Latest news with #trans-Atlantic
Hindustan Times
10 hours ago
- Business
- Hindustan Times
Trump's New Trade Order Is Fragile
President Trump has achieved the remarkable: raising tariffs by more than the notorious Smoot-Hawley Tariff Act of 1930, while—it appears—avoiding the destructive trade war that followed. Including the deal struck over the weekend with the European Union, the U.S. will impose an effective tariff rate of about 15% on its trading partners, by far the highest since the 1930s, according to JPMorgan Chase. Japan and the EU have together committed to investing $1.15 trillion in the U.S. Europe also agreed to energy and military purchases. And what did the U.S. give up in return? Nothing. So Trump has hit his goals, for now. But these deals don't yet represent a new trade order. They are sort of a way station, more fragile and with less legitimacy than the system they have supplanted. The formula for this achievement was distinctively Trumpian. The president calculated that others had more to lose from a trade war than the U.S. He picked off each trading partner in turn with the prospect that failure to strike a deal on his terms would result in worse treatment later. Among American allies, only the EU has the heft to inflict enough pain on American companies to change Trump's calculus. But despite drawing up plans for retaliation, it never pulled the trigger. Along with the economic pain of a trade war, Europe feared Trump would abandon Ukraine and perhaps NATO altogether. A one-sided deal was the price of keeping, for now, Trump committed to the trans-Atlantic security alliance. Of the major trading partners yet to strike deals, South Korea, Mexico and Canada can likely expect, like the U.K., Japan and the EU, to give up plenty and get nothing in return. China, the only country to have broadly retaliated, might fare differently. Trump has avoided a trade war, but it remains to be seen if the trade peace will last. Trade peace, for now Since the 1980s, Trump has believed that other countries have ripped off the U.S., producing deep trade deficits. His solution: charge for access to the U.S. market and the protection of its military. Others have now accepted his terms for access to the market, while NATO partners have agreed to boost defense spending to 5% of GDP. This seems to have softened Trump's prior antipathy toward the alliance and Ukraine. On Monday, he shortened the deadline for Russia to agree to a cease-fire with Ukraine or face sanctions. It might be too soon to announce 'mission accomplished,' but it certainly looks like Trump has begun rebalancing the relationship between the U.S. and its allies. 'The two concerns Trump had about Europe is that they were free riding on the U.S. security umbrella and their trade was unbalanced, with their market a fortress,' said Mujtaba Rahman, managing director for Europe at Eurasia Group, a consultancy. 'On both, Trump has implemented a shakedown.' The 15% baseline tariff and 5% military commitment represent Trump wins that put the trans-Atlantic alliance on a 'slightly more solid' basis than in February, he said. Whether tariffs achieve Trump's economic goals remains to be seen. In a recent speech, Trump's trade ambassador, Jamieson Greer, set three benchmarks: first, reduce the goods trade deficit; second, raise after-inflation incomes; and third, boost manufacturing's share of gross domestic product. The incentives in these deals to reshore production and purchase American goods should help meet these relatively low bars. As for how much of the tariffs consumers will ultimately bear, the jury is still out. From 1947 through 2012, the U.S. presided over a steady fall in trade barriers and growing economic integration. It came through painstakingly negotiated pacts. Everyone gained something and gave something up and were thus invested in the pacts' success. Such pacts 'require Congress to approve them, are deep and substantive, take a long time to negotiate, and last a long time,' said Doug Irwin, a trade historian at Dartmouth College. 'They are a binding commitment on the U.S.' By contrast, Irwin said, these latest agreements are 'handshake deals' with a president who isn't legally bound to adhere to the terms. Trump is at liberty to threaten higher tariffs again for any reason, from wresting Greenland from Denmark to protecting U.S. tech companies from European taxes or censorship. Europe, having foresworn retaliation, has few chips with which to bargain tariffs down, under this or a future president. Trump acted entirely without Congress. Indeed, one court has already ruled his use of a sanctions law to impose across-the-board tariffs was illegal. Should an appeals court uphold that finding, the legality of those deals would come into doubt. (Trump could turn to a different law that limits tariffs to 15%, for 150 days.) The one-sided nature of these deals also makes them more fragile. Other