Trump plans to hit Brazil with 50% tariffs

0:05Hello and welcome to Business Matters. I'm David Harper and on the programme today, tariffs just for a change. Today, it's Brazil facing 50 % on imports into the US and a look at whether a deal between Washington and Delhi is likely to surface. We've also seen Nvidia hit a record value of$4 trillion, bigger than the GDP of France, the UK or India. And we look at the direction of the social media network X now that Linda Yaccarino has stepped down as CEO. I'll be joined throughout the programme by two guests on opposite sides of the world. Zayma Islam, senior reporter at the Daily Star in Dhaka in Bangladesh.

0:39A very good morning to you, Zyma. Good morning, David. What is hitting the headlines in Bangladesh this morning? Tariffs. I was hoping that India and Washington would be able to come to some closure while I sleep, but clearly that hasn't happened. We'll be looking at that in some detail a little bit later on. And we're also joined by the Silicon Valley journalist and author Mike Malone, who is in California in the United States. A very good evening to you, Mike. Hey, David, how are you? Not so bad. Not so bad here in the north of England. What is coming your way in California at the moment? What's coming our way?

1:16Well, I think I saw fireworks the other night. It may have been the 4th of July, but it may have been NVIDIA celebrating. And we'll have more on that in a moment as well. We'll be back with both of you when we've had a look at some of our top stories, because another day, more tariff announcements. Earlier on Wednesday, countries including the Philippines, Algeria and Brunei received letters from US President Donald Trump telling them the number that they would be facing in the afternoon. Brazil, one of the top 20 trading nations with the US and a country that has a deficit in trade, got its number and it's a big number.

1:5150 % tariff on all Brazilian imports into the United States. This is significant because it is substantially higher than the 10 percent that was announced on Liberation Day back on April 2nd. So this was all announced in a letter to President Luiz Inácio Lula da Silva of Brazil. Mr. Trump wrote that the new tariffs were going to take effect on August 1st. And he went through a kind of laundry list of grievances, if you like. Trade, not the top of the list. That actually was about Brazil's treatment of former President Bolsonaro. He is currently sort of facing a criminal trial in the country. And Donald Trump essentially is intervening in another country's politics with this.

2:38He also is expressing concern about Brazil and how it has treated America's big tech companies, whether it's things from digital services taxes or whether it's about sort of their rules around hate speech and sort of the management of kind of language and accountability on these platforms. That is something that has irked the Trump administration, as well as, of course, at the root of all this, the trade deficit as well. And we should mention as well, this does come off the back of a summit of BRICS leaders, which has not been altogether favourable about the ever-changing tariff landscape with the US.

3:17Well, I mean, Donald Trump has made it clear this week, as well as sort of several letters that he sent out to countries announcing new tariff rates for different leaders for different countries. He's made it clear that he is unhappy with the BRIC countries. These include Brazil, but also Russia and China. And we've seen under Lula sort of closer ties between Brazil and China. And I think this is the way that he is expressing his displeasure with that, saying, you know, we see this. We're not happy. And so he's ratcheting up pressure, trying to see by sending this political message how Lula reacts.

3:59And in fact, we already get a sense of that because he has responded quickly, saying he thinks it's wrong and irresponsible for a president to be threatening others on social media. Our correspondent, Michelle Fleury, speaking to me about some of the details of what we've seen announced. I'm joined by Oliver Stunkel, who's an associate professor of international relations at the Getúlio Vargas Foundation in Sao Paulo, Brazil. Thank you very much for being with us. How is this being received? I mean, I suppose there's a lot to unpick here. There is the logistics of what a 50 percent tariff will mean, but also the reasoning behind it tied into former President Jair Bolsonaro.

4:41Yeah, this is quite a bit of bombshell in Brazilian politics, of course. Not entirely surprising because Bolsonaro and his family have been lobbying the Trump administration in Washington to do this, to act on his behalf, to intervene on his behalf. Bolsonaro's son, a very popular congressman, has resigned and moved to the United States to do this, to lobby in person. So the Lula government was a bit prepared, had also a prior warning because of Trump's announcements during the BRIC summit. But it's, of course, different from the tariffs that the United States is imposing on China, for example, because it is basically about Brazilian domestic politics.

