Canada PM says the US is ‘no longer a reliable partner’

0:05Hello and welcome to Business Matters here on the BBC World Service. I'm Rahul Tannen. Plenty coming up on the programme. Conversations, of course, about tariffs, that continuing impact on the global economy. How could it affect your life? That's what we'll be trying to focus on. And J.D. Vance, the US Vice President and his wife, heading out to Greenland. It's the latest twist in the US government's attempt to woo the territory. It still sends the same message, doesn't it? That the US is serious about wanting to control Greenland. He's visiting the same week that Donald Trump has said, we need it, we just have to have it.

0:42How would you feel about major retailers using AI models in their adverts? We'll look at the consequences of that. Could it mean less work for models moving forward? And the video game retailer GameStop has seen its share price tanked today after it announced it's investing in Bitcoin. We'll be joined throughout the programme by two guests on opposite sides of the world, Shushma Ramachandran, And, of course, independent journalist and columnist with the Tribune newspaper in Delhi. Well, I have to say, Shushma, I was chatting to some of my family a little bit earlier in the day and they were saying it's beginning to get pretty hot in Delhi at the moment.

1:18Yeah, it is. It is, Rahul. It's got suddenly over the last two or three days, it's got hot. And that's well, we're looking forward to a long and sizzling summer, I guess. Well, sizzling can be very sizzling in Telecom. Those temperatures can really rise. And also with us, Dante Desparte, Chief Strategy Officer and Head of Global Policy for the financial firm Circle in Washington. We're going to talk about Donald Trump. But, you know, when he came to power, there was a real bump for cryptocurrencies, weren't there? They soared in value. Not quite sustained that, has it, Dante? Well, I think, first, it's great to be back on and great to hear Sushma's friendly voice from India.

2:02And second, I think what the market is looking for are not policy signals, but policy and law. And so I would say, you know, hold out for legal passage here in the United States. OK, Dante, you will not be surprised to hear that the name Donald Trump is going to appear in our program a few times over the next 45 minutes or so. So tariffs, of course, still dominating the global business headlines. The Canadian Prime Minister, Mark Carney, has said the United States is no longer a reliable partner and Canada will need to dramatically reduce its reliance on the US. He was speaking after President Trump announced tariffs on all imports of cars and car parts, which will, of course, hit Canada hard.

2:43Mark Carney had this message for the US. I reject any attempts to weaken Canada, to wear us down, to break us so that America can own us. That will never happen. And our response to these latest tariffs is to fight, is to protect and to build. We will fight the US tariffs with retaliatory trade actions of our own that will have maximum impact in the United States and minimum impacts here in Canada. On this programme, we try and bring you both sides of a story. We wanted to get close or hear from somebody who was close to Donald Trump. So here's Thomas Phillips and his former chair of Donald Trump's Council of Economic Advisors in the first term.

3:29He says many countries are treating the US unfairly. This whole tariff negotiation, which I think is a short run phenomenon and it's not going to go on forever, obviously. But the initial motivation was obviously that US is not the criminal when it comes to trade negotiations. They're the victim from past trade agreements. So we are treated a lot worse, not only in tariffs, but also non-tariff barriers abroad. Our companies are treated a lot worse than we are treating them here. That's the whole impetus which this is trying to correct. When you say you think this is a short-term phenomenon, how long do you think it's going to last?

4:09Are we talking months? Are we talking a couple of years of the Donald Trump administration? Well, I mean, April 2 is going to come out, right? And then we're going to see, first of all, what does the administration exactly mean by reciprocity? Second, how will then countries respond to that reciprocity? Other countries can get free trade with the US on the reciprocity if they want. So they're screaming very loudly that this is, you know, a trade war. They can eliminate that trade war. You're right on that. But, you know, in that overall frame, because there is so much uncertainty and it is, it could well be inflationary having tariffs, likely to be, isn't it?