countries will be less willing to comply with something they don't think is in their economic interest, especially with so many details unsettled. Already, Japan has cast doubt on Trump's interpretation of its $550 billion investment commitment, and the Europeans' $600 billion pledge seems similarly vague. Deals made under duress are politically unpopular and thus less durable. Especially noteworthy was the negative reaction of far-right populist leaders who are already hostile to the EU and trade deals. Marine Le Pen, a leader of France's populist right-wing National Rally, which is slightly favored to win the presidential election in 2027, called the EU deal a 'political, economic and moral fiasco.' Alice Weidel, leader of Germany's far-right Alternative for Germany, wrote on X, 'The EU has let itself be brutally ripped off.' Trump got his deals because of the leverage other countries' deep economic and security ties gave to the U.S. In coming years, that leverage will wane as those countries cultivate markets elsewhere and build up their own militaries. The resulting international system will be less dependent on the U.S.—and less stable. Write to Greg Ip at
Mint
13 hours ago
- Business
- Mint
Trump's new trade order is fragile
President Donald Trump has achieved the remarkable: raising tariffs by more than the notorious Smoot-Hawley Tariff Act of 1930, while—it appears—avoiding the destructive trade war that followed. Including the deal struck over the weekend with the European Union, the U.S. will impose an effective tariff rate of about 15% on its trading partners, by far the highest since the 1930s, according to JPMorgan Chase. Japan and the EU have together committed to investing $1.15 trillion in the U.S. Europe also agreed to energy and military purchases. And what did the U.S. give up in return? Nothing. So Trump has hit his goals, for now. But these deals don't yet represent a new trade order. They are sort of a way station, more fragile and with less legitimacy than the system they have supplanted. The formula for this achievement was distinctively Trumpian. The president calculated that others had more to lose from a trade war than the U.S. He picked off each trading partner in turn with the prospect that failure to strike a deal on his terms would result in worse treatment later. Among American allies, only the EU has the heft to inflict enough pain on American companies to change Trump's calculus. But despite drawing up plans for retaliation, it never pulled the trigger. Along with the economic pain of a trade war, Europe feared Trump would abandon Ukraine and perhaps NATO altogether. A one-sided deal was the price of keeping, for now, Trump committed to the trans-Atlantic security alliance. Of the major trading partners yet to strike deals, South Korea, Mexico and Canada can likely expect, like the U.K., Japan and the EU, to give up plenty and get nothing in return. China, the only country to have broadly retaliated, might fare differently. Trump has avoided a trade war, but it remains to be seen if the trade peace will last. Since the 1980s, Trump has believed that other countries have ripped off the U.S., producing deep trade deficits. His solution: charge for access to the U.S. market and the protection of its military. Others have now accepted his terms for access to the market, while NATO partners have agreed to boost defense spending to 5% of GDP. This seems to have softened Trump's prior antipathy toward the alliance and Ukraine. On Monday, he shortened the deadline for Russia to agree to a cease-fire with Ukraine or face sanctions. It might be too soon to announce 'mission accomplished," but it certainly looks like Trump has begun rebalancing the relationship between the U.S. and its allies. 'The two concerns Trump had about Europe is that they were free riding on the U.S. security umbrella and their trade was unbalanced, with their market a fortress," said Mujtaba Rahman, managing director for Europe at Eurasia Group, a consultancy. 'On both, Trump has implemented a shakedown." The 15% baseline tariff and 5% military commitment represent Trump wins that put the trans-Atlantic alliance on a 'slightly more solid" basis than in February, he said. Whether tariffs achieve Trump's economic goals remains to be seen. In a recent speech, Trump's trade ambassador, Jamieson Greer, set three benchmarks: first, reduce the goods trade deficit; second, raise after-inflation incomes; and third, boost manufacturing's share of gross domestic product. The incentives in these deals to reshore production and purchase American goods should help meet these relatively low bars. As for how much of the tariffs consumers will ultimately bear, the jury is still out. From 1947 through 2012, the U.S. presided over a steady fall in trade barriers and growing economic integration. It came through painstakingly negotiated pacts. Everyone gained something and gave something up and were thus invested in the pacts' success. Such pacts 'require Congress to approve them, are deep and substantive, take a long time to negotiate, and last a long time," said Doug Irwin, a trade historian at Dartmouth College. 