5:26So Trump is telling Lula to, quote, end the witch hunt against Bolsonaro, who is being prosecuted for an alleged coup attempt two years ago. And this is a process controlled by the judiciary in Brazil. So it's not in Lula's hands. And the most likely scenario is, of course, that Lula will frame this as an attack on Brazil's sovereignty, that he will utilize this to produce a rally around the flag effect. And I would say it probably benefits Lula ahead of a very competitive election next year, because he can now say that Bolsonaro has instigated Trump to attack Brazil's economy, to attack Brazilian jobs.

6:13And so this is also a problem for right-wing politicians in Brazil, because it's not very popular to defend sanctions against your own country, but it's also difficult for them to attack Donald Trump. And of course, right from the very start of this whole swathe of tariffs, we can remember that image of Donald Trump holding up a big board outside the White House with a list of countries on it. It's all been about the perception that the US is getting a poor deal in the relationship with other countries. This sort of takes it in another direction. Assuming that this does all go through and that there's a whole question about how many of these tariffs have been announced and then called off and how the markets have kind of factored that in.

6:58But assuming it does go through, how will Brazil be affected? There is a lot of trade between Brazil and the United States. Yes, there is. But it's important to keep in mind, I mean, the United States has a trade surplus with Brazil. So, you know, it's very, very different from this trade wars with countries where Trump is seeking to create a more balanced trade relationship. The trade relationship with Brazil is actually very beneficial to the United States. of all the exports of Brazil, about 11 % go to the United States, which is a lot less than to China, but it's a lot of value-added goods.

7:40So this hits Brazil's industry very hard, steel exports. So this is for the richer states in the south, which ironically tend to support Bolsonaro, is very bad news. It doesn't actually affect commodity exports as much because those go to China. So the Brazilian exports to the U.S. represent about 2 % of Brazil's GDP. So it is quite serious and, of course, has caused alarm among CEOs of major companies in Brazil because it also creates a lot of uncertainty because you don't know, can you make an investment? Can you expand? How do you react to this? A lot of people hope that the taco dynamic of the Trump will in the end chicken out will apply.

8:29But there's no easy way out. There's not much Brazil can offer. Trump cannot ask the Supreme Court to stop prosecuting Bolsonaro. And we've already heard hints from President Lula that there could be reciprocal tariffs the otherwise will. Absolutely. Absolutely. I mean, Brazil has a number of options can make life even more difficult for U.S. tech companies. Brazil is a very big market for companies like X, Facebook and WhatsApp. And it may be popular among Brazilian citizens for Lula to stand up to the United States. Brazilians like the United States, but anti-Americanism can also be utilized to fan the flames of nationalism, and in particular ahead of an election.

9:16So I'm actually quite pessimistic when it comes to finding a way out of this. Just very quickly, Michelle mentioned this, our correspondent Michelle mentioned this a moment ago, but we've seen this big summit of BRICS leaders, of leaders of the BRICS nations of developing emerging economies. they've spoken quite harshly about the climate of tariffs that has sprung up around President Trump now and are we seeing really leaders of these economies sort of closing ranks and kind of dealing with each other and working out ways to survive without a reliance on the United States? Well it's quite interesting you mention that because the first day of the BRICS summit was rather subdued and low energy.

10:03And then Trump, at the end of the first day, made his threat against BRICS. And it really energized the summit. And the sense that I got from participating diplomats was that this is a sign that we actually need to strengthen cooperation amongst us. We need to diversify. We need to create more autonomy. We cannot rely too much on the United States. And in the days after the summit, Lula has had a state visit with Modi, the prime minister from India and the president from Indonesia. It's very much a reaction to a world in which countries like Brazil seek to preserve ties to the United States, but are also very aware that they cannot, they can no longer trust the Trump administration and need to urgently diversify.

