Global trade uncertainty 'is off the charts'
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Hello and welcome to World Business Report here on the BBC World Service. I'm Rahul Tandon. It's one of those days where a lot's happening in the global economy. Some big stories we could have had or decided to start the programme by talking about a crucial decision involving Google and the growing spat between the man who runs the world's most important central bank, Jerome Powell, and the man who runs the world's largest economy, Donald Trump. But

we have decided that we're going to start by talking about global trade once again because Donald Trump says he's 100% sure that he'll strike a trade deal with the European Union. It comes as the head of the International Monetary Fund, Kristalina Georgieva, said global trade uncertainty, which of course comes from Donald Trump's tariffs, is off the charts. Her warnings of a downturn echo those of the head of the US central bank, Jerome Powell. Ms Georgieva said economic growth

Ultimately, trade is like water. When countries put an obstacle in the form of tariff and non-tariff barriers, the flow diverts. Some sectors in some countries may be flooded by cheap imports. Others may see shortages. Our new growth projections will include notable markdowns, but not recession.

So that reference to water got us thinking and we thought let's look at the issue of global trade by looking at it through the lens of the shipping industry. Mariette Cordera is CEO of Long Beach Port, which currently lays claim to being the busiest port in the United States. Lots of trade coming in and out of China. He told me they'd been seeing record numbers this year already ahead, though, of that tariff implementation.

The percentile was due from shippers front-loading imports in anticipation of tariff implementation. So admittedly, these numbers that we have been reflective of in terms of record numbers

and what our position is now as the number one port. I don't think this is going to go through the 2025 year, and we're going to have possibly a rough 2025 second half in terms of diminished cargo volume. Yeah, I wanted to ask you about that because we've now seen both countries, China and the US, put heavy tariffs on each other. Are you already beginning to see a drop-off in both trade in and out of the port?

Well, in talking to our customers, what we are seeing is a diminished booking with regard to imports that are coming in or that will be coming in in the next couple of months. If the tariff or the high tariffs that we're looking at become permanent and long term, you're looking to a possible worse scenario of a 20% loss of imports here at the Pearl Long Beach for the second half of 2025, and at the very least 10%.

20% is quite a number. What does that translate to in terms of staffing at the port? You wouldn't need so many people if your volumes were down to such an extent. Well, what that means in terms of the port of Long Beach, and I'll give you some context here.

One in five jobs in the City of Long Beach derive directly or indirectly from the Port of Long Beach operations here. And when you look at that number of regional, it's about one in nine jobs. And when you look at the number in terms of statewide in the State of California, there's over 700,020 jobs that derive directly or indirectly from the Port of Long Beach. And last,

In the national supply, there's 2.6 million jobs that, again, derive from the operations here at the port of Long Beach. You've got another situation you might have to deal with, and that we don't know what's going to happen. Is there potential $1 million docking fees for Chinese-made vessels entering the U.S. ports? If that is put into place, what sort of impact will that have? It's problematic in terms of what that impact is, particularly in relation to the costs that are going to be passed on to the consumer.

But the good news is the...

U.S. trade representative. Now, as you may know, the president has now allowed additional time to study the impacts of this fee. So we're hopeful that somehow we approach it in a more problematic fashion and perhaps diminish the impact. Yeah, because a lot of the freight that comes into your port and many ports in the U.S. comes in on Chinese made ships. They dominate that sector, don't they? No question. I mean, there is a dominance of in the industry of Chinese

vessels built in China. And again, and I think that's one of the angles that the administration has a legitimate interest in looking at in terms of how that impacts our security, how that impacts our US mariners and the need for amplifying US built vessels. So we need to step back and give this some time to play out. It's interesting at the moment in the last couple of weeks,

a couple of days we've had some pretty stark comments from people at the cutting edge of the global economy the Director General of the World Trade Organization the head of the International Monetary Fund saying look we are heading into

for a pretty big reduction in global trade. From what you're already seeing, that's starting, isn't it? Well, you're starting to see that overall in the US has been a 20% reduction in imports. So this is not just a USA issue. As you mentioned, it's a global scenario here in terms of what that impacts global trade overall. Keep in mind that the tariffs that we are talking about initially now apply to 53, 57 countries globally.

