what they call national dignity with the government messaging saying that, you know what, we will not be bullied into this. We will protect the free trade. We will be that voice. Actually, a lot of Chinese, including the ordinary people and businesses, they felt a bit of that pride. So right now they are kind of all in this together. That's one. Number two, China.

Of course, there's pains. Some of our, let's say, friends across Guangdong, Guangdong is one of the biggest manufacturing hubs in the world, had to let their teams, the whole manufacturing floor, go home for two weeks or three weeks.

But at the same time, right now, many of them are back. They have focused on the domestic market for three, four weeks. They have got some success there. They have also tried to reach D2C, direct-to-consumer kind of programs and run them. And even in the U.S., it was perfect.

at times successful because American consumers are also interested to explore Chinese platforms, you know, from Douyin to Red Note to right now they go to platforms that allow them to purchase directly from Chinese manufacturers. So they have done a lot of things. And at this stage, there's no very big anxiety because the Chinese, I would say, nation is

public and businesses feel that this is a long-term shift. This is going to continue, whether it's 90 days, whether it's 30%, or it's 145%. Of course, 30% is a lot better. But ultimately, directionally, nothing changes. They will have to re-examine

you know, fight for their place at the not just table, but also in the room. And they are prepared to do so. Really interesting. Frank, round us out here with the most unenviable question of the lot, because as all of you have said, guessing and second guessing President Trump, not an easy thing to do. But what's your sense? Is this too fragile to hold beyond the 90? Or do we do we get to the end of the 90 days in this position? And sort of it's all about what happens next from there?

I'm a little cynical here because I think Trump sort of misplaced his hand over the weekend by declaring this was a major victory and a major reset. Meaning by doing that, by already declaring victory when he has nothing really on the table, he's kind of letting China off the hook. China can now underperform. China can now come in with minimalist commitments. And Trump has already said it was a great day for America. So.

So I think if we get something out of it, it will be quite modest, quite incremental. And if the Chinese are smart, I think they're very smart. They play this out over a year or two. There's no sense putting all of their offer up front in 90 days. In fact, what they ought to do, if you're trying to string Trump along, is put out a minimalist offer that keeps him in the game, but is sort of a grudging, you know, nickel and dime kind of response. So I think we get very little out of it in terms of improvement of trade. But Trump is not known for understatement.

Yeah, sounds like from what you're saying, Frank, we're going to have you and Ashley back on again in the not too distant future. Frank Lavin, former Undersecretary for International Trade at the U.S. Department of Commerce, and Ashley Dudaranuk from the founder of the China-focused research company, Chaozhan. Thanks so much for your time. Bill, give us a quick thought on what you heard there, and then I want to get you to broaden it out for all of us listening outside the U.S. and China and what you think it means for the rest of us listening around the rest of the world.

Sure. Well, I think the guys really put their finger on the number of the problem. If you are an international business and you're worried about your future, you are going to say in the short term that, oh, yes, I'm going to build lots of factories in the States. And, yeah, we're going to invest loads. And then you're going to do nothing.

because you're going to spend your time looking for real investments in stable and certain economies where you know there isn't going to be constant polarized politics threatening to unravel your trade position. And can you see, you talk to businesses every day about that kind of stuff. Can you see potential winners from that? Countries already where you're always talking to CEOs, aren't you? Are there places that people are seeing? You know, I'm just thinking about potential winners to all of this.

Yeah, here's a very simple view. Over half the world's population lives in Southeast Asia. That's the area of the world that is expanding in terms of wealth fastest. That's where people want to buy things. That's where people are going to want to deal. That doesn't just mean China. It means India, possibly even Pakistan, but Korea, Vietnam, all these economies.

that's where the world is getting interesting. And they're now looking for new places to export their goods. And I think ultimately Europe's going to be the beneficiary. From what you've said, Bill, you tend to agree by the sound of things.

The trade is just completely rewired now. Nothing will ever go back to being the same again, a bit like Mark Carney. Yeah, this is why I don't think the 90 days is significant at all, because at the end of 90 days, there is no way that Trump is going to go back to the kind of threats he's made.

Within 90 days, we're going to see some serious friction in the U.S. economy, possibly rising unemployment and certainly some inflation.

And that's going to make it impossible for him to go back to these trade threats. He's going to be forced to continue what he tried to do with the UK last week, which is this paper-mashy type of trade deal that he did with us. Yeah, that isn't really a deal. It's sort of beginnings of talks and all that kind of stuff as well. Going to be fascinating. Bill, been really great to get your insight. Thanks as always for talking us through it.

Sounds like it is going to be something we're going to discuss again on the program. As I say, get in touch with us with your thoughts on it. And thanks so much for listening to World Business Report.

From The Economist, I'm Andrew Palmer, and I'm back with a second season of Boss Class. We've gathered management tips from the world's best performing companies, from Levi's to Lego to Google. To hear all of Boss Class, you'll need to be a subscriber. Search Economist Podcasts Plus for our best offer.