RBA mulls more rate cuts as world prepares for Liberation Day 2.0
But the impact of the Trump plan may turn out to be a small positive if United States-based manufacturers leave America in favour of other nations with lower tariffs such as Australia, according to the independent Productivity Commission.
The Reserve Bank's monetary policy board started its two-day meeting on Monday. Financial markets and most economists expect it to back a further quarter percentage point cut in the official cash rate.
Following its May rate cut, interest rates would be at a two-year low of 3.6 per cent. It would be the first time the bank has delivered back-to-back rate cuts since March 2020 when the RBA sought to protect the country from the fallout of the pandemic.
On a $600,000 mortgage, a rate cut on Tuesday would be worth $100 a month and take to $300 the monthly savings since the Reserve Bank started easing monetary policy in February.
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Lower inflation, which fell to 2.1 per cent in May, and sluggish economic growth combined with the potential fallout from the Trump tariff agenda have all driven up expectations of a rate cut on Tuesday with a high chance of another rate reduction in August.
An ongoing concern has been the continuing strength of the jobs market. Unemployment has remained about 4.1 per cent for the past year with the country adding almost 330,000 jobs.
The latest ANZ-Indeed measure of job ads, released on Monday, lifted by 1.8 per cent in June to be at its highest level in a year.
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West Australian
27 minutes ago
- West Australian
PM unclear on Chinese AI offer amid Trump turbulence
Anthony Albanese has kept tight-lipped on China's offer to co-operate on artificial intelligence amid tensions between the government and the Trump administration. Chinese ambassador Xiao Qian wrote an op-ed this week saying Beijing was keen to take a 'more open attitude' to the free-trade agreement with Australia. Mr Xiao said that included bolstering 'co-operation in traditional areas such as agriculture and mining' but also exploring 'new growth areas in emerging fields like artificial intelligence' – a convenient offer against a backdrop of fierce AI competition with the US. Though, even as lacklustre Australian defence spending and US tariffs strain Canberra's alliance with Washington, the Prime Minister was hesitant to embrace or reject the offer on Tuesday. 'We will determine our policy,' Mr Albanese told reporters in Hobart. However, he was quick to spruik the benefits of free trade with China. 'Of course, we have a free-trade agreement that was done by the Coalition government when they were in office,' Mr Albanese said. 'What we have done is to get rid of the more than $20bn of impediments of goods that were stopped from going to China. 'It's made an enormous difference and we have, indeed, products like wine and barley have not just bounced back – they're back higher than they were before.' He also spruiked his upcoming trip to China, calling it an 'important trading partner for Australia'. 'Twenty-five per cent of our exports go to China,' Mr Albanese said. 'What that means is jobs and one of the things that my government prioritises is jobs.' Pressed on whether he was open to having AI covered by the China-Australia Free Trade Agreement, he dodged it, saying his 'priority is jobs'. China is in an AI race with the US. The launch of DeepSeek in January dealt the first serious blow to the US' global leadership in the space, with the ensuing tech sell-off wiping about $US1 trillion ($A1.5 trillion) in value off American titan Nvidia. The Trump administration earlier this year announced a $US500bn investment in AI, eclipsing all other countries as the clear frontrunner. About the same time, China launched a AI investment fund with an initial $8.2bn. But with DeepSeek free and offering capabilities comparable to American counterpart OpenAI, the AI race may not be won by those who splash the most cash.