10:47And that probably will also involve strengthening intra-Brix cooperation. And in fact, we're going to be talking about US-India trade ties before the end of this programme as well. Oliver, thank you very much for giving us a bit of your thoughts on it. Oliver Stunkel, Associate Professor of International Relations at the Getulio Vargas Foundation in Sao Paulo. Let's just go back to our guests for a moment. I suppose this would be a good time to talk about Silicon Valley. Mike Malone is with us, who's looked at this for many years. Will there be people there a little bit worried about the prospect of a barrier to trade with a country like Brazil?

11:26I don't think so. I mean, these companies here are so globalized and so wealthy. I don't think one country is going to affect that. I do think there's some real concern that, OK, it was it was strange enough to pull out, pull this tariff thing out of his pocket. But if if Trump is going to try to go in and influence the politics of other nations and you're right, I mean, this was the indictment came down from the Supreme Court of Brazil, not from Lula. And if Trump's saying, well, everything in Brazil is so corrupt that he needs to intervene, I don't see the justification for that. It's all very strange.

12:11I could see him being resentful of BRICS with their, you know, desire to create a counter currency to the dollar. but I don't understand why he's even bringing tariffs down on a company that we have positive trade numbers with. And then this Bolsonaro thing, that's a buddy of his. I mean, that doesn't seem very presidential to me. I think there's going to be some backlash here in the US. It does feel like it's raised up a notch from that original announcement from Trump that it was all about getting a better deal for the United States in terms of trade. Yeah. And in many of these cases, it turns out, yeah, we didn't realize just how much we were getting taken by some of these countries with their tariffs like Canada.

13:04But I don't see the logic behind taking on Brazil unless it's about BRICS. He seems to have an animus against BRICS, and we're seeing it in some of these tariff numbers for other nations, too. And I think maybe he's making Brazil an example. Speaking of other nations, let's cross to Bangladesh now, where Zayma Islam is with us this evening. A country with a lot of close ties and sometimes uneasy ties with India. We'll be talking a little bit about US-India relations, but how will people in Bangladesh be looking on at a distance at these sort of conversations? Tariffs, that's all we're talking about at the moment.

13:45Bangladesh got slapped with a 35 % tariff and exporters are saying that this is on top of the 16 % tariff that we already had with the US. So I think then the numbers would come up to like a 61 % tariff in total. And that would be devastating because right now the US makes up about 20 % of the total RMG exports from Bangladesh. And that's our biggest sector. It would be pretty devastating. But I wanted to say that it's, I mean, while Trump is protecting his bro in quotes, it's not unusual for countries to do that because India has been doing that with Bangladesh as well. Bangladesh garments industry, the Bangladesh garments industry used to use India for trans shipment facilities, as in our garments would use the land border with India.

14:45India surrounds us on three sides and would use the land border to use their airport and port facilities for say air shipments, quick, faster air shipments to destination countries. And India has stopped that since April this year because Bangladesh and India relations have really soured since last year when our autocratic ruler was given refuge in India. She fled Bangladesh and she's been given refuge in India. And so it's not abnormal for an entire country to jeopardize, say, economic relationships with another country based on their support or lack thereof with a former premier. Zyma and Mike, I think there will be a lot more to talk about on this later on.

15:37But I want to move on for a moment because today we saw a bit of a landmark point in the American market. Tech giant NVIDIA becomes the first ever company to hit the four trillion market cap. NVIDIA, a four trillion dollar market cap, which no company's ever done. NVIDIA is back in the news again. It has crossed$4 trillion in market cap. So the American computer chip manufacturer NVIDIA has reached a record high and now accounts for 7.5 % of the S &P 500 index. The climb has been phenomenally rapid. Today's value, four times the$1 trillion point that NVIDIA first reached two years ago. Michael Furtick is a venture capitalist and founder of Heroic Ventures.

16:22He's also an investor in tech startups in particular, and that has included NVIDIA. They can keep rising and rising. But I do believe that in general, and broadly speaking, and specifically with respect to NVIDIA, the AI explosion, the Cambrian explosion is just starting. And I believe that their dominance in their chip offering and their compute offering is so strong that there's a lot of headroom for the company to grow. Does that translate to stock price change? That's up to your listeners to decide. But I believe the wind is at their backs. The world is moving towards AI. AI is eating software.

