Trade war threats become reality

Summary

Marketplace Morning Report: Trade War Threats Become Reality

Episode Release Date: March 4, 2025
Host: Liana Byrne
Source: BBC World Service

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Introduction

In this episode of the Marketplace Morning Report, hosted by Liana Byrne and produced by the BBC World Service, the escalating tensions in the ongoing trade war take center stage. The report delves into the latest developments, economic implications, market reactions, and industry-specific responses to the intensifying tariffs imposed by the United States and the subsequent retaliatory measures by its trading partners.

Escalation of the US-China Trade War

The episode opens with Liana Byrne addressing the heightened state of the trade war, highlighting recent actions taken by the U.S. President.

Liana Byrne [00:48]:
"Trade war threats become reality life in the UK this is the Marketplace Morning Report from the BBC World Service."

Mariko Oy, the BBC correspondent, provides a detailed account of China's swift retaliation following the U.S. decision to implement new tariffs.

Mariko Oy [01:20]:
"China has practically immediately, within an hour or so announced retaliatory tariffs on certain products. And when it was only 10%, they also announced retaliatory measures. It only affected things like crude oil, which the US doesn't import in large quantities, making the initial impact minimal."

However, the stakes have been raised as the U.S. doubles tariffs from 10% to 20% on a broader range of goods, including chicken, pork, dairy products, vegetables, and fruits. This expansion is expected to significantly influence the prices of imported goods in the United States.

Retaliatory Measures from Canada and Mexico

The trade tensions are not isolated to China. Both Canada and Mexico have responded to the U.S. tariffs with their own retaliatory measures.

Mariko Oy [02:18]:
"Canada announced retaliatory tariffs on certain products worth about US$100 billion. Mexico has also indicated that they will announce something later today."

These actions are indicative of a broader strategy by the affected countries to mitigate the economic impact of U.S. policies and protect their own industries.

Business Reactions and Strategic Shifts

The trade war has prompted significant shifts in business strategies, particularly in the technology sector. TSMC, a leading Taiwanese chip manufacturer, has announced plans to establish a factory in the United States. This move aligns with U.S. President Trump's objectives to encourage domestic manufacturing through the imposition of tariffs on foreign trading partners.

Mariko Oy [02:47]:
"Companies like TSMC have been contemplating building factories in the U.S. for some time, especially as they monitor the escalating trade tensions. This aligns with the administration's goal of bringing manufacturing jobs back to America."

Additionally, American and international firms are making substantial investments to expand their manufacturing presence within the United States, seeking to balance the adverse effects of the tariffs with long-term strategic benefits.

Economic Impact on Consumers and Global Economy

Andrew Wilson, Deputy Secretary General and Global Policy Director at the International Chambers of Commerce in Paris, provides an expert analysis of the broader economic repercussions.

Andrew Wilson [03:26]:
"We have every expectation that these measures will have the biggest effective increase in U.S. tariffs since the 1940s, with severe economic risks attached."

He elaborates on the potential financial burden on U.S. households, citing a Yale prediction that the tariffs could cost American families approximately US$2,000 this year alone.

Andrew Wilson [03:59]:
"There's a clear risk of it contracting the U.S. economy. The tariffs will also impact global business investment, reducing business confidence not just in the U.S. but across North America, with potential global implications."

Wilson warns of a "very risky scenario for global trade and the global economy," highlighting the possibility of a "chill" on business investment worldwide.

Market Reactions

The immediate response from global financial markets has been negative. Indicators show a decline in both stocks and bonds, reflecting investor anxiety over the uncertain economic landscape.

• Europe's Stoxx 600 dropped by 1%.
• US 10-year Treasury yields fell to their lowest levels since October.
• Bitcoin slipped below $84,000 after a recent rebound.

These movements underscore the volatility and investor unease stemming from the escalating trade tensions.

Unexpected Alliances in the Electric Vehicle Industry

In an unexpected development within the electric vehicle (EV) sector, China's BYD, one of the largest EV manufacturers, has proposed a partnership with rival Tesla to collaboratively combat the dominance of gas-powered vehicles.