'They are a binding commitment on the U.S." By contrast, Irwin said, these latest agreements are 'handshake deals" with a president who isn't legally bound to adhere to the terms. Trump is at liberty to threaten higher tariffs again for any reason, from wresting Greenland from Denmark to protecting U.S. tech companies from European taxes or censorship. Europe, having foresworn retaliation, has few chips with which to bargain tariffs down, under this or a future president. Trump acted entirely without Congress. Indeed, one court has already ruled his use of a sanctions law to impose across-the-board tariffs was illegal. Should an appeals court uphold that finding, the legality of those deals would come into doubt. (Trump could turn to a different law that limits tariffs to 15%, for 150 days.) The one-sided nature of these deals also makes them more fragile. Other countries will be less willing to comply with something they don't think is in their economic interest, especially with so many details unsettled. Already, Japan has cast doubt on Trump's interpretation of its $550 billion investment commitment, and the Europeans' $600 billion pledge seems similarly vague. Deals made under duress are politically unpopular and thus less durable. Especially noteworthy was the negative reaction of far-right populist leaders who are already hostile to the EU and trade deals. Marine Le Pen, a leader of France's populist right-wing National Rally, which is slightly favored to win the presidential election in 2027, called the EU deal a 'political, economic and moral fiasco." Alice Weidel, leader of Germany's far-right Alternative for Germany, wrote on X, 'The EU has let itself be brutally ripped off." Trump got his deals because of the leverage other countries' deep economic and security ties gave to the U.S. In coming years, that leverage will wane as those countries cultivate markets elsewhere and build up their own militaries. The resulting international system will be less dependent on the U.S.—and less stable. Write to Greg Ip at
Nahar Net
13 hours ago
- Business
- Nahar Net
Reaction to the European Union's trade agreement with the Trump administration
by Naharnet Newsdesk 29 July 2025, 12:22 The European Union's trade agreement with the Trump administration is getting mixed reviews. EU officials say they warded off a total economic disaster. But French officials in particular say the EU punched below its weight while economists say the deal is dangerously vague. The deal leaves Europe with a 15% tariff on most goods imported into the U.S., with some goods categories tariff-free, but no agreement on rates for key areas such as pharmaceuticals and steel. Here is what they're saying: European Commission Failing to reach a deal by the Aug. 1 deadline would have meant a 30% tariff threatened by U.S. President Donald Trump, EU chief trade negotiator Maroš Šefčovič said. The main aim of European officials was a negotiated agreement, rather than a tit-for-tat escalation that could have included retaliatory EU tariffs on 93 billion euros ($108 billion) worth of goods, including U.S. agricultural products, steel and chemicals. "A trade war may seem appealing to some, but it comes with serious consequences, with at least a 30% tariff," Šefčovič said. "Our trans-Atlantic trade would effectively come to a halt, putting close to 5 million jobs, including those in SMEs (small- and medium-sized enterprises) in Europe, at grave risk. "Our businesses have sent us a unanimous message: avoid escalation and work towards a solution that delivers immediate relief," he said. France: 'A dark day' Major exports to the U.S.: Aircraft, pharmaceuticals, luxury perfumes and leather goods, wine and spirits. Senior French officials on Monday criticized the accord, with Foreign Trade Minister Laurent Saint-Martin urging a European response in the services sector, and Strategy Commissioner Clément Beaune warning it underplayed the 27-nation bloc's economic strength. "The good news is that there is an agreement — our companies now have visibility and stability in the trans-Atlantic trade relationship," Saint-Martin said on France Inter radio. "But this agreement is not balanced, and we will need to keep working." He pointed to digital services as a key front in the trade imbalance. "Donald Trump spent months saying he wanted to rebalance a trade relationship that disadvantages the United States, but he was only talking about goods. If we look at services, it's the opposite. So it's up to us now to carry out the work of force and rebalancing," he said. "The United States decided to use force to impose a new law of the jungle that no longer respects the rules of international trade