The Advertiser
35 minutes ago
- The Advertiser
PM offers tariff warning as US expands levies on allies
The prime minister has stressed tariffs punish the country imposing them, as Donald Trump increased levies on exports from Australia's most important trade partners. The US president has unveiled 25 per cent tariffs on goods from Japan and Korea, which are Australia's second and third biggest export markets and its third and fourth top two-way trading partners. Australia has not received a tariff letter, meaning most of its exports to the US remain subject to the baseline 10 per cent while steel and aluminium has had a 50 per cent tariff imposed. Prime Minister Anthony Albanese maintained the higher tariffs on Japan and Korea would not raise domestic prices because the federal government was not increasing tariffs. "Tariffs are a penalty on the country that is imposing them because what they require is for goods to be purchased with a tax on top," Mr Albanese told reporters in Tasmania on Tuesday. "The US has made that decision." The government would continue to try negotiate a total exemption from US tariffs, he said, even though no country in the world had done so. But Opposition Leader Sussan Ley noted it would be difficult for those discussions to occur if the prime minister couldn't secure a face-to-face meeting with Mr Trump. "I note the changes in some tariffs in some countries today - I care about Australia," she told reporters in Melbourne. "I would urge the prime minister do everything possible to achieve that meeting, to build that relationship." While the tariffs are unlikely to have a significant direct impact on Australia, the uncertainty they create could wreak havoc on living standards across the globe. Were it not for that, modelling from the Productivity Commission has found Australia could receive some benefits from US tariffs. However, the federal government's independent research and advisory body has recommended Australia mitigate impacts by committing to free-trade agreements, reducing some of its own tariffs and working towards open markets - offering much-needed certainty for exporters. Any retaliatory tariffs could escalate into a broader trade war, potentially exacerbating uncertainty, which the commission warned would bring "serious consequences". In 2025, economic uncertainty in Australia and across the world reached its highest level since the COVID-19 pandemic. The speed, frequency and varying scope of Mr Trump's tariffs created an environment where world trade could be transformed at any time and without warning, resulting in uncertainty that could slow economic activity, household consumption and investment. Of the scenarios modelled by the commission, Australia would do better under a "Liberation Day" situation where - much like the real event - Australia's exports face only the baseline tariff of 10 per cent while other countries' goods are hit with higher rates. Since Australian items are impacted by a lower rate, they would be comparatively cheaper, meaning American consumers would shift demand to Australian goods. Lower US demand for other countries' imports would decrease their price, reducing the cost of import inputs used in Australian production. The US tariffs would also likely lead capital to flow out of America and high-tariffed countries, benefiting other economies like Australia. This means Liberation Day tariffs, alongside Mr Trump's levies on steel and aluminium, could lead to a 0.37 per cent increase in Australia's real gross domestic product and a 30.9 per cent increase in US demand for Australian exports. While it is unclear whether Australia could negotiate a tariff exemption, the government could take things into its own hands by removing more of its own "nuisance" levies. It has already abolished almost 500 of these tariffs, which impose high costs on businesses and generate little revenue, but the commission identified another 315 that could be urgently removed. "Australia is best served by continuing to advocate for free and fair trade - and that's exactly what we've done," Treasurer Jim Chalmers said in response to the report. The prime minister has stressed tariffs punish the country imposing them, as Donald Trump increased levies on exports from Australia's most important trade partners. The US president has unveiled 25 per cent tariffs on goods from Japan and Korea, which are Australia's second and third biggest export markets and its third and fourth top two-way trading partners. Australia has not received a tariff letter, meaning most of its exports to the US remain subject to the baseline 10 per cent while steel and aluminium has had a 50 per cent tariff imposed. Prime Minister Anthony Albanese maintained the higher tariffs on Japan and Korea would not raise domestic prices because the federal government was not increasing tariffs. "Tariffs are a penalty on the country that is imposing them because what they require is for goods to be purchased with a tax on top," Mr Albanese told reporters in Tasmania on Tuesday. "The US has made that decision." The government would continue to try negotiate a total exemption from US tariffs, he said, even though no country in the world had done so. But Opposition Leader Sussan Ley noted it would be difficult for those discussions to occur if the prime minister couldn't secure a face-to-face meeting with Mr Trump. "I note the changes in some tariffs in some countries today - I care about Australia," she told reporters in Melbourne. "I would urge the prime minister do everything possible to achieve that meeting, to build that relationship." While the tariffs are unlikely to have a significant direct impact on Australia, the uncertainty they create could wreak havoc on living standards across the globe. Were it not for that, modelling from the Productivity Commission has found Australia could receive some benefits from US tariffs. However, the federal government's independent research and advisory body has recommended Australia mitigate impacts by committing to free-trade agreements, reducing some of its own tariffs and working towards open markets - offering much-needed certainty for exporters. Any retaliatory tariffs could escalate into a broader trade