4:45if you're honest about it. So that period, I'm interested in that. I don't believe it's inflationary at all. You don't? I mean, no. You don't think US consumers will be paying more for the cars that they're going to buy? That may happen, but that's not inflationary. The way economists define it is economy-wide increases in prices, which we saw the last few years. There's going to be increases in some prices that are tariffed, potentially. It depends how competitive those industries are with the US. They can't just push on higher prices onto U.S. customers because they're going to lose the customers if they're competitive industries with those cars in the U.S.

5:23Yeah, that's true. But it also depends on the scale of the tariffs. If we see tariffs on a lot of products, that could well be inflation, couldn't it? Yeah, yeah. No, if it's economy-wide, yes. Let us see what happens in terms of that. Shushma, always delighted to have you on the programme, particularly when we're talking about tariffs here, because India will be looking very closely at those reciprocal tariffs, won't they? Because there are still barriers to many countries coming into India, aren't there? Yes. The fact is that people have reacted very differently in India to Trump's tariffs compared to the rest of the world.

5:57One reason is that India's tariffs are high. You know, Trump actually has a legitimate grievance. and economists have been saying for several years now that the Modi government, in fact, has been actually increasing tariffs in a kind of creeping way over the last five to six years. And that has been viewed with concern by a lot of experts. So there's a feeling that actually this kind of pressure from the U.S. is going to result in something good for India, that tariffs are going to be brought down in key sectors. Because at the same time, some of the issues are of concern. For instance, agriculture.

6:37I mean, if the U.S. wants to bring agricultural products into India, that's where we have to protect our farmers. So that's an area of concern. Another area of concern, of course, is in exports to the U.S., steel and aluminum exports. And now the latest auto tariffs will probably not impact India in terms of the automobile market, but in terms of the auto components market, it will, because auto parts are shipped to the U.S. So but what's most important is that right now, just right now, there is a U.S. trade delegation here and they're having talks on a bilateral treaty, which was agreed to when Modi had gone there.

7:22And they're trying to finalize something. They're also they have also apparently told India that we're not going to treat you on par with China, Mexico and Canada. So let's see. Let's see. Let's see. Good news for good news for Indians. But, you know, the story is changing all the time. It was interesting what Shushma was saying there at the beginning of that conversation where she she talked about India's protectionism and increased protectionism, creeping protectionism. That's not just India. That's many countries doing that at the moment. Well, indeed. And frankly, I mean, I think in many ways what you're seeing from this round of the Trump presidency is a strategy that was also employed in their first first term in office, which is that when people say America first, they genuinely mean it.

8:07But there's also this world in which the use of the threat of tariffs is partly a negotiating tool to bring countries and stakeholders to the table. Our view simply and my view simply is countries that trade together stay together. But there is something to be said about bilateral linkages, the U.S.-India link that Sushma just described. And obviously Canada is such an important cultural, trading and economic neighbor to the United States. is my sincere hope is that we'll see a ratcheting down of at least the rhetoric and the tensions and try to get, you know, get negotiators back at the table.

8:40I think it's too essential an economic relationship, the one between the United States and Canada, the US and Europe, for bluster and for the news cycle to define the ultimate aims economically. Well, let us see how that relationship develops. Of course, on the program last night, we were getting that instant response to Donald Trump's tariffs on cars made outside of the US, One country that could be badly affected is Japan, giant car manufacturing countries. So its prime minister, Shigeru Ishiba, said that Tokyo would put all options on the table. So what are those options? Kazuto Suzuki is professor at the University of Tokyo, director of the Institute of Geoeconomics.

9:17He joins us from Dallas in the US. Delighted to have you on the program, professor. Before we look at the response, how badly could this hit Japan's car industry? I know they have many factories inside the US, but this could be a major threat to an important part of your country's economy.

9:41OK, we have lost the professor there. What we're going to do is we're going to try and get him back. But we like to bring you business voices, don't we, here on this programme? That's why it's called Business Matters. Let's hear from one now. Lynn Calder is the CEO of Ineos Automotive. automotive. Most of its vehicles are exported to the US from France. She's frustrated that the EU has not done more to tackle the tariff imbalance that Donald Trump talks about. For American cars coming into the EU, it's 10 % tariff. And the other way around, cars from the EU going into the US is two and a half percent.