that we had for decades," Saint-Martin said. Beaune, France's high commissioner for strategy and planning, said on franceinfo radio that "this is an unequal and unbalanced agreement." He warned that "Europe did not wield its strength. We are the world's leading trading power." "When you look at it, the glass is a quarter full and three-quarters empty," Beaune said. Prime Minister François Bayrou was even more scathing, posting on X: "It is a dark day when an alliance of free peoples, united to uphold their values and defend their interests, resigns itself to submission." Germany: 'Avoided unnecessary escalation' Major exports to the U.S.: Motor vehicles, pharmaceuticals and industrial machinery. German Chancellor Friedrich Merz said that the deal would give companies a more predictable environment to plan and invest — a key EU goal after weeks of back-and-forth threats in tense talks with Trump administration officials. "It is good that Europe and the USA have agreed and thus avoided an unnecessary escalation in trans-Atlantic trade relations," he said. "We have been able to preserve our core interests, even if I would have very much wished for further relief in trans-Atlantic trade." Asked about negative reactions to the deal from German business, Merz countered that it was met with relief by some companies and sectors. However, "it is completely clear to me that the tariffs that now remain — in particular the 15% against 0% for imports to the European Union — constitute a significant burden for the export-oriented economy of the Federal Republic of Germany," Merz said, noting that he had said repeatedly before the agreement that "there will be an asymmetric deal, if there is one at all." Italy: 'Positive outcome' Major exports to the U.S.: Industrial machinery, cars and agricultural products. Italian Premier Giorgia Meloni, who has positioned herself as a "bridge" between the Trump administration and Europe, welcomed news of the tariff agreement as a "positive" outcome that avoided an "unpredictable and potentially devastating" trade war. But in comments to reporters on the sidelines of a U.N. food security conference in Addis Ababa, Ethiopia, she said that details still needed to be worked out and that she's still unclear what exemptions are carved out for particular industries. "I always thought, I continue to think that a trade escalation between Europe and the United States would have unpredictable, potentially devastating consequences," she said. Meloni said that she needed to understand what the exemptions might be, including on agricultural products, which are of concern to Italy, given its wine exports in particular. "So there are a number of elements that are missing as well, as I don't know exactly what we are referring to when we talk about investments, gas purchases." She noted that the deal in its current form is legally nonbinding in principle, "so there is still, let's say, room to fight." Hungary: Trump 'ate EU for breakfast' Major exports to the U.S.: Packaged medicines and batteries. Hungarian Prime Minister Viktor Orbán, an ally of Trump who has gained a following within the MAGA movement, blasted the agreement on Monday as a failure on the part of Europe's leadership. "Even at first glance, it is obvious to me that this is not an agreement," Orbán said in a video discussion with his party's spokesman. "Donald Trump ate (European Commission President) Ursula von der Leyen for breakfast, that's what happened." Orbán, a frequent EU critic, has been careful not to criticize Trump's administration for its trade policy, instead faulting the bloc for being unable to conclude a comprehensive tariff agreement with Washington. Orbán said that a U.S.-U.K. trade deal, which imposed a blanket 10% tariff on British exports, was more favorable than the one concluded with the EU. "The American president is a heavyweight negotiator, and (von der Leyen) is a featherweight," Orbán said. "The European agreement is worse than the British one, so portraying it as a success will be difficult." Economists: Less growth, many blank spots Jon Harrison at TS Lombard: "It is no surprise to find that trade deals agreed under duress in weeks rather than the usual years of careful negotiation leave a mass of detail incomplete and open to interpretation." Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics: "We think this will reduce EU GDP (gross domestic product) by about 0.5%, which is worse than we had previously assumed." "While the deal has avoided a much worse outcome for now, it remains to be seen whether it will last." Julian Hinz, trade expert at the Kiel Institute for the World Economy: "The deal agreed yesterday is not a good deal — it is appeasement. "While the EU may avert a trade war in the short term, it is paying a high price in the long term by abandoning the principles of the multilateral, rules-based world trade system of the World Trade Organization."
