Trump's tariff deadline to have only 3 outcomes

New Straits Times

5 hours ago

A few days before United States President Donald Trump reimposes steep tariffs on dozens of economies, including the European Union and Japan, many are still scrambling to reach a deal that would protect them from the worst.
The tariffs taking effect on July 9 are part of a package Trump imposed in April citing a lack of "reciprocity " in trading ties.
He slapped a 10 per cent levy on most partners, with higher customised rates to kick in later in countries the US has major trade deficits with. But these were halted until this month to allow room for negotiations.
Analysts expect countries will encounter one of three outcomes: they could reach a framework for an agreement; receive an extended pause on higher tariffs; or see levies surge. "There will be a group of deals that we will land before July 9," said Treasury Secretary Scott Bessent last Friday on CNBC.
Policymakers have not named countries in this group, although Bessent maintains that Washington has been focused on striking deals with about 18 key partners. "Vietnam, India and Taiwan remain promising candidates for a deal," said Asia Society Policy Institute vice-president Wendy Cutler.
Without a deal, Vietnam's "reciprocal tariff" rises from the baseline of 10 per cent to 46 per cent, India's to 26 per cent and Taiwan's to 32 per cent.
Josh Lipsky, international economics chair at the Atlantic Council, cited Indian negotiators' extension of their US trip recently in noting that it "seems like a frontrunner ".
"Japan was in that category, but things have set back a little," said Lipsky, referring to Trump's criticism on Monday over what the president called Japan's reluctance to accept US rice exports.
The deals, however, would unlikely be full-fledged trade pacts, said analysts, citing complexities in negotiating such agreements. Since April, Washington has only announced a pact with Britain and a deal to temporarily lower tit-for-tat duties with China. Bessent has also said countries "negotiating in good faith" can have their tariffs remain at the 10 per cent baseline.
But extensions of the pause on higher rates would depend on Trump, he added. "With a new government, (South) Korea looks well positioned to secure an extension," said Cutler of ASPI. Lipsky expects many countries to fall into this bucket, receiving an extended halt on higher tariffs that could last until Labour Day, which falls on Sept 1. Bessent earlier said Washington could wrap up its agenda for trade deals by Labour Day, a signal that more agreements could be concluded but with talks likely to extend past July. For countries that the US finds "recalcitrant", however, tariffs could spring back to the higher levels Trump previously announced, Bessent has warned. These range from 11 per cent to 50 per cent. Cutler warned that "Japan's refusal to open its rice market, coupled with the US resistance to lowering automotive tariffs, may lead to the reimposition of Japan's 24 per cent reciprocal tariff ".
Trump himself said on Tuesday a trade deal was unlikely with Japan and the country could pay a tariff of "30 per cent, 35 per cent, or whatever the number is that we determine". Lipsky believes that the EU is at risk of having tariffs snap back to steeper levels, too —to the 20 per cent unveiled in April or the 50 per cent Trump more recently threatened.
An area of tension could be Europe's approach to digital regulation. Trump recently said he would terminate trade talks with Canada — which is not impacted by the July 9 deadline — in retaliation for the country's digital services tax, which Ottawa eventually said it would rescind.
This week, EU trade chief Maros Sefcovic is in Washington in a push to seal a trade deal, with the EU commission having received early drafts of proposals that officials are working on.