President Trump threatens tariffs on 14 countries

0:05Hello and welcome to Business Matters here on the BBC World Service. For the next hour, I'm Sam Fenwick. Coming up in this first half of the programme, President Trump is threatening tariffs of between 25 % and 40 % on countries, including Japan, South Korea and South Africa. But he's delayed bringing them in until the 1st of August. So 24 days they have to strike a deal. Will it happen? The White House says the clock's been reset. So is this tough talk or a tactical pause? We'll also be talking about the spending boom in Singapore, the luxury spending boom. It's growing there while demand calls elsewhere.

0:51And also today, they just decided to paint the city in a different way. So rather than repaint it themselves, to just call artists from all around the world and create a mural festival. We'll find out how art is bringing a southern Italian ghost town back to life. As ever on Business Matters, we'll be joined throughout the whole hour of the programme by two guests on opposite sides of the world. Peter Landers joins us today. He is the Asia business and finance editor at the Wall Street Journal. He's joining us from Beijing. So a very good morning to you, Peter. Good morning. Good morning. What do you think about street art?

1:36street art well there isn't a whole lot of it in Beijing I think it's a pretty well-kept city what about in Singapore where you normally where you normally are I don't suppose there's very much there either is there I think the government would want to make sure that any street art was approved okay and Erin McLaughlin is a senior an economist she's at the conference board which is a an economic think tank, joins us from New York, where I would imagine, Erin, there's probably more street art than Peter can lay his eyes on in either Beijing or Singapore. I think there is. I'm not sure it's that coordinated, such as in this Italian town.

2:18But yes, we have our fair share of street art here in New York City. And it really does liven up the streets, doesn't it? It's quite nice to see. We'll talk about that a little bit later in the programme. But let's get started with Donald Trump and the tariffs. So he says that imports from a group of US trading partners will face steep new tariffs starting in August, August the 1st. Throughout Monday, in a series of posts on his social media platform Truth Social, President Trump shared signed letters addressed to world leaders. White House Press Secretary Caroline Levitt gave details of them in a press conference.

2:57This one is to the President of the Republic of Korea, original signature on that, and these will be mailed. And then here we also have another letter to the Prime Minister of Japan as well. Both countries will be receiving a 25 % tariff rate effective on August 1st. Now, there are 14 countries targeted and they now have 24 days to negotiate with Washington. Donald Trump warned in the letters that persistent trade surpluses with the United States pose a threat to national security and said that new tariffs are designed to restore what he called fair and reciprocal trade. Speaking at a White House event on Monday evening, President Trump had a message for countries looking to negotiate deals with the United States.

3:44We've already taken in over$100 billion worth of tariffs, and we haven't even started. And all I say to the other countries is, you know, some of them wanted to make a deal and want to be fair. Others perhaps got a little bit spoiled. They were a little bit spoiled because for 30, 40 years, 50 years, they were taking advantage of the country. So we're going to, I would say, final. But if they call with a different offer and if I like it, we'll do it. Mr. Trump first, well actually sorry I thought I was going to race ahead then but what I want to do first is just play you a short clip from the North American business correspondent Michelle Fleury because she has outlined where the Trump's tariffs will go.

4:28Broadly speaking those reciprocal tariffs that were announced with great fanfare on April the 2nd, Liberation Day as the president called it, have been pushed back to August the 1st. Now that allows potentially for more negotiation of trade deals to take place. There were also letters sent out to the heads of various foreign countries in which the president informed them of their new tariff rate. So for example, South Korea, Japan and Malaysia were told that their new tariff rate would be 25%. Other countries like South Africa were told their new rate would be 30%, while Myanmar and Laos, for example, both were told that they now faced a much higher tariff rate of 40 % on goods coming from there.

5:11Perhaps the only case in which we saw a country's tariff rate actually go down was Cambodia, a slight decrease there. But broadly speaking, the trend was upwards for all of these countries. One has to assume that some of this is countries that are heavily dependent on the United States for trading and don't have much room to kind of retaliate. What was interesting about those letters that I just mentioned was that they contained a warning saying for any countries that they were thinking of retaliating, this number could change at any time. So that was Michelle Fleury, the North America business correspondent for the BBC.