10:13I think what President Trump signalled very early on in this year was he wanted reciprocity, which could have meant two and a half percent or 10 % or anywhere in between, But with a lack of negotiation, with a lack of discussion on this point, we've ended up at 25%. And that's why I'm so frustrated. Frustrated, indeed. Let's go back to Professor Kazuto Suzuki, professor at the University of Tokyo. Professor, thanks for joining us. How serious a threat is this, not just, I suppose, to the Japanese car industry, but the Japanese economy as a whole, these threats that Donald Trump is proposing? Yes, indeed.

10:49It's a really serious threat. One third of the total export to the United States is the automobile. So I think this will be having a very serious problem for the Japanese automakers. How do you think the Japanese Prime Minister Shigeru Ishiba is going to respond? Because it's not easy, is it? Because economic considerations are important. But Japan has security considerations that the U.S. play an important role in, don't they? Yes, but Canada also has security implications. but still, you know, very fighting hard against the United States tariffs. So I think Mr. Shiba is considering some sort of an option of the retaliatory tariffs.

11:33But the problem is that unlike Canada, we don't have much chalk points or any, you know, indispensable parts of the American industry. So I think, you know, Japan has limited options to push back the Trump tariffs on automobile. And so I think there'll be a possibility that Mr. Ishiba is going to supplement or, you know, provide subsidies for the auto industry of the losses of the tariffs. Professor, I want you to have a listen to this, if you don't mind now, because Jennifer Safian is president and CEO of AutoDrive America. It's an organization that represents international automands, including the likes of Nissan and Tokyo.

12:22I asked if Donald Trump's tariffs will ultimately lead to those foreign companies building more factories and creating more jobs in the US. That's really hard to say because, of course, for auto manufacturers, it takes years to plan their investment efforts, certainly years to plan any restructuring that they might. You know, these are not decisions that they make lightly, nor can they make them overnight. So there's a lot of time and planning that goes into decisions that they make with regard to investments. I will say that we have done some modeling. The modeling showed that it would decrease sales, U.S.

12:55sales, and decrease production in the U.S. You know, it would take a number of years before we actually started to see an uptick in production. So I'm not sure that the initiation of these tariffs are going to have the immediate impact that is desired. Do they feel they've been unfairly treated here, do you think, some of these companies? Because they have, as you said, invested heavily, huge amounts of money in the US. They've created lots of jobs in the US. And now do they feel they're being targeted? I would not say that they feel they're being targeted, but I will say certainly that my members are just the perfect example of what the president is asking for.

13:30More manufacturing in the United States and more auto manufacturing in the United States. And that's exactly what my members have done. And they have been doing it for 60 years, right? They chose to come into the United States to invest heavily,$109 billion so far and counting, right? There's more coming, right? But they have been doing this for a good number of years. They have been supporting their communities and, of course, their workforce. That was always their intention. And that's certainly what they've been doing. Professor Suzuki, do you think the Japanese government, Japanese car companies will feel let down because Japan is such a huge investor into the U.S.?

14:05Yes, indeed. I think the new factory in South Carolina has been active for Toyota. And I think there are more increasing in domestic production, you know, expanding the production lines. But those are the sort of immediate reactions. But I think the capacity of increasing the volume is limited. So I think it will be showing some decline of sales in the United States. Professor, stay with us. I want to bring in Shushma here. Here. I know at the beginning of this conversation, you said that India had a slightly different reaction to what we've seen in many parts of the world. Do you think that's also because India is very much a service based economy?

14:51You know, a lot of what it provides to the US are services in terms of IT, etc. So it feels that maybe it's not going to get caught up as much as other countries. No, actually, Rahul, that's not so. Yes, of course, what you said is correct. We are a services economy largely, and we do provide a lot of services. But also to the U.S., in terms of merchandise trade, it's much larger. Merchandise trade is in the region of about$120 to$130 billion out of the probably$160 total billion bilateral trade. But most of it, actually, very interestingly, the exports that we make to the U.S. are really more in the case of in the area of finished goods.

