Donald Trump has reiterated his threat to impose reciprocal tariffs on major trading partners, while allowing a three-week window for countries to negotiate trade deals with the US.
In letters sent on Monday to Japan and South Korea, two of the US’s largest trading partners, Trump announced plans to impose 25 per cent tariffs starting on August 1. South Africa would face 30 per cent tariffs, with additional levies on 11 other countries also in the works.
These tariffs mirror those unveiled by Trump in April, which caused significant disruptions in global financial markets. The initial reciprocal levies were temporarily paused until July 9 to stabilize markets, but progress has been limited with only three trade agreements reached since then.
Despite labeling the letters as “more or less final offers,” Trump hinted that there is room for negotiation. He stated, “If countries call with a different offer, and if I like it, we’ll do it. I would say firm…but not 100 per cent firm.”
Trump also mentioned that the US is on the verge of finalizing a trade deal with India. The executive order released on Monday indicated that the reciprocal tariffs would take effect shortly after midnight on August 1, based on updated information and recommendations.
While the announcement of these tariffs weighed on markets, with the S&P 500 closing down 0.8 per cent, there is a sense that risks lean towards higher tariff rates rather than lower ones, according to JPMorgan.
The letters posted by Trump on his Truth Social platform highlighted the US goods trade deficits with the targeted countries, emphasizing the economic and national security threats posed by these imbalances.
Despite the strong language in the letters, Trump left room for potential adjustments to the proposed tariffs based on the countries’ willingness to open their markets. This suggests that negotiations could lead to modifications in the tariff rates.
Officials in Tokyo and Seoul are taking steps to address the tariff threats, with Japan convening a trade task force meeting and South Korea aiming to continue negotiations for mutually beneficial outcomes.
Additionally, the EU is expected to sign a temporary trade deal with the US to maintain tariffs at 10 per cent while discussions continue. Plans are in place to potentially reduce tariffs on vehicles, although the fate of steel tariffs remains uncertain.
The ongoing trade tensions underscore the challenges in reaching agreements that satisfy all parties involved, with the potential for further negotiations and adjustments to the proposed tariffs.
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