5:48Mr Trump first announced tariff hikes in April, as Michelle was saying, in an attempt to pressure countries over what he said were unfair trade practices. They were suspended for 90 days after their announcement caused turmoil on the financial markets. Let's go to Peter Landers first on this. Are you surprised that these tariffs have been delayed again? No, I think it's part of the usual Trump negotiating style to make a lot of make a lot of threats and see what he can extract from these trading partners. I should mention that there is some question about the legality of the tariffs. He's sending these letters, but there are cases proceeding through the courts that question whether the president can use his emergency authority to impose these tariffs that normally would be the domain of Congress.

6:42The Constitution says Congress is in control of tariffs. tariffs. Now, they've let the president move ahead with these steps. So I think it's going to be, you know, another three weeks, perhaps more if he decides to extend further, another three weeks of negotiation here. Because I think he has said that the 1st of August deadline is firm, but not 100 % firm. Exactly. Erin, I can hear you laughing in the background there. Are you surprised that there's been this delay? I'm not surprised at all, because they had referenced perhaps doing 90 deals in 90 days. And we really only have two deals, which are more like frameworks with the UK and Vietnam.

7:26So I think that this is a way to buy a little bit of time and that the letters themselves are sort of a volley back to the other nations to get perhaps talks moving. Yeah. And certainly the president, the administration has been very busy with the big, beautiful bill and so much else that is happening. But only two out of 90 countries is not good for those 90 day pause. You track business sentiment quite closely, don't you, through the conference board? Are we seeing signs that this rhetoric, this kind of, Are they happening? Are they not happening with the tariffs? They're starting to dampen investment in the U.S.

8:10and maybe potentially affecting people's hiring plans. It absolutely is. We haven't seen a lot of really firm numbers yet, but we basically are seeing that the uncertainty, which is certainly sort of the word of the year, is causing businesses to sort of delay some of their decision making regarding capital improvement projects, regarding how they change their own supply chains. And I think it's interesting also because at some of these rates that we're talking about, whether it's, you know, 20 percent, which is sort of the the the tariff rate with Vietnam or 30 percent, which is the baseline with the current agreement with China.

8:56You know, I don't think that that is necessarily high enough to actually create an on-shoring or reshoring renaissance here in the U.S. And so it just goes back to, you know, what is the point of all of this? Is the point to collect the duties and the levies, which is really a tax on U.S. businesses and consumers? Or is the point truly to onshore? and it will of course depend on what those businesses do as well um because we've spoken to businesses on the program that create uh you know manufacture ironing boards and stuff that you have in your kitchen washing baskets things like that and and and they are such low margin products that you you can't bring them you can't make them in the u.s they would they would cost huge amount more in just labor.

9:44Yes, yes. And we have a very low unemployment number. It hasn't really moved. It's hovering at about 4.1, 4.2. We have a shrinking workforce with our immigration policies and just sort of our lower birth rate, as many industrial countries do. So it is not as if there are, you know, a lot of folks on the sidelines, you know, waiting for these manufacturing jobs. But Peter, and then of course, you've got reciprocal tariffs that other countries might put in to retaliate against this. And that can affect businesses right around the world, can't it? It certainly can. China put some reciprocal tariffs on the US that were damaging to particular industries.

10:32And generally, the US does have large trade deficits with some of its biggest trading partners. That includes Japan and China and others, Vietnam, for example, that did apparently reach a trade deal with the Trump administration. So the damage would probably be greater overall on the country that has the surplus. But countries such as China are very sharp in picking out the politically sensitive industries in the U.S., whether it be aircraft or farmers who do export a lot. And by raising tariffs on those products, they can affect the political process in the US. Chinese businesses have been sending an increased number of goods to the US via different trading routes to try and avoid those tariffs.

11:17And I noticed that in the letters that were sent out today on Truth Social, they specifically talk about trans shipments going to get bigger tariffs if that happens. How would the U.S. prove that that had happened? It would be difficult, and I think it could add a lot of burden. We just heard about uncertainty, and that's just sort of bureaucracy. And red tape is another factor that is obviously concerning to businesses if they have to go through a lot of paperwork to show that a particular, I don't know, a kitchen fan or something we just talked about, or an ironing board, let's say, You know, where did the metal that's in the ironing board come from?

