【By Observer News, Qi Qian】
On April 2nd, "Liberation Day," President Trump of the United States loudly announced a tariff war against the entire world, threatening the international community to compromise with the US, otherwise high "reciprocal tariffs" would be imposed. However, three months later, it turned out that Trump's tariff plan was more difficult and slower to implement than expected.
Trump boasted verbally, but as the 90-day suspension period (July 9th) approached, the US had only reached agreements with a few countries.
Therefore, on July 7th local time, Trump announced that the implementation date of the "reciprocal tariffs" would be extended to August 1st, and gradually published new tax rates for many countries, including Myanmar, Laos, and Cambodia, in addition to Japan and South Korea.
Bloomberg cited analysts on the 8th, stating that Trump initially targeted China, but found that this show of force had "little effect on China," so he could only gain "victories" from smaller countries. A professor at France's École Supérieure de Commerce said to Hong Kong's South China Morning Post: "The biggest losers will be the smaller Asian economies with larger trade surpluses with the US; the US is likely to extract more concessions from these smaller countries."
Currently, countries such as South Korea, Japan, and Thailand have responded. Japan reiterated that it would not easily compromise. South Korea stated that it would continue to push for negotiations and strive to achieve mutually beneficial results. On the 8th, the Thai Finance Minister said that they would fight to the end.
Trump wants to hit China? "The Chinese will not compromise"
On the 7th, Trump began sending letters to trade partners who had not yet reached a tariff agreement. So far, 14 countries have received Trump's notice letters.
According to Trump's announcement, the US will impose 25% tariffs on Japan and South Korea, 40% on Myanmar and Laos, 36% on Cambodia and Thailand, 35% on Bangladesh and Serbia, 32% on Indonesia, 30% on South Africa and Bosnia and Herzegovina, and 25% on Kazakhstan, Malaysia, and Tunisia.
"Please understand that a 25% tax rate is far below the level needed to eliminate our trade deficit with your country," Trump warned Japan and South Korea in his published letter, "if you decide to raise tariffs, whatever amount you raise will be added on top of our 25% rate."
Latest tax rates faced by some countries - Bloomberg chart
Bloomberg reported that Trump's decision to delay the tariff implementation date until August 1st was partly to extract the best final offers from economies that Trump believed were still willing to reach an agreement.
"This is very much like a last-minute squeeze," said Kelly Ann Shaw, a partner at the law firm Akin Gump and a former senior Trump trade advisor. However, this is also an acknowledgment of a more realistic situation, that the US negotiating team seems too spread out to achieve the expected "trade concession harvest".
According to insiders, early this week, trade agreements with India and the EU were almost completed, but it was hard to announce the final results in time.
Shaw continued, "The end of any trade negotiation is chaotic, and in this case, the Trump administration is negotiating with every country on Earth at the same time." However, she still expects more agreements to be reached within the next three weeks, "many tax rates will be reduced".
The report said that the White House faces the risk that retreating and delaying will erode Trump's "image of quick and decisive action." At the same time, policy back-and-forth may increase the burden on American importers and American families.
"Although there are several weeks of leeway, we will continue to see high tariffs, which will push up consumer prices," said Matt Priest, president and CEO of the American Footwear Distributors and Retailers Association, in an interview recently. Policy uncertainty affects industry procurement decisions.
Trump and his senior aides have repeatedly boasted that dozens of countries are rushing to negotiate with the US. But so far, the Trump administration has only announced agreements with the UK and Vietnam, and a framework agreement with China.
"This process will continue because Trump likes it," said Derek Sissons, a China expert at the American Enterprise Institute. "He likes to boast and likes to be noticed; he will get enough victories from smaller partners to make everything worthwhile."
But Sissons said this approach does little to China. He pointed out, "We can continue to delay trade issues, reaching more small agreements with small countries, who will offer some benefits to the US to avoid trouble. But the Chinese won't."
White House released Trump's tariff letter to 14 countries - screenshot of tweet
"The biggest losers will be smaller Asian economies"
Associate Professor Jamus Lim from France's École Supérieure de Commerce shares the same view.
He told the South China Morning Post that all countries, including Southeast Asian countries, should expect at least 10% or higher tariffs. "The US will use its leverage as a major trading partner to extract more concessions from smaller countries, including completely eliminating tariffs on goods exported to the US."
"The biggest losers will be the smaller Asian economies with larger trade surpluses with the US, such as South Korea, Thailand, and Vietnam," Jamus also mentioned that Trump is likely to use the so-called "transit" issue to impose higher tariffs on goods transiting through other countries from China. He pointed out, "Once the situation changes, after a deal is reached, it is likely to be re-negotiated repeatedly."
Jamus believes that the ability of negotiators is crucial to trade outcomes. Larger Asian countries, such as Japan and China, will have "greater resistance capacity" in negotiations with the US.
However, according to Reuters, on the 8th, Deputy Prime Minister and Finance Minister Pichai of Thailand posted on social media platform X that the negotiation team has been fighting and will continue to do so. They will fight to the end to secure the best solution for Thailand. Pichai stated that Thailand is developing a backup plan to cope with the 36% tariff on its export goods.
The Korean Ministry of Trade, Industry and Energy stated that the actual suspension of tariffs by the US "allows us to quickly eliminate uncertainties. We will accelerate the negotiation process with the US during the remaining time and strive to achieve mutually beneficial results."
Additionally, Japanese Prime Minister Ishiba said on the 8th, "We are very sorry about the US announcement of additional tariffs... The Japanese government did not easily compromise in the difficult negotiations, voiced what should be said, and protected what should be protected." He also said that the actual effective date of the tariff is August 1st, which means the negotiation deadline has been extended, and they will continue to negotiate with the US.
Thai Finance Minister Pichai - photo
According to the July 8th Morgan Stanley report, if the new tariff rates take effect, the average tariff on Asian countries by the US will rise to 27%. The report also pointed out that the US may impose higher tariffs on specific industries, such as drug imports. The report said, "Our core view is that uncertainty may persist, affecting business confidence, capital spending, and trade cycles."
The report mentioned that Trump once said, "We are about to reach an agreement with India," indicating that most large economies in the region will reach agreements before August 1st; however, most Asian countries face a complex negotiation path, for example, Japan and South Korea may not be able to resolve auto tariffs and Japanese agricultural products through negotiations.
Morgan Stanley mentioned that the issue of "transferring" Chinese goods through other countries will become complicated in the US. "Considering that China is at the core of the regional cross-border production network, restricting trade with China is almost impossible for Asian economies."
Research institution BMI believes that Trump's latest statement indicates a "somewhat pragmatic approach," on one hand, to give more time to economies striving to reach trade agreements with the US, and on the other hand, considering the risks of trade tensions to the US and global economy.
"Given the complexity of the negotiations, some 'trade agreements' may be vague in details, ultimately just 'trade frameworks' rather than agreements," BMI analyzed, "some agreements may be postponed to September or October, and in some cases, the final details may require until the end of the year, or even longer, to fully agree."
On July 8th, Foreign Ministry Spokesperson Mao Ning commented on Trump's announcement of imposing tariffs on 14 countries, saying that China's position on the tariff issue has always been consistent and clear. There are no winners in a tariff war or a trade war, and protectionism harms everyone's interests.
On the same day, a Bloomberg reporter asked, "US Treasury Secretary Bensin said he expects to meet with Chinese officials in the coming weeks to promote discussions between the two countries on trade and other issues." Mao Ning replied, "This question suggests asking the relevant Chinese authorities."
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