Much different than the first Trump administration, which the dynamic was really with regard to tariffs as it relates to China. And just to give you some context back then, in 2019, the Port of Long Beach lost volume from China, imports from China at the tune of 20.5%, 20.5%. But we gained 10% from other regions, like, for example, Vietnam, Indonesia, Southeast Asia.

But again, the difference now is every country right now has been impacted with some form of tariff. You are the busiest container port in the US at the moment. But because so much of your trade comes in from China, you're unlikely to be in a few months time, aren't you?

Well, I mean, that's true. I mean, that's why maybe I'm taking the opportunity of emphasizing our number one status at this point. But on the other hand, to be candid and transparent, the second half of the year may be a different story. And let's just keep in mind that I think this is a question of U.S. imports and U.S. exports.

that are going to be impacted. To what extent depends on the ultimate long-term implementation of whatever tariff percentile we're talking about. But it's going to affect every port gateway in the USA.

Mario Cordero there, CEO of Long Beachport. Let's bring in Kerry Leahy, economist with Columbia University. Fascinating to hear that it's already impacting that port there. Donald Trump has said this evening that China has reached out for talks with the US. For global trade, it's vital that we see something, some breakthrough in relations between the world's two great economic powers, isn't it, Kerry?

I certainly hope so, because while you can say that Trump is asking some good questions, the answers he's giving us are very bad. And while it's understandable you want to expand the U.S. manufacturing sector and produce more than they've done before, this is not the way to go about it. And if you want to disentangle yourself from China, there are ways to do it, but I'm not sure that

Tariffs of 150% are the way to get the job done. He's also talked about a possible deal with the EU. What are the markets? What do they want to see? It's not talk of deals. They want to see things being signed, don't they?

Absolutely that. And then, of course, the difficulty is, is if you sign a deal, can you be trusted for the deal to last more than a day or two? And so the on and off and ineptitude of the transition is still going to have people on tetherhooks probably until the last day of his second administration. Last night on the program, we heard this from Jerome Powell, who is the chairman of the U.S. central bank, the Federal Reserve.

The level of tariff increases announced so far is significantly larger than anticipated, and the same is likely to be true of the economic effects, which will include higher inflation and slower growth. Both survey and market-based measures of near-term inflation expectations have moved up significantly, with survey participants pointing to tariffs.

That prompted a pretty angry response from Donald Trump. He repeated a demand for Mr Powell to lower interest rates and said his decisions were always too late and too wrong. Speaking to reporters in the Oval Office in the past few hours, he said this. I don't think he's doing the job. He's too late, always too late, a little slow, and I'm not happy with him. I let him know it and...

If I want him out, he'll be out of there real fast, believe me. Judy Shelton is a former economic advisor to Donald Trump. Well, I have to tell you, I was appalled.

by the comments offered by Chair Powell. I think that the level of passive aggressiveness being shown by our central bank chairman purposefully, it's seemingly oriented to undermine the Trump economic agenda has just reached an untenable level. So strong words, let's get some reaction. Julia Coronado is a former economist at the Federal Reserve who's now the president of Macro Policy Perspectives.

I don't think it's rocket science what he's doing. He's just trying to call it as cleanly as he sees it. There's nothing political about that. Should he have been less candid, you mean?

Or should he have been that candid? I mean, look, I think that Chair Powell was not necessarily trying to move markets. He speaks clearly. He speaks plainly. And the outlook has deteriorated. It's their job at the end of the day to keep their eye on medium term stability. And that's what they're doing. As intense as the political moment is,

They're trying to hold on to their institutional credibility. You obviously worked at the Federal Reserve. Have you ever seen a situation where the governor of the Federal Reserve is under so much pressure from a U.S. president? It is an intense moment. There is always pressure. There have been moments of pressure under the Trump, first Trump administration. There have been moments of pressure in other administrations. Does this seem different?

