Hello and welcome to World Business Report from the BBC World Service. I'm Sam Fenwick. So global trade tensions are reaching new heights. Donald Trump's decision to impose tariffs on Canada, Mexico and China is sending shockwaves through global markets. Coming up today, we'll explore how these... trading nations are responding. We'll start in Canada where Prime Minister Justin Trudeau has reacted strongly. Now it's not in my habit to agree with the Wall Street Journal but Donald.
They point out that even though you're a very smart guy, this is a very dumb thing to do. Next, we'll turn to China and its decision to retaliate by suspending imports of US soybeans. Then we'll explore how Mexico plans to navigate this escalating trade war. The struggles, you know, the drug war. The pandemic with COVID, we were able to survive both of those crises, but I do not think that we can survive a permanent tariff war.
And it's not just these nations feeling the strain. We'll also look at how tariffs could drive up car prices for US motorists. These tariffs would add four to ten thousand dollars per typical vehicle. And it's a number that we consider to be unsustainable for customers and for the manufacturers. That's all coming up in the next 30 minutes. So let's begin in China, which has responded pretty strongly to the US administration's decision to impose tariffs.
Canadian officials warn that these tariffs could have devastating consequences for the American economy and its people, raising prices at the grocery stores and gas pumps and potentially costing thousands of jobs. Here's Canada's Prime Minister Justin Trudeau again. Even the excuse that he's giving for these tariffs today of fentanyl is completely bogus, completely unjustified, completely false.
So we actually have to fold back on the one thing he has said repeatedly, that what he wants is to see a total collapse of the Canadian economy, because that'll make it easier to annex us. is the second half of his thought. Now, first of all, that's never going to happen. We will never be the 51st state. But yeah, he can do damage to the Canadian economy, and he started this morning.
So how has Canada retaliated? Well, Justin Trudeau was adamant that neither his country nor his government would submit to American pressure. Canadians are reasonable and we are polite. But we will not back down from a fight, not when our country and the well-being of everyone in it is at stake. At the moment, the U.S. tariffs came into effect in the early hours of this morning.
And so did the Canadian response. Canada will be implementing 25% tariffs against $155 billion worth of American goods. starting with tariffs on $30 billion worth of goods immediately and tariffs on the remaining $125 billion of American products in 21 days' time. And among those goods being targeted are items like orange juice, peanut butter and motorcycles.
The province of British Columbia has estimated that the cost of these tariffs to their economy will be in the region of $70 billion in the next three years, which includes potential job losses of 124,000. Key industries at risk include lumber, so that's wood processing, construction and agriculture. Let's talk now to Laura Jones. She's the president and CEO of the Business Council of British Columbia. That is a significant loss estimated by your province. Why so high?
Well, it's going to be high right across the board, right throughout Canada. This is going to cost hundreds of thousands of jobs. And it's because... The U.S. is our biggest trading partner. In fact, our province is a little bit more insulated than some of the other provinces. So in British Columbia, about 54 percent of our exports go to the U.S. Across Canada, it's 75 percent. So three quarters of our exports go.
to the US market. And we are a small trade dependent country. This is a very, very big deal for Canada. How do you feel about the way your Prime Minister approached this today? He sounded pretty passionate, didn't he? Yeah, I think what you're seeing is that Canadians across the board are pretty passionate about this. I came home last night and my teenagers were talking about tariffs. And you know when the teenagers are talking about it, everyone's talking about it.
So people are pretty worried about it. They were asking me, what does this mean? You're seeing Canadian flags everywhere. So it's really sparked a lot of national pride. I've heard it from my business circles to my ballet. class circles. People are talking about canceling or not going on vacation to the U.S. So it's really, the world feels very upside down too for Canadians because Canada and the U.S. in normal times are very good friends.
always agree on everything, but we're good neighbors and good friends. And we've been through, we've been there for each other during hard times. September 11th, for example, Canada landed planes headed for the U.S. There have been musicals done about it. You know, we're there for each other in hard times. So this feels very, very upside down. So you mentioned there's some sort of retaliatory tactics individually, people not going on holiday. We heard from the prime minister.
Mr. Justin Trudeau talking about tariffs on $30 billion worth of products. What is your province doing in terms of retaliatory measures? So the premier here has talked about pulling all of the American alcohol products off the shelves from the red states. So that's one thing that is going on here. And I expect there'll be more.
come if this lasts for any period of time. But it's hard to imagine that it will if any kind of sanity or rationality comes into play, because this is going to spark a global slowdown. It's increasing. inflation, job losses, and this is very bad for the Americans, not just the Canadians and beyond. I mean, I know, you know, and of course with China and Mexico involved, but this has the potential to really spark a global slowdown.
down. So Donald Trump is, President Trump is playing with fire. Is there a way of prioritizing Canadian business procurement so that you can make sure that you keep things kind of local? Yes. Yeah. Yes, and that will be happening as well. That will be a big part of the retaliation as well.
