This week, letters from Washington to nine Asian trading partners delivered a mix of good, bad, and ugly. The White House granted a three-week ‘extension’ to avoid steep tariffs, for now, and reach trade terms acceptable to U.S. President Donald Trump. But the letters also threatened these same trading partners, stating that if they didn’t accept Trump’s demands, Washington would apply punishingly high tariff rates on them come August 1.
The initial tariff hikes, first announced by Trump on ‘Liberation Day’ on April 2, were meant to push countries to lower their tariffs on (and buy more) American goods, shrinking the U.S.’s bilateral trade deficits.
So far, only a few deals have come to fruition. Partial exceptions include a recently announced deal with Vietnam and continued discussions on a deal reached with China in June. The deal with Hanoi stipulates, however, that U.S. goods will enter Vietnam duty-free, while Vietnamese goods will be subject to a 20 per cent tariff, down from the 46 per cent rate announced on April 2.
A further headache for Hanoi — and other Southeast Asian economies — is the 40 per cent tariff that will be imposed on ‘trans-shipped’ goods (i.e. Chinese products routed through Vietnam or that contain a certain percentage of inputs from China).
Many of these economies’ exports rely heavily on the U.S. market, but on China for the raw materials used to make these exports.
Deal or no deal with China?
Beijing objected to the U.S. deal with Vietnam and Washington's crackdown on trans-shipping, vowing to take “countermeasures.”
China has been negotiating its own deal with the U.S. for months. In June, the two sides agreed to ease export controls on critical products such as rare-earth magnets, but neither side has made the terms of that deal public.
New Delhi, for one, didn’t receive one of Trump’s letters this week, but was given a tariff-pause extension until August 1. According to Trump, the two countries are “very close” to reaching an agreement, but talks are described as “increasingly entangled in hard bargaining.” New Delhi has indicated that if no deal is forthcoming, it is prepared to raise the issue with the World Trade Organization and has floated possible tariffs on U.S. automobiles.
With friends like these, who needs enemies?
Washington was less patient with Japan, Malaysia, and South Korea: on July 7, the White House announced 25 per cent tariffs on each country, roughly in line with the rates revealed on ‘Liberation Day.’
Trump also took aim at members of BRICS+, the non-Western bloc advancing alternatives to a U.S.-led world order. On Monday, BRICS leaders, following a summit in Brazil, released a statement voicing "serious concerns about the rise of unilateral tariff and non-tariff measures."
Trump responded by vowing to impose an additional 10 per cent tariff on anyone aligning with what he called “Anti-American” BRICS+ policies. It remains to be seen whether India, a founding member of BRICS+ and a country with which Trump is eager to finalize an agreement, will be spared from these additional tariffs.