Yes, it does seem different because there is an...

an assertion of executive authority in other agencies and other independent agencies before the Supreme Court that are being adjudicated right now. There is an intention to have a heavier hand on administrative authority across a range of bodies, including the Fed. So, yes, this is quite different. But Donald Trump is entitled to say, isn't he, that he wants his Federal Reserve chairman to cut interest rates quicker than

than he's doing at the moment. He's entitled to voice that opinion, isn't he? He's entitled to voice that opinion. He can say whatever he wants. I think that what he said was not just that he would like to see the Fed cut rates, but that he would like to see Chair Powell out of his current position. And that is a different...

level of sort of implied threat. Are we at a seminal moment, not for Jerome Powell, but also for the independence of the Federal Reserve here when you have a president making those sort of statements? We are potentially at a seminal moment. The statements, again, they're just words.

if they are followed through with action. And we understand there's a variety, there's a range of voices within the administration that are trying to temper that threat and maintain the independence of the Fed. And Chair Powell himself has said, you know, Congress still stands behind Fed independence. So as long as that institutional independence holds,

then we maintain that institutional arrangement, that credibility, that source of stability. But I would say the risk to their independence is certainly greater than it's been in the past. Kerry Leahy still with us. Fascinating to hear Julia's thoughts. Have you ever seen a situation like this where a U.S. president basically says he wants the chair of the Federal Reserve not to be in the job anymore?

No, not to this extent. Of course, Truman and Johnson had problems with the same man, Preston Martin. But while they may have been upset and yelled at them, they didn't talk about firing them because they knew that the legal grounds for doing that were exceptionally low.

Kerry, I want to have a listen to this. Christine Lagarde, of course, who is in charge of the European Central Bank, well, she announced new cuts in interest rates today because of what she said was exceptional uncertainty. She said the bank would take a wait-and-see approach

as to whether the planned tariffs will lead to higher inflation in the euro bloc. Looking at today and the tariffs debate that is going on, as well as the tariff impact that is actually happening, we know that it's a negative demand shock. We can anticipate that it will have some impact on growth, but the net impact on inflation...

will only become clearer over the course of time. That decision, I'm sure, is something that Donald Trump would like Jerome Powell to do. But they're different economies, aren't they, the EU and the US?

That's right. And as many of our listeners know, the growth rates in the EU have been significantly lower than the U.S. And they have a somewhat better outlook on growth in the last month now that we had a Sputnik moment in Germany, potentially. But the combination of slower growth and a little better inflation profile than the U.S. does, or at least the prospect of it, means they have a lot more room to cut rates rather than the Fed, who does not at the moment.

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You're with World Business Report from the BBC World Service. A judge in the US has ruled that Google has an illegal monopoly in advertising technology, which determines where online adverts are placed. This is a really significant ruling. Here to explain why is our technology reporter, Lily Jamali, of course, is there in San Francisco. This is quite a crucial moment, isn't it?

It is. There's a lot of momentum in the antitrust space here in the U.S. And this is the latest example. This is a ruling having to do with Google's advertising technology. And this judge, Leonie Brinkema in Alexandria, Virginia, has ruled that they do, in fact, hold a monopoly in two of the three buckets that were up for discussion here. The ad tools that publishers use,

as well as the exchange that Google operates that connects buyers of ads with sellers of ads. So it's a big deal. And it comes at a time when big tech is under a lot of scrutiny. You've been covering that meta hearing, haven't you?