A top executive from BYD told the Financial Times that collaboration is essential to "change the industry." This strategic alliance is noteworthy, especially as Chinese EVs struggle against steep tariffs in both the U.S. and Europe, hindering their global competitiveness.

Mariko Oy [04:03]:
"Despite rising trade tensions, China is open to sharing key EVIC technology with foreign firms, signaling a willingness to collaborate on technological advancements even amidst economic discord."

Toy Industry Responds to Tariffs

The ripples of the trade war extend into various industries, including the toy sector. Gregor Hearn, President and CEO of the Toy Association, expresses concerns over the impact of tariffs on Chinese imports.

Gregor Hearn [05:30]:
"Tariffs will be inflationary for toys. Raising toy prices is bad for small businesses. It's bad for families that are budget-conscious. It potentially even swings the door open for knockoffs and counterfeit toys that might not go through all the testing and that might seem like a cheap alternative to parents out there."

When questioned about who bears the brunt of the increased tariffs, Hearn points to U.S. consumers.

Gregor Hearn [05:55]:
"At a 20% or 25% rate on a tariff, it really is impossible for that not to be passed on in some way to the U.S. consumer."

Jay Foreman, CEO of Basic Fun, adds that even minimal price increases per item can accumulate, significantly affecting consumers during peak shopping seasons like Christmas.

Jay Foreman [06:18]:
"For an individual item, that doesn't sound like a lot, but when a parent is gathering a basket together of Christmas presents, it might cost them an extra fifty, hundred, two hundred dollars to buy those gifts for their children."

Aberdeen's Rebranding Backlash

Shifting focus to the investment sector, the UK-based firm Aberdeen has reversed a controversial rebranding decision. In 2021, Aberdeen dropped the letters "E" from its name, a move that received widespread criticism. The firm has now decided to reinstate the letters to eliminate distractions arising from the unpopular change.

Conclusion

The Marketplace Morning Report provides a comprehensive overview of the escalating trade war's multifaceted impact on global economies, markets, and specific industries. From increased consumer costs and reduced business confidence to strategic business realignments and unexpected industry alliances, the ramifications of these trade tensions are profound and far-reaching. As the situation develops, businesses and consumers alike are bracing for continued uncertainty and economic challenges.

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Transcript

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[Liana Byrne]

Trade war threats become reality life in the UK this is the Marketplace Morning Report from the BBC World Service. I'm Liana Byrne. Good morning. So that trade war that was brewing has reached boiling point. After President Trump slapped new tariffs on imports from Canada, Mexico and China, Beijing fired back fast. The BBC's Mariko Oy is following this one. Hello. Hello, Mariko. We have a lot to talk about, don't we? I want to first start with China. What are the retaliatory measures that China have brought in?

[Mariko Oy]

Well, China has practically immediately, within an hour or so announced retaliatory tariffs on certain products. And if you remember, we're talking about initially they had that 10% tariffs on everything being imported from China into the United States. And then it was basically doubled to 20%. And within an hour they announced those retiratory measures. And when it was only 10%, they also announced retargetory measures. But it only affected things like crude oil. And the US doesn't actually really import lots of crude oil. So the impact was not really significant. And it sounded like a bit of a symbolic measure. But this time around, those measures, you know, 10 to 15% tariffs affecting everything from chicken, pork, dairy products to vegetables and fruits and so on. So that will have a significant impact on prices of what gets imported into the United States.

[Liana Byrne]

What about Canada and Mexico?

[Mariko Oy]

Those tariffs kicked in as well. Of course, they were put on hold for a while while they negotiated the deals, but then they kicked. And immediately we heard from Canada announcing the territory tariffs on certain products worth about US$100 billion. Mexico says that they will announce something.

[Liana Byrne]

Later today and it's interesting, isn't it, Mariko? It seems like business has reacted as well. You see in tsmc, that Taiwanese chip maker, it's now saying it's going to have a factory in America, isn't it?