15:32So, finished goods with kind of higher technological value. And, in fact, we are getting stuff from the U.S., which is more in the nature of probably crude oil and less high-value products. So, it's not – I mean, that's not one of the reasons. One of the reasons that we are not going to be impacted, especially, for instance, on automobiles, is because Indian industry is more focused on the domestic market. Domestic sales are very important. We have a huge market. Well, that's why the U.S. wants to come in. That's why they want us to reduce the tariffs. And interesting, U.S. and India, quite similar in that way, in that, you know, the U.S.

16:14has a huge internal market as well. Dante, I want you to have a listen to this because we're going to have a conversation now a little bit about the impact that tariffs could have, not so much on prices, but on jobs. Chuck Dardis is the president and COO of Alpha USA, which supplies car parts to U.S. automakers, Fords, Delantis and GM. He spoke to us from Detroit. It's not going to help us because it's an additional tax. The products that we're bringing in, we're paying the tariff. when it crosses the border for us from Canada and we go through our import broker, we are paying that. It's not being paid on the other side.

16:51So this is, in our case, a dramatic increase in our material cost. How much? Because you use Canadian steel, there's tariffs on that. Do you use Canadian auto parts? Are you facing even more tariffs now? We bring in fasteners from Canada, which are considered steel. So when the tariffs first came in, our parts were subject to the 25 % tariff. But then when the steel tariffs came in on March 12th, by definition, nuts fasteners are considered a derivative of steel. Therefore, they're subject to the 25 % tariff as well. So by April 2nd, we could very well be looking at 50 % tariffs because of the way that they stack.

17:30You said you're a small company and I know your work is a really important to you. Will you have to lay some of them off? Is that a thought? Eventually that could happen because production could be curtailed by our customers. And that could happen. We work very hard to avoid that, but that could be an eventuality. That was so interesting to you, Dante, because the idea of Donald Trump's tariffs is to protect manufacturing. Here's a manufacturer that could actually have to lay people off. Yeah, indeed. And I years ago wrote an article highlighting these same issues, the economic cost of tit-for-tat nationalism.

18:03And exactly as the that the speaker just described, that over time, unless there is a balanced approach to the implementation of tariffs or these types of perceived or real trade imbalances, you end up having the economic equivalent of mutually assured destruction, especially with trading partners. And so the landed cost of goods in many cases may go up and the impact on the manufacturing base, unless there's a real calibration of nearshoring or onshoring or some of the other activities that are potentially contemplated by these trade positions the U.S. is taking will effectively hurt business industries and cost.

18:37I think we have to look at it, as I said at the beginning, partly as posturing and a negotiating tactic to get countries to the table and not necessarily an economic policy for the long term. Yeah, and certainly that's what Thomas Plissett, who advised Donald Trump, thinks is the case. Professor Suzuki, though, Donald Trump did say when he announced these tariffs, but these were not for discussion. These are permanent were the words that he used. So could that cause job losses in Japan as well within the car sector? Oh, yes. I think it's a big worry for Japan. And I think it's, you know, we are expecting that this is going on for the next four years until Mr.

19:20Trump leaves the office. But we are not exactly sure that this will end by four years. And probably we need to completely make a different strategy for accessing the U.S. market. But at the end of the day, I think there are a lot of stress on the U.S. market as well because of the increasing tariffs. And I don't think it is for many companies in Japan, in the United States, the Japanese companies in the United States needs to have more access to the other countries, suppliers such as Mexico. So the tariff between the United States and Mexico is also a big concern for the domestic investment in the United States.

20:07Professor, it's been a real delight having you on the programme. and we look forward to speaking to you again as this story continues to unfold. We are going to go over the river, we heard there, didn't we, from Chuck Dardis in Detroit. We're going to go over that river to the Canadian city of Windsor. It's tied into the US auto industry with car parts crossing the border several times during that manufacturing process. There are fears that the tariffs could lead to job losses in the city. The city's mayor, Drew Dilkins, told me that residents are already worried about their livelihoods. Oh, they're already saving.