16:59AI is eating the world. AI is eating jobs. AI is eating industry. And these guys are the most important arms dealers selling the most important weapons, heavy artillery, big computing power to this market. So I think it's very much a bullish future on the growth of the company. The stock is a different question, but the growth of the company for sure. There's kind of two questions there in one, isn't there really? The outlook for the future of AI and then the outlook for NVIDIA's role in it. And AI is clearly going to be a big part of our lives going forward. It's already a big part of our lives and it's only going to increase.

17:36But are NVIDIA going to still dominate that as we go forward? that there's undoubtedly other companies that are going to want a piece of this. Many companies do want a piece of it. Many companies run by very smart people and very capable people that are chasing a piece of this. NVIDIA has the jump on the market. So what does NVIDIA do? Because not everyone is born with this stuff. NVIDIA makes processors and provides computing power to the companies that want to do things with AI. So you've heard of companies like OpenAI or Oracle. These are companies that use computing power to provide AI services to companies and to end users.

18:16So if you've tried ChatGPT or you've tried Perplexity or something else, maybe on Google, you might be benefiting from the technology, the software, and the artificial intelligence that is being powered by the compute that is made by NVIDIA. And NVIDIA has a lineup, a roadmap of current and future products that just continues to keep dominating this field. They are well in front to the tip of the spear, to the bleeding edge. And one of the remarkable and important facts about this industry is that it takes a while, years usually, to create new chips. Michael Furtick speaking to me a little earlier, venture capitalist and founder of Heroic Ventures, also an investor in NVIDIA at one point.

19:02Mike Malone, looking at this astonishing value that NVIDIA has created, we were discussing there a moment ago whether any company is going to be able to catch up with them. Surely this has got to be a market. If we have the future for AI that everyone is saying we're going to, that this is going to keep on running and running. There are going to be other people who are going to want a slice of that. Oh, sure. But I think in the near term, you know, interestingly, a month or two ago, there was a kind of a growing consensus that NVIDIA was slowing down, that it might have peaked, that its stock wasn't growing at the same rate.

19:42And they were predicting, you know, less than impressive quarterly earnings and all of that, at least by their standards. and yet they've taken off again. And there's talk now on the markets that NVIDIA could grow 10, 20 % in the years ahead in the market. Even beyond the value they have at the moment? Yeah, even up to 50%, which is mind-boggling. That would get them to$6 trillion. I mean, it's hard to imagine, but they just, in the last few days, they passed Apple, Microsoft, and even Saudi Aramco. They're the most valuable company in the history of the world. And, you know, they've done it in just a matter of, what, five years since they really got into AI.

20:36We were discussing this a little bit earlier on. And there are numerous times throughout history, particularly in the tech industry, where a particular sector has grown and grown and grown and been predicted to be this massive thing that's going to keep on going and going and going. And then you get to a point where a bubble bursts. And the dot-com bubble of the 90s is one that's mentioned a lot, but it's happened in the computer gaming industry. It's happened in other things as well. Is there the potential that AI might not quite be the massive market that it's being predicted? And it may not quite reach that point.

21:15Well, having been at the very center, I was running a Forbes magazine during the dot-com bubble bursting, and that was a very different creature. That was a feeling that this whole world was new, and there were all these companies, and they were getting all sorts of venture capital money, and they were all promising 100 % growth and market share, and it just couldn't survive. Right now, like we just heard from the other speaker, there doesn't seem to be an upper end to this, that AI is eating the soft world world and it's going to slowly eat the whole world. Well, let me bring Zymer in on that as well, because we keep being told of the amazing benefits that this technology is going to bring to the whole world.

22:03Is it something that people in Bangladesh see a bright future in as well? I think generative AI has definitely made it to everyone's personal devices. I have ChatGPT open at the moment. I think I've ChatGPT open for all my waking hours. So I do think that AI is on an upward sort of trajectory in Bangladeshi industries. And that would be very different from, say, two years back. I would have said very different things two years ago. It seems to be infecting pretty much every sector there is out there. There's going to be nobody who'll be able to keep away from it. Zyma, Mike, thank you very much for giving us your thoughts.

22:48We'll have more on this and much more of today's business stories coming up in the next half hour. Stay with us after the news summary.