OK, well, that was Laura Jones, President and CEO of the Business Council for British Columbia. Thank you for joining us today. Let's now take a closer look at how China has responded to the latest tariffs. Beijing has held...
back. It hasn't held back. In response, China has imposed additional tariffs of 10 to 15% on key US agricultural products like soybeans, pork, beef, chicken and dairy, with these measures set to take... effect on monday the government has also taken specific action against imports it suspended shipments of u.s logs and soybeans from certain companies citing quality concerns now agriculture accounts for over
20% of US exports to China valued at $36 billion in 2022. Soybeans alone made up half of all US agriculture exports. Earlier, I spoke to Jim Sutter, the CEO of the US Soybean Export Council, and he says that he's quite puzzled about China's decision to suspend shipments from those specific companies. I don't have 100% clarification on that. These three companies, CHS, Louis-Dreyfus, and EGT, they are...
You know, exporters of U.S. grains, U.S. soybeans, among many other grains, they shipped to China as well as many other destinations. We do not know exactly the reason that they were singled out and put on a do not. I don't know exactly what you call it, but the list of companies that may not ship things to China. So...
Of course, we're disappointed by that. These companies are all members of our organization. And as far as we know, exporters in good standing. I think what I can tell you is we've had questions from a couple of them and they don't understand why they have been. put on that list either. So we are not exactly sure of the rationale or exactly when it takes effect and how long it takes effect.
You know, the tariffs are going to take effect on commodities that ship after March 10th and arrive after April 12th into China. So we're unsure if that also is the same schedule that these companies will be tied up with. if it's more of an immediate situation with the companies. Is it a worrying precedent, do you think, that China is likely aiming to exert pressure on key players in the US agricultural sector?
Well, I think it really depends. And I don't know if we'll ever know exactly why. It has been something that I understand China... does in our industry and other industries. At times, if there's a company that ships a product that may be out of specification or something, I don't think this... It's not without precedent that they... may say for a period of time, we're going to have that company on a no ship list until we kind of review their processes and procedures. So if that's the case,
You know, it's not a good situation, but it is not necessarily a worrying precedent. If this is the start of China kind of picking winners and losers out of our export grain industry, I think that's worrying. Is it worrying this is down to the tariffs, that this is getting more tit-for-tat than it has been previously?
Yeah, I think, Sam, it's disappointing to us that these tariffs were put in place. Maybe not totally surprising, but disappointing for sure. Our organization and the whole... U.S. soy industry, farmers have had a long-term relationship with China. 43 years we've been doing work in China. And we think that the relationship between both our farmers, the association, the association that I'm with, and our U.S. export industry.
has really good relationship with Chinese importers, with Chinese companies, with the associations there. So I think if you would go and talk to people who utilize... soy in China, I think they would tell you that the U.S. soy industry has been a great partner. So it's disappointing to us that we get caught up in what is really sort of a high level government to government situation.
As soybeans are the largest export, our largest agricultural export commodity and the largest export to China of agricultural commodities from the U.S. We're a target. We got a bullseye on our back. And so that's, I think, why soybeans are chosen. How long can the soybean industry survive without China's business? I think we can survive.
This is sort of a normal thing that happens this time of year. What we sure hope is that the Chinese and U.S. officials can get together and talk about the issues that there are between the two countries. And, you know, we've been suggesting that the agreement that President Trump in his first term and President Xi both hailed as a very successful agreement that was signed on January 15th, 2020.
called the phase one agreement. We would love to see that phase one agreement. And we think it makes a lot of sense for that to be kind of pulled out and dusted off and perhaps maybe a new and improved phase one or a phase two agreement. That was Jim Sutter and he is the CEO of the US Soybean Export Council.
Let's head over to Mexico now. The trade relationship between the US and Mexico is deeply intertwined. The economies of both nations rely on highly integrated supply chains. Mexico is one of the United States' largest trading partners.
In 2023, total two-way goods traded between the two countries reached $807 billion. So tariffs on goods from Mexico will cut deep. And the country's president, Claudia Scheinbaum, has criticised the U.S. decision as unjustified, saying that it will harm both nations.
Jose Mario Sanchez is a Mexican businessman who sends materials for making wooden furniture from Mexico to the United States. He told us how the tariff war will affect him. This is the first time that I feel... in the last 40 years that our companies can cease to exist.