[Mariko Oy]

That was something that they have been thinking about for a while. You know, as they watched closely these trade tensions between various countries. You know, it's not just tsmc, but American and as well as foreign companies have been announcing huge investments to build factories in the United States. And that's what Mr. Trump wants. That's what he says he wants by imposing these tariffs on trading partners.

[Liana Byrne]

Okay. The BBC's Mariko Oy, thank you so much for joining us in Marketplace.

[Mariko Oy]

Thank you.

[Liana Byrne]

So what have businesses got to say? Andrew Wilson, deputy secretary general and global policy director at the International Chambers of Commerce in Paris, says consumers will feel.

[Andrew Wilson]

The effect if these measures stake and we have every expectation that they now will. What we're seeing in effect is the biggest effective increase in U.S. tariffs since the 1940s with severe economic risks attached to that. Yale, I think, has predicted these measures could cost US households in the region of US$2,000 this year alone. There's a clear risk of it contracting the US Economy. And then we have the impact of the retaliatory measures.

[Liana Byrne]

He added that the tariffs will also impact global business investment.

[Andrew Wilson]

We're now entering into what is a very risky scenario for global trade and the global economy. And I think the immediate effect will ultimately be to reduce business confidence in the US and also more broadly across North America. Perhaps there'll be global implications and chill business investment.

[Liana Byrne]

Andrew Wilson from the International Chambers of Commerce there. So how are markets reacting? Let's do the numbers. Global stocks and bonds took a hit. Europe's Stoxx 600 is down 1%. And US 10 year treasury yields dropped their lowest levels since October. Even bitcoin slipped under $84,000 after recently being on a rebound. Now to an unexpected alliance in the electric car world. China's byd, one of the biggest EV makers, says it wants to team up with rival Tesla to take on gas powered cars. A top executive told the Financial Times that both companies need to work together to change the industry. This comes as Chinese EVs face steep tariffs in the US and Europe, making it harder for them to compete globally. But despite those rising trade tensions, she says China is open to sharing key EVIC technology with foreign firms. Now let's get more business reaction on this tariff story, this time from the toy industry. It's concerned about the impact on tariffs on Chinese imports. The BBC's Aaron Delmore was at the Toy Association Fair in New York and asked its president and CEO Gregor Hearn for his reaction.

[Gregor Hearn]

We do know this, that tariffs will be inflationary for toys. Raising toy prices is bad for small businesses. It's bad for families that are budget, budget conscious. And it potentially even swings the door open for knockoffs and counterfeit toys that might not go through all the testing and that might be seem like a cheap alternative to parents out there.

[Liana Byrne]

And when we talk about tariffs doubling from 10% to 20% on imports from China, who pays the price?

[Gregor Hearn]

We all believe now it's going to be the US consumer again. At a 20% or 25% rate on a tariff, it really is impossible for that not to be passed on in some way to the US Consumer.

[Liana Byrne]

Jay Foreman, founder and CEO of Basic Fun, says that consumers could end up paying a dollar more for a $5 toy, maybe $5 more for a $20 toy.

[Gregor Hearn]

You know, for an individual item, that doesn't sound like a lot, but when a parent is gathering a basket together of Christmas presents to put under the tree, it might cost them an extra fifty hundred, two hundred dollars to buy those gifts for their children. And of course, you know, I hope the administration would not want to be the grinch who stole Christmas and raise prices on toys.

[Liana Byrne]

I'm the BBC's Erin Delmore for Marketplace. And finally, a UK investment firm just admitted defeat on one of the most baffling rebrands in recent history. Aberdeen dropped their letters E from its name in 2021, but now it's bringing them back, saying it will remove distractions over the controversial change. And that's it from the Marketplace Morning Report from the BBC World Service. If you've just tuned in and want to catch up, you can listen back to the program wherever you get your podcasts. Big thanks to Naomi Rainey, our producer today. James Graham is the editor. Big thanks to him, too. And I'm Liana Byrne. Thanks so much for listening. Have a great day.

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