Yes, that's right. So the Federal Trade Commission, which is a different body that deals with antitrust matters, has been suing Meta, which owns, let's count them together, Facebook. They own Instagram. They own WhatsApp. And as you hear me say there, you know, there's a lot of scrutiny on Meta around do they have too much control over these various spaces. And the one that's understated

under the microscope by the FTC and on trial this week has to do with social media. Do they have a monopoly in social media? We've seen Mark Zuckerberg, the CEO of Meta, take the stand today to make the case that no, there's plenty of competition. Look at TikTok.

For example, that's the big one that they've been dwelling on a lot, as has the former chief operating officer at Meta, Sheryl Sandberg, who followed Zuckerberg on the stand this week. Lily, thank you so much for joining us. Let's bring in David Balto, former policy director at the Federal Trade Commission in the US. David, thanks for joining us so much. Thank you. We heard from Lily that, you know, you're somebody who would have looked at these companies for Alphabet, which owns Google. How significant a ruling do you see this being?

Oh, this is a landmark decision that I think has a significant potential to disrupt these markets and break them open for competition that's desperately needed. The history, as demonstrated by the court's decision, is that Google used coercive practices to basically force people to use its ad tools and its exchanges illegally.

and in doing so significantly increased prices and reduced product quality. Well, you know, Google, I'm sure, would deny that. What does this mean in that much bigger way that government is looking at big tech? We know that many people feel that these companies are too big, too powerful, bigger than many of the world's largest economies at the moment. Do you expect to see this as a crucial moment in sort of controlling big tech?

I think so. And I think the court's decision shows how using conventional, conservative, mainstream antitrust principles, you can find a violation of the law. And you can use the antitrust laws to restrict these kinds of anti-competitive practices, which should permit a new competition to break out, leading to better choice and lower prices.

What do you think happens next here? Because the court will determine remedies next week, won't they, in terms of what should happen? What

What would you like to see happen? They're going to begin the remedy process. And the Department of Justice has suggested that it's not enough for them to say, well, stop doing the bad things. The court needs to think about structural relief requiring divestiture, separation of certain parts of these businesses to really allow competition to flourish.

That will be something that will be very seriously considered by this court. What does that actually – is it selling Chrome? Is that what you would like to see?

Well, that goes more to the search case, which is in another court. But here in this case, it's going to be a question of whether or not you break up the ad tools and exchange businesses so that there's greater choice for advertisers, which have paid an exorbitant price for advertising over the past several years.

David, thank you so much for joining us and making sense of what is an important ruling. It has huge implications there for some of those big tech companies. Let's talk about, I suppose, another tech company now. It's happening. Something is coming.

That is from Netflix's series Adolescence. If you haven't seen it, definitely worth the watch. Netflix have had their results out, reported quarterly profits of $2.9 billion as revenue grew some 13%. And, Kerry, we're seeing a company, you know, doing very well with its streaming series and also doing well with streaming sports in the US WWE, doing very well for them.

That's right. They've spread out and they're now going into live performance as it is mainly in sports. And it's really helped their business. I think what the bothersome business was that they didn't tell what their subscriber base had done. And probably most people think it's probably not increasing as fast as they would like. And that's why they didn't want to talk about it.

Kerry, stay with us. We're going to go to Cambodia now. We've been talking about President Xi's trip to Asia on the programme all this week. Well, he is in Cambodia now. And these Cambodians, well, they've been talking about the benefits of their country's close relationship with China. China helped build bridges and hospitals and helped poor Cambodians. They provided money for us to build our country. China helped build bridges and hospitals and helped poor Cambodians.

and want him to help us more. The more money he can give us, the better for us. China helped to build the road named after President Xi, and also bridges and other roads. I think a strong relationship with China will potentially help our economy develop even more.

China helped to build streets, bridges, schools and supermarkets. So as a Cambodian, I'm so proud and I'm happy to welcome President Trump.