We have gone through a lot of crisis. You know, we have gone through security crisis, the drug war in Juarez, you know, made us famous as the most dangerous city in the world. We were able to survive that through resilience. But this one is very difficult. We have 365 worldwide companies that produce here that create around half a million jobs. If that ceases to exist, there's nothing to replace them. And if we lose that...
then we're going to have a greater crisis than what we have now. We have struggles, you know, the drug war, the pandemic with COVID, and now this tariff war that, and let me tell you, the tariff war has a potential. of destroying the system more or the way of life in the border than in the drug war. We were able to survive both of those crises, but I do not think that we can survive a permanent tariff war.
Jose Mario Sanchez, a Mexican businessman, speaking to us there. Katerina Schultz is a journalist and joins us now from Mexico City. Katerina, do you think other... business owners in Mexico share the same feelings there as Jose? I certainly agree. I think for a lot of people, there is a fear that these tariffs are going to drive Mexico into a recession, particularly because the Mexican government has really followed through with Trump. demands in terms of cracking down on fentanyl trafficking.
on the flow of undocumented migrants from the Mexican into the US border. And I think that with these tariffs, it's going to make that crackdown even more costly. And for a lot of people... who are working in Mexico, Mexican people here, they rely on the industries that are going to be most impacted, like agriculture and automotive. And we've already seen that Honda has made this promise to... to shift manufacturing of their hybrid civic model into Indiana and the United States.
This will result in a potential significant loss of jobs, and I think it is worrying quite a few people, and it's certainly worrying the Mexican president, which is why she has decided to sort of hold off. away in announcing retaliation until Sunday. Yeah, we're expecting that announcement sometime on Sunday, aren't we? I mean, the impact of the tariff announcement has already caused the peso to drop by about 1.4% across the day today. Yes, it has. And I think that...
Just seeing that immediate reaction in how heavily it impacted the Mexican currency and is impacting. What's going to happen at the border? What's going to happen for these industries that many Mexican people rely on? And keeping in mind that for a lot of these folks working in these industries that are going to be most impacted, a lot of them are. earning their wages day to day. And so that sense of uncertainty is far more scary than
if folks had some savings they could perhaps rely on or other forms of income. But for most people here, that just isn't reality. What do you think or what's the sort of word on the street as to what the retaliation might be when you hear that announcement on Sunday? So... There's sort of two ways that this could go and it's kind of what the rhetoric is showing here is either Mexican President Claudia Sheenbaum is hoping that by after saying this morning we are going to retaliate on
that President Donald Trump may backtrack or move into negotiations with the Mexican federal government. Or, on the other hand, Mexico will crack down and push retaliatory tariffs, just like was mentioned the first time that tariffs were mentioned by President Donald Trump. Of course, ideally, whether this is for the Mexican people, the Mexican government.
They don't want to see that. I think they want to move into that negotiation step and hope that they can mitigate this without having to start this trade war in an effort to maintain this. pretty strong bilateral relationship that they've had since Trump took office in January. Katerina Schultz, thank you very much. A journalist there joining us from Mexico City. And you can follow all the developments, of course, here across the BBC World Service on what happens over the weekend.
You are listening to World Business Report from the BBC World Service with me, Sam Fenwick. So now let's turn our attention to how these tariffs are affecting people in the US. Now, retailers are already raising alarms about the potential fallout. Target, the popular discount department store and hypermarket chain, has warned. that shoppers could see prices increase in stores within days. Its CEO has said that staples like strawberries and avocados, bananas are expected to become more expensive.
specs that American consumers could lose between $46 billion and $78 billion in spending power annually due to the tariffs. The car industry is among the hardest hit sectors. For decades, automakers have relied on the economic alliance between the US, Canada and Mexico to establish highly efficient supply chains. Tariffs threaten to disrupt that balance. Earlier, I spoke to Patrick Anderson.
He is the CEO of Anderson Economic Group and he's in Detroit. And he's been analysing the economic impact these tariffs will have on the industry, including how much more it could cost to buy a car. The Anderson Economic Group estimates, which are based on 10 different actual vehicles assembled in North America from a variety of manufacturers, are that these tariffs would add $4,000 to $10,000 per typical vehicle.
And it's a number that we consider to be unsustainable for customers and for the manufacturers. A typical car now, brand new car sold in the United States can cost $46,000 to $50,000. you're adding more than 10% to the cost of this car for nothing valuable from the point of view of the consumer. It's just additional cost. So you can expect that customers are going to be resistant. to these kind of tariff costs. Where do those costs come from? Have you broken that down?