12:02Did it come from China or someplace else? And what about the battery in there? Did that come from China? If you have all that paperwork, it would be difficult. And it's not clear. I don't think the U.S. has made clear exactly how it intends to enforce that, what sorts of requirements would be imposed. But it's just the principle that President Trump wants to stress that please don't turn your country into a midway point between China and the United States. Well, as Erin and Peter both have been saying, the cost of everyday goods could go up in the US because of these tariffs. And the cost of everyday tech could increase for US consumers too, because a lot of that comes from countries like Japan and South Korea.

12:44Prices on products for things like smartphones, laptops, video game consoles could rise by as much as 70%. Well, joining us now is Ed Britzvar. He is the vice president of international trade at the Consumer Technology Association. It represents more than a thousand tech companies in the United States. He joins us from Bethesda in Maryland. Thank you, Ed, for being on. So go through some of these possible price increases for us. You've done some specific research on this, haven't you? We have. We've been looking at this since the president ran for president last year and made specific proposals on trade during his campaign.

13:27And we issued two different versions of a study prior to the president coming into office. And then after he cited all the tariff rates he wanted to impose in early April, we turned around a revision. And what we discovered was that because of the very high tariff rates imposed on imports from China, our estimates were actually, you know, we had a high end and a low end. And in reality, it's somewhere right in the middle. We're seeing for video game consoles. And this is just one example. video game consoles if they get hit with that 145 tariff rate on imports from china the average retail price increase could be around 70 percent over 430 dollar price increase that's for that that's the retail value average retail price increase for video game consoles could be uh almost 70 percent because video game consoles are predominantly made in china still um some are shifting to Vietnam.

14:34But if there's a 20 % tariff on all imports from Vietnam, that will still impact those products as well. So I'm looking at these tariff rates and they're all kind of in range of what we estimated. And so that's taking into account the fact that businesses won't pass on all of the costs, presumably to consumers, because lots of business have been telling us that they will try and suck it up somehow and not pass it on too much? Every business has to make its own decision on what they do here. Our study did assume full pass-through, but we recognize that in reality things are going to be very different.

15:13So small businesses, for example, and 80 % of our member companies are small businesses, they will not be able to afford sucking up the cost of the tariffs. So it's very likely that small businesses have to make tougher choices than larger businesses, which have more optionality, let's just say. And do you think policymakers in the US, the Trump administration, understand the real cost to American families? They continue, at least from what I hear, they continue to say there is no cost to the tariffs. Everyone's going to be fine. Maybe you'll have less things to buy. I think they do actually acknowledge that there will be a cost to the tariffs when they say instead of 30 items, you'll buy two or you'll just have to buy less of this at the end of the year.

16:03You know, our industry has been a deflationary industry, enabling more Americans, even of little means, to buy technology products. And when you impose tariffs of this nature in this way, like in a very haphazard, uncertain whiplash effect way, you take those products out of reach for people because the costs very likely will go up. And we don't want that to happen. We want it to be deflationary as opposed to inflationary in the future. So how do you feel about this 24-day delay? The tariffs will now come in for these countries, these 12 that were mentioned on the 1st of August. Is this good news or is this just sort of prolong the agony for your businesses that have such uncertainty at the moment?

16:53I will say it's good news, but it's temporary. There's still the uncertainty, like what happens on August 1st? I mean, we were dealing with July 9th as the date, and now it's August 1st. Is that really going to hold? Are those tariff rates actually going to come into effect? Are we looking at, just as an example, 36 % for Thailand or 32 % for Indonesia on August 1st? It's really hard to say because this administration has a way of making threats and then taking a step back. But as a former trade negotiator, I think talking is better than imposing punitive measures. And I'm hopeful that they get to deals.