Japan Today
15 hours ago
- Business
- Japan Today
Trump is getting the world economy he wants — but the risk to growth could spoil his victory lap
President Donald Trump reads from a paper and European Commission President Ursula von der Leyen listens after reaching a trade deal between the U.S. and the EU at the Trump Turnberry golf course in Turnberry, Scotland Sunday, July 27, 2025. (AP Photo/Jacquelyn Martin) By JOSH BOAK and PAUL WISEMAN President Donald Trump is getting his way with the world economy. Trading partners from the European Union to Japan to Vietnam appear to be acceding to the president's demands to accept higher costs — in the form of high tariffs — for the privilege of selling their wares to the United States. For Trump, the agreements driven by a mix of threats and cajoling, are a fulfillment of a decades-long belief in protectionism and a massive gamble that it will pay off politically and economically with American consumers. On Sunday, the United States and the 27-member state European Union announced that they had reached a trade framework agreement: The EU agreed to accept 15% U.S. tariffs on most its goods, easing fears of a catastrophic trans-Atlantic trade war. There were also commitments by the EU to buy $750 billion in U.S. energy products and make $600 billion in new investments through 2028, according to the White House. 'We just signed a very big trade deal, the biggest of them all,' Trump said Monday. But there's no guarantee that Trump's radical overhaul of U.S. trade policy will deliver the happy ending he's promised. The framework agreement was exceedingly spare on details. Most trade deals require months and even years of painstaking negotiation that rise and fall on granular details. Financial markets, at first panicked by the president's protectionist agenda, seem to have acquiesced to a world in which U.S. import taxes — tariffs — are at the highest rates they've been in roughly 90 years. Several billion in new revenues from his levies on foreign goods are pouring into the U.S. Treasury and could somewhat offset the massive tax cuts he signed into law on July 4. Outside economists say that high tariffs are still likely to raise prices for American consumers, dampen the Federal Reserve's ability to lower interest rates and make the U.S. economy less efficient over time. Democrats say the middle class and poor will ultimately pay for the tariffs. 'It's pretty striking that it's seen as a sigh of relief moment,' said Daniel Hornung, a former Biden White House economic official who now holds fellowships at Housing Finance Policy Center and the Massachusetts Institute of Technology. 'But if the new baseline across all trading partners is 15%, that is a meaningful drag on growth that increases recession risks, while simultaneously making it harder for the Fed to cut.' The EU agreement came just four days after Japan also agreed to 15% U.S. tariffs and to invest in the United States. Earlier, the United States reached deals that raised tariffs on imports from Vietnam, Indonesia, the Philippines and the United Kingdom considerably from where they'd been before Trump returned to the White House. More one-sided trade deals are likely as countries try to beat a Friday deadline after which Trump will impose even higher tariffs on countries that refuse to make concessions. The U.S. president has long claimed that America erred by not taking advantage of its clout as the world's biggest economy and erecting a wall of tariffs, in effect making other countries ante up for access to America's massive consumer market. To his closest aides, Trump's use of tariffs has validated their trust in his skills as a negotiator and their belief that the economists who warned of downturns and inflation were wrong. Stocks dipped slightly in Monday afternoon trading, but they've more than recovered from the tariff-induced selloff in April. 'Where are the 'experts' now?' Commerce Secretary Howard Lutnick posted on X. But the story is not over. For one thing, many of the details of Trump's trade deals remain somewhat hazy and have not been captured in writing. The U.S. and Japan, for instance, have offered differing descriptions of Japan's agreement to invest $550 billion in the United States. 