The estimates that we have are based on the announced tariff policy of the United States and of Canada and Mexico. So these are all additional costs that are in the form of taxes or tariffs that go to. national governments. And obviously there's no service that a customer gets because of this. The product doesn't get any better. They just pay more to buy it. Can American consumers afford the extra cost on these cars?
A lot of American consumers are simply not going to pay an additional four or $8,000. We have to remind ourselves that very few auto buyers actually have to buy a new car this year. And if we see the production cutbacks, reductions in sale that I expect we will, you're going to see job losses in these states. Why are Canada and Mexico so important to the US car making industry?
The United States and Canada, all the way back in the 1960s, understood the benefits that they could share by integrating some of their manufacture across the border really between Ontario and Michigan. And then with NAFTA, that expanded to northern Mexico, too. And one of the reasons why the North American auto industry is so productive and sells so many vehicles is that you can build parts and whole vehicles in northern Mexico.
canada ohio michigan alabama different states making use of these other components and that makes it an incredibly productive place to build cars and that's why you've got German automakers, for example, building vehicles here and exporting them back to Europe. The supply chain is very well established, isn't it? I mean, how difficult is it going to be for it to continue like that? This is a body blow on the whole.
supply chain across Canada and the United States. And if you maintain 25% tariffs, it will have permanent effects on our ability to do what we have done, which is a big threat to Michigan and Ohio and Ontario. Because if you don't think of the state of Michigan as a center of auto manufacturing and design where you can build some parts of a car and send it to Ontario or get some products from Ontario and bring it here.
then really a lot of the advantage that Michigan has had for the past century starts to go away. Donald Trump would say that the supply chain has actually cost U.S. manufacturing jobs. and that he wants to bring those jobs back to the US. Is that going to happen? I have no doubt that President Donald Trump wants to bring manufacturing jobs back to the U.S. The problem here is we do have manufacturing jobs in the U.S., and this is going to cost us some of them.
I completely understand the president's insistence on border security. I hope that that insistence on border enforcement results in improved border enforcement and not taking down this very beneficial trade. that is supporting so many jobs. in the United States and Canada and Mexico. So with an industry then, are you sort of hoping that, you know, Mexico and Canada will tighten up the borders further? They have introduced some new message, haven't they, since Donald Trump became president?
these tariffs might go away? I definitely hope that the tariffs that have been just recently imposed end up going away in favour of the carefully negotiated. and very beneficial trade arrangement that we have with Canada and Mexico. That was Patrick Anderson. He is the CEO of Anderson Economic Group. Listening to that is Walter Todd, President and Chief Investment Officer at Greenwood Capital. He joins us today from South Carolina. There's some new analysis out from S&P Global Mobility.
today, Walter, and they're estimating that tariffs could disrupt car production in North America pretty quickly by around a third. That's a cut of around 20,000 vehicles a day across the US, Canada. And Mexico. I suppose what's happening is they're having real effects, these tariffs, aren't they? Well, we're just 24 hours in here, but yeah, they certainly have the potential to be very disruptive to the economic flows as has been discussed.
My hope is we're starting to get some inklings that maybe there's some relief in the near term, so we'll have to watch and see that. BMW plant located about 20 minutes from where I'm sitting right now. It's been here for 30 years. So you do have companies that are producing over here, foreign companies that are producing cars in the United States that would avoid some of these tariffs, but certainly disruptive.
You get the theme from the people that we've spoken to today on the programme that they think that these tariffs will be short-lived, that if we tighten up the borders in Canada... and Mexico, then the tariffs will go away. And we saw, didn't we, that there was a delay. Donald Trump delayed them, but then he brought them in quite swiftly. Is it realistic to think that the tariffs are not going to be here in the next few weeks? I think, well...
You never know with the current administration what headlines are going to cross tomorrow. But if you look at how the market reacted today, so for example, the EWW, the ETF that represents the Mexican stock market, it was down 3.6% at the lows today. closed up on the day. Canada didn't close up, but closed well off the lows as did the U.S. stock market. So I think there's some inkling that this is going to be a short-term impact, but we'll just have to wait and see.
So what are investors doing at the moment? Are they just sort of waiting, biding their time to see what happens? Well, they seem to be trading a lot because there's a lot of volatility during intraday as well as across days. I mean, the S&P hit a high just a couple of weeks ago and is down about 6% from those levels. So certainly a lot of volatility. I expect that. to continue as we get these headlines crossing
And we'll see what happens. Well, thank you very much as ever. Walter Todd, President and Chief Investment Officer at Greenwood Capital, joining us today from South Carolina. Thank you for being with us. The producer today was David Cann. Thank you very much to him. You can always get a podcast of World Business Report by searching for us wherever you get your BBC podcast. Thanks for listening. I'm Sam Fenwick.