20:42The uncertainty that's been out in the economy for the past couple of months has caused people to save and wait for the rainy day. And we're a community that knows about the cyclical nature of manufacturing and automotive. We're used to seeing rainy days every once in a while. And so people here are used to that. They're saving their money. They're waiting for that rainy day, all driven by uncertainty. And it's more than just the people. It's businesses who are parking their capital on the sidelines, not making investments, waiting to have a clearer picture of how this is going to end. Because all of the smart people and sensible people who are looking at this are saying, there's just no way to practically do this.

21:17And we're not willing to risk the money by making investments if they had it today, not knowing where this is going to land. At some point, he's going to have to land the plane. We're hopeful that it will land in a place that respects the relationship that we've built. The mayor there of that city in Canada, Windsor Drew Dilkins. Shushma, final thoughts from you in this first half hour of the program on tariffs. A lot of people think protectionism will raise prices, it's not good for economies, but politically it's good. So, you know, we are in a world now where we will probably see more protectionism, won't we?

21:55Not just from the US, but from other countries as well. Yes, absolutely. And I think one thing you have to remember when people talk about what's going to happen after Trump goes, as far as India is concerned, when Trump removed the generalized system of preferences, which was concessional tariffs for developing countries, I mean, India lost a lot. But and also the steel and aluminum tariffs, which were imposed at that time. India did impose retaliatory tariffs after a year. But the fact is the Biden administration did not withdraw the tariffs imposed by the Trump administration. So I think that people really need to look at these in the long haul because, you know, Democrats might take a different, might take the same view as Trump.

22:36That is a very good point. And we didn't see that just with India, did we? we saw that many of the tariffs that Donald Trump put in place on China remained there during the Biden administration. Right, in the second half of the programme, it could be a tariff-free zone. Not quite sure. Stay tuned, find out.

23:04You're listening to Business Matters here on the BBC World Service with me, Rahul Tandon. We have Dante there in the US. Dante, just a question, not so much on task, but just the whole uncertainty in the business world. Are you picking up on that when you talk to people in the US? Are they worried about this uncertainty that is surrounding not just the US economy, but the global economy at the moment? No doubt. And frankly, the difference between risk and uncertainty is that you could measure risk. However, uncertainty creates panics sort of freezes investments and investment activity. And you could definitely start to feel that some of the broad uncertainty, you know, is being priced into market sentiment.

23:47It's being priced into the way companies are behaving at the moment. So it's not helpful. And frankly, I think the response in the economy is an important source of checks and balances to some of the issues we were talking about in the first half. You as somebody who's in that business world, is it affecting your decisions? Well, no, for our part, and if it's any consolation to our Japanese speaker a moment ago, we've actually just announced an investment in Japan and the availability of our product, a digital dollar USDC across the Japanese market, the first development of its kind. And so a company like ours continues to build and continues to grow in part because there's a big demand around the world for lower cost money movement, cross-border payments.

24:27And some of these innovations are just critical in a world where you need to do more with less. Technology can be a big game changer. But net net overall, we're all affected by the macro economy. And I think business decisions effectively are starting to price in the uncertainty that we're seeing. OK, let us move on to Greenland now, because US Vice President J.D. Vance will visit a US base in Greenland on Friday. Since Donald Trump returned to the White House, the Danish Arctic Territory has become a focus of US foreign policy, with the president suggesting that the US may annex it. If we don't have Greenland, we can't have great international security.

25:05If you look at the ships outside of Greenland, China, Russia, places that we have to be there. If we're not there, we can't have national or international security. So I view it from a security standpoint, we have to be there. So this trip of J.D. Vance is likely to get a lot of coverage. Here's our North of America editor, Sarah Smith. No, it's being seen as really quite provocative in Greenland and also in Denmark, the country that controls that territory. J.D. Vance is the most senior U.S. official to visit Greenland. And that's why it's seen as putting pressure on the country to send somebody that senior.