'The trade deals do seem to count as a qualified win for Trump, with other countries giving the U.S. favorable trade terms while accepting U.S. tariffs,' said Eswar Prasad, a Cornell University economist. "However, certain terms of the deals, such as other countries' investments in the U.S., seem more promising in the abstract than they might prove in reality over time.'' Trump is also facing a court challenge from states and businesses arguing that the president overstepped his authority by declaring national emergencies to justify the tariffs on most of the world's economies. In May, a federal court struck down those tariffs. And an appeals court, which agreed to let the government continue collecting the tariffs for now, will hear oral arguments in the case Thursday. And he's yet to reach an accord with China — which has deftly used the threat of retaliatory tariffs and withholding exports of rare earth minerals that are desperately needed for electric vehicles, computer chips and wind turbines to avoid caving in to Trump's demands. The U.S. and China are talking this week in Stockholm, Sweden. There is also skepticism that tariffs will produce the economic boom claimed by Trump. Analysts at Morgan Stanley said 'the most likely outcome is slow growth and firm inflation,' but not a recession. After all, the 15% tariffs on the EU and Japan are a slight increase from the 10% rate that Trump began charging in April during a negotiation period. While autos made in the EU and Japan will no longer face the 25% tariffs Trump had imposed, they will still face a 15% tax that has yet to appear in prices at U.S. dealerships. The administration has said the lack of auto price increases suggests that foreign producers are absorbing the costs, but it might ultimately just reflect the buildup of auto inventories to front-run the import taxes. 'Dealers built stocks ahead of tariff implementation, damping the immediate impact on retail prices. That cushion is starting to wear thin,' Morgan Stanley said in a separate note. 'Our Japan auto analyst notes that as pre-tariff inventory clears, replacement vehicles will likely carry higher price tags.' Economist Mary Lovely of the Peterson Institute for International Economics warned of a 'slow-burn efficiency loss'' as U.S. companies scramble to adjust to Trump's new world. For decades, American companies have mostly paid the same tariffs – and often none at all – on imported machinery and raw materials from all over the world. Now, as a result of Trump's trade deals, tariffs vary by country. 'U.S. firms have to change their designs and get inputs from different places based on these variable tariff rates,'' she said. 'It's an incredible administrative burden. There's all these things that are acting as longer-term drags on economy, but their effect will show up only slowly.'' Mark Zandi, chief economist at Moody's Analytics, said that the United States' effective tariff rate has risen to 17.5% from around 2.5% at the start of the year. 'I wouldn't take a victory lap,'' Zandi said. 'The economic damage caused by the higher tariffs will mount in the coming months.'' © Copyright 2025 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.
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Business Standard
21 hours ago
- Business
- Business Standard
Trump gets economy he wants, but growth risks may spoil his victory lap
President Donald Trump is getting his way with the world economy. Trading partners from the European Union to Japan to Vietnam appear to be acceding to the president's demands to accept higher costs in the form of high tariffs for the privilege of selling their wares to the United States. For Trump, the agreements driven by a mix of threats and cajoling, are a fulfillment of a decades-long belief in protectionism and a massive gamble that it will pay off politically and economically with American consumers. On Sunday, the United States and the 27-member state European Union announced that they had reached a trade framework agreement: The EU agreed to accept 15 per cent US tariffs on most its goods, easing fears of a catastrophic trans-Atlantic trade war. There were also commitments by the EU to buy $750 billion in US energy products and make $600 billion in new investments through 2028, according to the White House. We just signed a very big trade deal, the biggest of them all, Trump said Monday. But there's no guarantee that Trump's radical overhaul of US trade policy will deliver the happy ending he's promised. The framework agreement was exceedingly spare on details. Most trade deals require months and even years of painstaking negotiation that rise and fall on granular details. High-stakes negotiations break Trump's way Financial markets, at first panicked by the president's protectionist agenda, seem to have acquiesced to a world in which US import taxes tariffs are at the highest rates they've been in roughly 90 years. Several billion in new revenues from his levies on foreign goods are pouring into the US Treasury and could somewhat offset the massive tax cuts he signed into law on July 4. Outside economists say that high tariffs are still likely to raise prices for American consumers, dampen the Federal Reserve's ability to lower interest rates and make the US economy less efficient over time. Democrats say the middle class and poor will ultimately pay for the tariffs. It's pretty striking that it's seen as a sigh of relief moment, said Daniel Hornung, a former Biden White House economic official who now holds fellowships at Housing Finance Policy Centre