I've been talking to Sopal Iyer, Associate Professor at the Thunderbird School of Global Management at Arizona State University. He's been telling me how important the U.S. is for Cambodian exports, particularly in clothing and footwear. For Cambodia, it's critical. The U.S. market represents...

a large portion of its exports because it focuses on garments, footwear and toys, things that are actually the raw materials of which are imported from China. So in a way, if Cambodia stops exporting to the United States, it will also stop importing from China those raw materials used to make or assemble those items and then to export them to the United States because there won't be a need to import those raw materials anymore.

For Cambodia, this will be a difficult position now, isn't it? This is a difficult position because they need to strike a deal with the US. And to do that, the US will want them to distance their links from China, won't they? Oh, that has been a recurring refrain even before Trump came to power.

Cambodia's proximity to China is one of the Association of Southeast Asian Nations, ASEAN member nations that is simply very close to China and supports China in so many ways, from Xinjiang to Hong Kong to whatever human rights claims people make about China. Cambodia is very eager to dispute those because Cambodia relies heavily on China for foreign direct investment and for

frankly, for the infrastructure it has enjoyed through the Belt and Road Initiative over the years. Last year in 2024, Cambodia didn't get any money from China in terms of BRI. And so it's a little worrisome for the leadership there that China may be not so interested in giving or lending Cambodia the money that it needs to build its infrastructure.

But now, because of the situation, President Xi is in Cambodia. Do you expect to see more Chinese investment coming in to offset any possibility of Cambodia striking some sort of deal with the U.S.? Well, yeah, in terms of Chinese investment, that continues. But in terms of Chinese foreign investment, that has remained stagnant.

in the billions. And so with Xi's visit, I'm sure he's not coming empty handed with nothing to announce so that there's always going to be a kind of fanfare around the idea of the leaders meeting, things are going to get signed.

And so this is an opportunity. Of course, the timing is very odd. I mean, it's during the Cambodian New Year when everybody's out of town and going to the countryside. But and it's also happens to be the 50th anniversary of the fall of Phnom Penh by the Khmer Rouge, who were supported by none other than China. So it's somewhat ironic, although I don't think it was possible for the Cambodian leadership to say, I'm sorry, this is not a good time to come visit President Xi. It's our new year. We're not really working during this time, but.

he apparently wanted this date. So that's what's happening. Do the Americans have a point when they say, look, what we've seen is the growth of the footwear and clothing industry in Cambodia, but those are not Cambodian companies. They are, in effect, Chinese proxies. Right. So the

ethnic Chinese own these factories. They're not necessarily Beijing-controlled ethnic Chinese. I mean, they're Malaysian Chinese, Singaporean Chinese. They've got Taiwanese garment factories that own garment factories in Cambodia. But it's just that the inputs come from China. And so the

relationship is actually a kind of this twin relationship of yes you export to the united states but you you bring the inputs from china and the money obviously is benefiting a country that is close to china and it it serves also as a kind of alternative location for production right so if tariffs are imposed on china china could then say okay well let's offshore or near shore to cambodia

and then Cambodia can export to the United States. And it'll say made in Cambodia. It'll be made by Cambodians, but it'll almost entirely be from raw materials sent by China. So far, Kerry, we started the program talking about global trade. Let's end it by talking about global trade. Cambodia, Vietnam, Malaysia, countries that look like they're going to have to choose between China and the US when it comes to trade.

That seems to be the case. And this is a perfect example that a country has to get the raw materials from China and they're going to be squeezed on that, particularly if they try to cut a deal separately with the United States. So where are they going to get the input to produce the stuff that the U.S. wants is going to be a really hard case because Trump's going to work very hard in trying to figure out how much of all these countries stuff is actually Chinese stuff.

It certainly is. Kerry, thank you so much for joining us on the program, guiding us through what has been once again another busy day for the global economy. Many of those negotiations, I'm sure, will be continuing over the next few days and weeks in Washington as countries go there, trying to talk to the US trade representatives about possible deals that could alleviate some of the tariffs that may be imposed on them by Donald Trump when those 90 days are

finished. We'll be back with Business Matters in a couple of hours time, but that is it for this edition of World Business Report.

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