17:37It's really hard. 90 deals in 90 days was never realistic. I think that was a lot of rhetoric. For firms trying to navigate this environment, how feasible is it for them to shift production into the US? Erin was talking about it being very virtually impossible for some companies. What about those tech firms that you represent? It's very, very difficult. We took a hard look at this issue about two years ago in a study that we did. And the idea that you're going to make all the consumer technology for the U.S. market inside the United States is not feasible. It would be too costly. It would price consumers out of the consumer tech market.

18:19We think working with our friends and allies like Japan, like Korea, like Vietnam is far better than imposing tariffs on those products. And, you know, the real problem here is that if you want to make a finished good in the United States, you need inputs. And that presumes that the inputs are also going to be made in the United States. So we're not going to see that movement of input production into the United States, like printed circuit boards or casings for products or, you know, the real fine inputs like permanent magnets. They're not going to be made in the United States right away. So this is going to take a lot of time, cost and effort.

19:01And like I said, we'd prefer to work with our allies as opposed to impose punitive tariffs on their imports. Peter, Ed, they're talking about magnets. China is starting to stockpile nickel and other critical minerals used in things like semiconductors. How are countries across Asia kind of dealing with these tariffs and their concerns about them?

19:29Well, I think it's, you know, some of them are trying to support their own domestic economies. That's true in Japan, for example, realizing that exports to the U.S. are probably going to go down. It could cause factories to close in Japan, especially car factories that are facing a 25 percent tariff. That's a different one from the overall tariff that Trump has imposed, but happens to be the same rate, 25 percent. In that case, you could have a big impact for the car industry in Japan. And I think the response there has been to offer financial support, offer consumers perhaps direct payments to stimulate the economy through consumption.

20:13And we must say that actually the car industry are affected by different tariffs, not these 25 % tariffs that we're talking about today. There's a whole other conversation going on about tariffs on cars and steel and things like that. Erin, I just wanted to ask you, if these tariffs go ahead and start pushing up prices for consumers, do you think the Federal Reserve might have to respond? Could it complicate their efforts to bring down inflation? Well, it certainly could. Yes. So Jerome Powell, the Fed chair, has said that he is delaying, essentially, or that the Board of Governors really wants to see what will happen with these tariffs with regards to inflation, the cost of goods going up in the U.S., besides before they decide to sort of take down the interest rate and bring it down from its sort of restrictive high number that it is now.

21:10And even though we've had a lot of talk about tariffs with Liberation Day on April 2nd, we haven't really seen the effect yet because it's been at 10%. A lot of companies imported their inventories ahead of April 2nd to sort of get ahead of this a little bit. But we do know from earnings calls, a lot of companies don't necessarily want to just come out and say, I'm going to have to raise prices. But when we look at their quarterly earnings calls and some other more subtle communications, we know that companies, they might try to absorb some of the costs, but they will need to raise prices. And that certainly could affect future interest rate changes.

21:51Ed, just coming back to you finally, what happens now for your members in these next 20 odd days? You know, the tariffs that the president is threatening right now on all these trading partners like Japan and Korea, that's just one piece of the puzzle. We're very much focused on other types of tariffs he might impose. You mentioned steel and aluminum and autos. There are Section 232 investigations on semiconductors, on copper, on lumber, on critical minerals, on commercial aircraft. The semiconductor one is really, yeah, that's really interesting. Like the semiconductor one is going to cover potentially consumer tech products, all the downstream products that contain semiconductors.

22:36So there might be more tariffs in the future. Okay. Ed Britzvar from Vice President of the International Trade and Consumer Technology Association. Thank you for joining us today on Business Matters. This is Business Matters from the BBC World Service. I'm Sam Fanick.

23:04Hello, you're listening to Business Matters on the BBC World Service. I'm Sam Fenwick. Today we have Peter Landers joining us today from Beijing. He's the Asia Business and Finance Editor for The Wall Street Journal. And Erin McLaughlin is the Senior Economist at the Conference Board. That's a think tank and she joins us today from New York. We can now get an early indication of how the markets in Asia are reacting to President Trump's announcement that so-called Liberation Day tariffs will be delayed until the beginning of next month, the 1st of August. The Tokyo Nikkei average futures were down 0.3 % in early trading and seems set to follow the yen lower on Tuesday.

