Trade partners grow restless waiting for Trump's tariff breaks

Business Times

18 hours ago

[LONDON] UK Prime Minister Keir Starmer declared at a Jaguar Land Rover factory in May that his world-leading trade deal with US President Donald Trump included a cut in US tariffs on British steel to zero.
More than three months later, steel lobbyist Peter Brennan was still waiting for that relief to become reality.
Brennan, director of trade and economic policy at industry body UK Steel, said most members had seen US orders fall because of the uncertainty over America's 25 per cent import tax. One producer that makes particularly price-competitive products said that they'd be out of business by year-end if tariffs are not reduced to zero, he added.
'Concern is growing that finalising the deal on steel has fallen down the priority list both for the UK and US governments,' Brennan said last week. 'The will to close the deal may well be faltering on both sides.'
Frustration and economic losses like those in the UK are growing in Japan, the European Union and South Korea. Those three made similar announcements over the past month: that Washington granted them leniency on auto exports in the haggling over the level of Trump's across-the-board tariffs that took effect Aug 7.
But for the trio of car export powerhouses, which, unlike the UK face a 50 per cent duty on their steel and aluminium, the wait for Trump's concession continues while an American levy justified on national security grounds on imported Toyotas, BMWs, Hyundais and others remains at a crippling 25 per cent.
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'We are continuing to see damage, the bleeding hasn't stopped,' Japan's chief trade negotiator Ryosei Akazawa said on Friday in a reference to the country's car industry. 'We want the US to sign the executive order as soon as possible.'
Spokesmen for the White House, the US Trade Representative's office and the Commerce Department did not reply to requests for comment.
'Forever negotiations'
It was three weeks ago that EU Commission President Ursula von der Leyen shook hands with Trump in Scotland over what she called an 'all-inclusive' tariff of 15 per cent that officials in Brussels later understood to be a ceiling that would also apply to cars.
VDA, which represents Germany's car industry, is pressing for fast implementation to alleviate a 'considerable burden' on manufacturers and their suppliers.
'The deal between the EU and the US has not yet brought any clarity or improvement for the German automotive industry,' VDA president Hildegard Müller said on Thursday (Aug 14). 'The costs incurred run into the billions and continue to rise.'
Cecilia Malmstrom, the former European commissioner for trade who's now a non-resident fellow at the Peterson Institute for International Economics, cautioned that any delays may be purely administrative.
But 'if nothing happens, there will be huge pressure on the European Commission to retaliate or to act in some way, especially from carmakers in Germany, Italy, France, Sweden and others', she said. 'There are so many other things that are vague in the EU-US deal, and in the others as well, so it is likely we will see forever negotiations and a lot of filibustering.'
At a press briefing on Aug 14, European Commission spokesperson Olof Gill said that Washington and Brussels are finalising a joint statement. 'The US has made political commitments to us in this respect and we look forward to them being implemented,' he said.
Japan's uncertainty
Less than a week before the EU's announcement, the US and Japan clinched a surprise deal on Jul 22 that lowered across-the-board tariffs and car levies to 15 per cent. So far, the broader duties have been implemented, but the added tax on autos remains at 25 per cent.
Officials in Asia's No 2 economy are waiting for an executive order from Trump to bring down the car levies, as well as an official directive, like the EU already received, to clarify that the universal tariffs don't stack on top of existing duties.
Akazawa has mentioned how a Japanese carmaker is losing 100 million yen (S$870,500) every hour due to the tariffs.
Last month, Nissan Motor said that it foresaw a 300 billion yen hit from the lower tariff rate, down from a previous estimate of 450 billion yen. But chief executive officer Ivan Espinosa has warned of the difficulties in giving an accurate forecast as long as it's unclear when the tariffs will take effect and in what way.
Akazawa flew to the US earlier this month to confirm that the US will be adjusting its executive order soon to remove the stacking and pay back overcharges on tariffs. Neither has yet to materialise.
Hyundai, Kia
Facing similar questions is South Korea, which announced a trade agreement with Washington on Jul 31. That pact would impose a 15 per cent tariff on imports to the US, including autos, alongside a US$350 billion Korean investment pledge focused on shipbuilding, and US$100 billion in energy purchases.
The 15 per cent universal tariff took effect earlier this month under Trump's order, but like Japan, the sectoral auto tariff remains at 25 per cent. While South Korea's exports overall have stayed resilient in the first half of the year, thanks to front-loading by companies anticipating higher US tariffs, the value of car shipments to the US fell nearly 17 per cent, and steel exports dropped more than 11 per cent, trade data showed.
South Korea's top automaker Hyundai Motor and affiliate Kia could face as much as US$5 billion in additional costs this year even under the new 15 per cent auto tariff, according to Bloomberg Intelligence analyst Joanna Chen. While avoiding a 25 per cent levy will save more than US$3 billion, the duty squeezes margins amid softer demand and tighter subsidies, intensifying competition with Japanese automakers, Chen said.
South Korean President Lee Jae Myung's planned summit with Trump on Aug 25, their first meeting since Lee took office in June, will test the durability of the US$350 billion investment pledge, as well as their alliance over sensitive issues such as defence spending, US troop levels and North Korea policy.
'Just overwhelmed'
For Starmer and the UK, most aspects of the pact have now come into force, including a 10 per cent so-called reciprocal rate that's the lowest among all US trading partners. Yet Trump's 25 per cent tax on British steel still chafes amid the delays in cutting it.
Among the issues to resolve is the US's insistence that steel should be melted and poured in the UK in order to qualify. That's a requirement which Tata Steel UK, one of the country's biggest producers, is no longer able to fulfil after closing down its blast furnace last year. Its new electric arc furnace is not due to be ready until late 2027.
People familiar with the government's thinking are cautiously optimistic that they might be able to secure exemptions to the melt-and-pour rule, whereby steel imported from certain European countries before being further processed in the UK is allowed to qualify as British.
'It's not for lack of trying by the UK government,' said Tim Rutter, director of public affairs at Tata Steel. 'We hear that US departments are just overwhelmed.'
A spokesperson for the UK Department for Business and Trade said officials will continue to work with Washington to implement the deal as soon as possible.
Late on Friday in Washington, the US Customs and Border Protection agency issued new inclusions to steel and aluminium product lists for tariffs that take effect Monday, with some of the guidance affecting imports from the UK.
Japan's Akazawa acknowledged that even with the UK, actual implementation of key parts of their deal took 54 days. As a result, he's said that it's 'not bad' if an executive order from the US comes by around mid-September.
'It's just further confirmation that negotiations never really end,' especially with more US tariffs coming for sectors including pharmaceuticals and semiconductors, said Sam Lowe, a partner at Flint Global in London and head of its trade and market access practice. BLOOMBERG