23:04Welcome back to Business Matters with me, David Harper from the BBC World Service. We are talking trades today. We've been talking a little bit about some of the back and forth between the United States and Brazil. Let's look at India because a trade deal between India and the US is yet to be confirmed as Donald Trump's deadline to ink a deal comes up on the 1st of August. Talks between the two countries are ongoing. Earlier this week, the US president expressed optimism about reaching the agreement soon. Trump has previously said his administration would levy a 200 % tariff on pharma products, 50 % duty on copper and levies on semiconductors.

23:38The timeline on this is unclear. The US reportedly accounts for nearly a third of India's pharma exports, around about US$9 billion last year. President Trump also said countries part of the BRICS economic grouping, including India, will pretty soon be charged a 10 % additional tariff on imports. Again, unclear exactly when this would kick in. Let's unpick some of the details. We're joined by Biswajit Dhar, a distinguished professor of economics at the Council for Social Development in New Delhi, who has also previously been part of India's delegation in multilateral treaty negotiations, including with the WTO, the UN, and the World Intellectual Property Organization.

24:16It's great to have you here with a bit of your experience to join us. Can you give us a feel of what is likely to be going on behind the scenes at the moment? We haven't really heard any sort of a breakthrough in this yet, but there'll be a lot of discussions happening at the moment. Of course, there's been quite intense discussions between the two negotiating teams. and there have been several critical issues for India and which I believe would be the sticking points. Now, India has huge sensitivities on agricultural sector and in all the trade agreements that we have done till now, agriculture has been off the negotiating table.

25:03Now, of course, it's a different ballgame as far as the US is concerned because there have been several references to India's high agricultural tariffs made by President Trump himself and also his commerce secretary. So very clearly, this is a large market that the Trump administration is looking at. But then, you know, India has this largest workforce in agriculture. It's almost, you know, 55, 60 percent of its workforce. and a large number of Indian farmers are actually very poor farmers. And exposing these farmers to global competition is something that the government of India can't sort of accept because they have serious political and economic implications.

25:53So agriculture is one, and you're talking about the major cereals, you know, corn, soy, wheat, and then dairy products. And dairy, as you know, is an additional source of income for the farmers. So this agriculture and dairy would be the major sticking point. And the government has actually indicated, Indian government, that we're in no hurry to do a deal. we will do when we feel that the trade-off is acceptable and then only we will do a deal. Tell us a little bit about the options here because short of a full deal, there's also the possibility, I understand, of some kind of interim, for want of a better term, mini deal which could be signed to come to at least some agreement with potentially something further down the line.

26:52Sure, actually, you know, what we call early harvest, you know, something that we have done with Australia as well. That's certainly possible. And plucking some low hanging fruits is entirely on the cards. So there are a number of minor agricultural products. products and we've also been providing access to American agricultural products like several nuts and other commodities. And then there are a few sectors in the manufacturing area where the tariffs are high. One of them being automobiles, very high tariffs. Recently we did the deal with the United Kingdom where it was agreed that we're going to have a tariff rate quota for automobiles.

27:44So it means the tariffs won't come down drastically at one go. There will be access given through a quota and that could be run. So I think there'll be a combination of these low-hanging fruits. Let's go back to one of our guests this evening. Zayma Islam is joining us as a senior reporter on the Daily Star in Dhaka in Bangladesh. what will the implications be for the white, not just Bangladesh, but other countries in the Asian market? How critical will a deal between India and the United States be for other trading partners? I think it's going to be important for Bangladesh because, say, if India gets a higher tariff than Bangladesh, then Bangladesh may still be able to keep some of the RMG export market.

28:34Bangladesh would still be a favorable location for supplying garments in that case. Because, and I think we've spoken about this on this program before, is that investors are moving away from China and moving to India. Because India offers better rates. I mean, clearly better, the tariff rates would be better. and that's a little frightening for Bangladesh because India can provide the same sort of low-cost labor that Bangladesh provides at the moment. And honestly, that's Bangladesh's only selling point. We don't have better transport facilities. We're not providing better, say, energy facilities to factories here.