23:51On Monday, US stocks fell, with the S &P 500 closing 0.8 % lower, but the dollar rose while emerging market currencies did sink. Donald Trump has threatened to impose levies on Japan of at least 25%. Let's talk to Rio Sahashi now, Professor of International Politics at the Institute for Advanced Studies on Asia. It's part of the University of Tokyo. Thank you very much for joining us this morning at Rio on Business Matters here on the World Service. Just tell us, first of all, how is the Japanese government likely to interpret President Trump's latest tariff threat when they wake up this morning and read that letter that Donald Trump's posted on his social media pages?

24:42Hi, Sam. It is my pleasure to join this program. and yes, the new letter received a big surprise in Japan. Of course, you know, we are now in the election and, you know, this is upper house election and the vote date is in just 10 days, 20th of July. So, and, you know, we have sent our minister in charge to negotiate with the United States seven times from April, you know, seven times from April. And also we had the summit meeting in G7, you know, between our prime minister, Ishiro, and also President Trump. But everything was in vain, you know. Of course, we started to sense our negotiation might not produce big results or even small results from two weeks or three weeks ago, right?

25:42we started to be very pessimistic. But, you know, we have to be reminded in April, we, I mean, not including me, but the many people in the government were so optimistic about this negotiation with Donald Trump and his team. But the last few weeks, we really started to be very pessimistic and now we receive the letter. When we saw in Canada were going, the Canadians were going to a vote on this and the candidates in that got quite tough on Trump. We saw some very strong words coming out of Canada at the time. Is that similar to what might happen now in the run-up to your elections in a few weeks' time, in a couple of weeks' time?

26:34I dearly don't think so. You know, we Japanese are very humble, but at the same time, you know, we judge the retaliation or to be tough against Trump is not a good strategy. So this is what we have done last three months. And even, you know, by receiving this letter, I don't think our prime minister will change the idea, right? We have to buy time. We still have four weeks until August 1st, right? So I think first what we can do, I mean, the Ishibe Shigeru as prime minister can do is to explain the situation to the people and try to buy time until, you know, the voting day. But I think many voters will not be happy about this outcome and data from President Trump.

27:33So a protest vote might be a real big shock to the ruling party. We heard a clip earlier in the program from Donald Trump speaking on Monday night at an event. And he talked about countries being spoiled by the United States, that countries had taken advantage of the United States. Last week on social media, Donald Trump talked about Japan being spoiled, accusing it of refusing to buy more American rice. How does Tokyo respond to that, being told that you're spoiled? I don't think we are spoiled. We both, everyone just lived in the pre-trade world. And we Japanese companies never have a special treatment in the US market.

28:32And actually, from 1990s, many Japanese automobile companies and other companies invest a lot to American markets. And, you know, in February, our prime minister also assured and made a new promise to Donald Trump about the increase of investment. So I really don't think we are, you know, spoiled by the United States. You know, we really try to be loyal. But I think the real key for the two-country negotiation is automobile. And Japan, like Korea, you know, each country sent 1.5 million automobile every year to United States market. So we are really easy targets. Let's bring Peter Landers into the conversation again.

29:21He joins us in Beijing. He's normally based in Singapore. He's the Asia business and finance editor for The Wall Street Journal. Perhaps you can kind of see it from both sides. And Donald Trump accuses Japan of being spoiled, of taking advantage of the United States for many years. Could you can you see the point that he's trying to make? I do. And I was in Tokyo for many years. And, you know, as Professor Sahashi said, there was a global free trading system that was adopted for many decades. and Japan was playing by the rules that existed, that have existed. They even made a free trade deal with the U.S.

30:06in the first Trump administration. Not free trade for everything, but there was a trade agreement that Trump is now ripping up. So I think I understand why Japan feels that the rules of the game have been changed partway through. Until now, companies have tried hard. They marketed their products in the U.S. Take cars, for example. Some exported from Japan, others manufactured at factories in the U.S., and they competed in the market and were successful. So it does come to as a shock, I think, to Japan. On the other hand, President Trump is correct that there has been a large, you know, tens of billions of dollars of trade deficit for many decades with Japan.