and the Massachusetts Institute of Technology. But if the new baseline across all trading partners is 15 per cent, that is a meaningful drag on growth that increases recession risks, while simultaneously making it harder for the Fed to cut. The EU agreement came just four days after Japan also agreed to 15 per cent US tariffs and to invest in the United States. Earlier, the United States reached deals that raised tariffs on imports from Vietnam, Indonesia, the Philippines and the United Kingdom considerably from where they'd been before Trump returned to the White House. More one-sided trade deals are likely as countries try to beat a Friday deadline after which Trump will impose even higher tariffs on countries that refuse to make concessions. Trump's long-held theory now faces reality The US president has long claimed that America erred by not taking advantage of its clout as the world's biggest economy and erecting a wall of tariffs, in effect making other countries ante up for access to America's massive consumer market. To his closest aides, Trump's use of tariffs has validated their trust in his skills as a negotiator and their belief that the economists who warned of downturns and inflation were wrong. Stocks rose slightly on Monday morning on tariffs that once seemed unthinkably risky. Where are the experts' now? Commerce Secretary Howard Lutnick posted on X. But the story is not over. For one thing, many of the details of Trump's trade deals remain somewhat hazy and have not been captured in writing. The US and Japan, for instance, have offered differing descriptions of Japan's agreement to invest $550 billion in the United States. The trade deals do seem to count as a qualified win for Trump, with other countries giving the US favourable trade terms while accepting US tariffs, said Eswar Prasad, a Cornell University economist. "However, certain terms of the deals, such as other countries' investments in the US, seem more promising in the abstract than they might prove in reality over time.' Trump is also facing a court challenge from states and businesses arguing that the president overstepped his authority by declaring national emergencies to justify the tariffs on most of the world's economies. In May, a federal court struck down those tariffs. And an appeals court, which agreed to let the government continue collecting the tariffs for now, will hear oral arguments in the case Thursday. And he's yet to reach an accord with China which has deftly used the threat of retaliatory tariffs and withholding exports of rare earth minerals that are desperately needed for electric vehicles, computer chips and wind turbines to avoid caving in to Trump's demands. The US and China are talking this week in Stockholm, Sweden. Economists remain sceptical of the impacts for US consumers There is also skepticism that tariffs will produce the economic boom claimed by Trump. Analysts at Morgan Stanley said the most likely outcome is slow growth and firm inflation, but not a recession. After all, the 15 per cent tariffs on the EU and Japan are a slight increase from the 10 per cent rate that Trump began charging in April during a negotiation period. While autos made in the EU and Japan will no longer face the 25 per cent tariffs Trump had imposed, they will still face a 15 per cent tax that has yet to appear in prices at US dealerships. The administration has said the lack of auto price increases suggests that foreign producers are absorbing the costs, but it might ultimately just reflect the buildup of auto inventories to front-run the import taxes. Dealers built stocks ahead of tariff implementation, damping the immediate impact on retail prices. That cushion is starting to wear thin, Morgan Stanley said in a separate note. Our Japan auto analyst notes that as pre-tariff inventory clears, replacement vehicles will likely carry higher price tags. Economist Mary Lovely of the Peterson Institute for International Economics warned of a slow-burn efficiency loss' as US companies scramble to adjust to Trump's new world. For decades, American companies have mostly paid the same tariffs and often none at all on imported machinery and raw materials from all over the world. Now, as a result of Trump's trade deals, tariffs vary by country. US firms have to change their designs and get inputs from different places based on these variable tariff rates,' she said. It's an incredible administrative burden. There's all these things that are acting as longer-term drags on economy, but their effect will show up only slowly.' Mark Zandi, chief economist at Moody's Analytics, said that the United States' effective tariff rate has risen to 17.5 per cent from around 2.5 per cent at the start of the year. I wouldn't take a victory lap,' Zandi said. The economic damage caused by the higher tariffs will mount in the coming months. (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
