Next round of tariffs

"Tariff pause" ends July 9...

Things will get serious in the next few days. July 9 marks the end of the 90-day period Donald Trump set for negotiations, during which his reciprocal tariffs are limited to 10% instead of the country-specific, mostly higher rates (for an overview of the current tariffs, see the box below).

... few "deals" so far, ...

However, the negotiations have yielded few results so far. Only a framework agreement with the UK has been signed, and even here the details are still being worked out. In addition, it has been agreed with the Chinese government that the US will ease its export restrictions on chips in exchange for rare earths. For China, the reciprocal tariff rate of 34% that was originally planned has been reduced to 10%, and unlike the other countries, this will apply not only until July 9, but until August 12. In addition, there is a 20% “fentanyl tariff”. Different tariffs apply to some industries, for example 50% on steel and aluminum products.

According to Donald Trump, an agreement has also recently been reached with Vietnam. Under this agreement, tariffs on Vietnamese shipments to the US will be set at 20% (and 40% for transit shipments, which is presumably intended to prevent Chinese companies from circumventing tariffs by exporting to the US via Vietnam). Although this is more than the standard rate of 10%, it is significantly less than the 46% that was planned as a reciprocal tariff. US goods imported by Vietnam, on the other hand, are duty-free. Vietnam has become an important supplier to the US in recent years. In the last twelve months, the country exported goods worth around $150 billion to the US, the same amount as Japan. In contrast, Vietnamese imports from the US amounted to only $15 billion.

... most negotiations are tough

Numerous further negotiations are still ongoing. According to Commerce Secretary Luttnick, agreements with around ten important trading partners are in the final stages, although it remains unclear whether the finish line can really be reached in the next few days. US policy has recently focused on getting the major tax bill through Congress. This may have led to some delays in the planned trade deals.

The negotiations with Japan show that a “deal” with advanced economies is not as easy to conclude as Trump apparently envisages. According to press reports, Japanese negotiators are not prepared to sign an agreement that leaves car tariffs (25%) unchanged. Trump, in turn, complains that Japan is making it difficult to import rice – a staple food for the country and a very sensitive area for Japan – in order to protect domestic producers. Trump is demanding that the Japanese market be opened up to US agricultural exports, rightly pointing out that Japan is currently facing major problems in securing its rice supply anyway.

... which is why Trump could soon be writing a lot of letters

If the negotiating partners continue to be recalcitrant, Donald Trump has already announced that he will simply notify those countries of the future tariffs by letter. The first letters could be sent out today, with more to follow in the next few days. Trump has indicated that tariffs could range from 10% to 70%. The countries affected would pay the increased tariffs from August 1.

However, it cannot be ruled out that negotiations with some countries will be extended if they prove constructive in Trump's eyes. If the countries concerned do not make sufficient concessions, Trump could base future reciprocal tariffs on the rates announced on April 2 (and suspended a week later).

For full text see attached PDF-Version.