war, potentially exacerbating uncertainty, which the commission warned would bring "serious consequences". In 2025, economic uncertainty in Australia and across the world reached its highest level since the COVID-19 pandemic. The speed, frequency and varying scope of Mr Trump's tariffs created an environment where world trade could be transformed at any time and without warning, resulting in uncertainty that could slow economic activity, household consumption and investment. Of the scenarios modelled by the commission, Australia would do better under a "Liberation Day" situation where - much like the real event - Australia's exports face only the baseline tariff of 10 per cent while other countries' goods are hit with higher rates. Since Australian items are impacted by a lower rate, they would be comparatively cheaper, meaning American consumers would shift demand to Australian goods. Lower US demand for other countries' imports would decrease their price, reducing the cost of import inputs used in Australian production. The US tariffs would also likely lead capital to flow out of America and high-tariffed countries, benefiting other economies like Australia. This means Liberation Day tariffs, alongside Mr Trump's levies on steel and aluminium, could lead to a 0.37 per cent increase in Australia's real gross domestic product and a 30.9 per cent increase in US demand for Australian exports. While it is unclear whether Australia could negotiate a tariff exemption, the government could take things into its own hands by removing more of its own "nuisance" levies. It has already abolished almost 500 of these tariffs, which impose high costs on businesses and generate little revenue, but the commission identified another 315 that could be urgently removed. "Australia is best served by continuing to advocate for free and fair trade - and that's exactly what we've done," Treasurer Jim Chalmers said in response to the report. The prime minister has stressed tariffs punish the country imposing them, as Donald Trump increased levies on exports from Australia's most important trade partners. The US president has unveiled 25 per cent tariffs on goods from Japan and Korea, which are Australia's second and third biggest export markets and its third and fourth top two-way trading partners. Australia has not received a tariff letter, meaning most of its exports to the US remain subject to the baseline 10 per cent while steel and aluminium has had a 50 per cent tariff imposed. Prime Minister Anthony Albanese maintained the higher tariffs on Japan and Korea would not raise domestic prices because the federal government was not increasing tariffs. "Tariffs are a penalty on the country that is imposing them because what they require is for goods to be purchased with a tax on top," Mr Albanese told reporters in Tasmania on Tuesday. "The US has made that decision." The government would continue to try negotiate a total exemption from US tariffs, he said, even though no country in the world had done so. But Opposition Leader Sussan Ley noted it would be difficult for those discussions to occur if the prime minister couldn't secure a face-to-face meeting with Mr Trump. "I note the changes in some tariffs in some countries today - I care about Australia," she told reporters in Melbourne. "I would urge the prime minister do everything possible to achieve that meeting, to build that relationship." While the tariffs are unlikely to have a significant direct impact on Australia, the uncertainty they create could wreak havoc on living standards across the globe. Were it not for that, modelling from the Productivity Commission has found Australia could receive some benefits from US tariffs. However, the federal government's independent research and advisory body has recommended Australia mitigate impacts by committing to free-trade agreements, reducing some of its own tariffs and working towards open markets - offering much-needed certainty for exporters. Any retaliatory tariffs could escalate into a broader trade war, potentially exacerbating uncertainty, which the commission warned would bring "serious consequences". In 2025, economic uncertainty in Australia and across the world reached its highest level since the COVID-19 pandemic. The speed, frequency and varying scope of Mr Trump's tariffs created an environment where world trade could be transformed at any time and without warning, resulting in uncertainty that could slow economic activity, household consumption and investment. Of the scenarios modelled by the commission, Australia would do better under a "Liberation Day" situation where - much like the real event - Australia's exports face only the baseline tariff of 10 per cent while other countries' goods are hit with higher rates. Since Australian items are impacted by a lower rate, they would be comparatively cheaper, meaning American consumers would shift demand to Australian goods. Lower US demand for other countries' imports would decrease their price, reducing the cost of import inputs used in Australian production. The US tariffs would also likely lead capital to flow out of America and high-tariffed countries, benefiting other economies like Australia. This means Liberation Day tariffs, alongside Mr Trump's levies on steel and aluminium, could lead to a 0.37 per cent increase in Australia's real gross domestic product and a 30.9 per cent increase in US demand for Australian exports. While it is unclear whether Australia could negotiate a tariff exemption, the government could take things into its own hands by removing more of its own "nuisance" levies. It has already abolished almost 500 of these tariffs, which impose high costs on businesses and generate little revenue, but the commission identified another 315 that could be urgently removed. "Australia is best served by continuing to advocate for free and fair trade - and that's exactly what we've done," Treasurer Jim Chalmers said in response to the report. The prime minister has stressed tariffs punish the country imposing them, as Donald Trump increased levies on exports from Australia's most important trade partners. The US president has unveiled 25 per cent tariffs on goods from Japan and Korea, which are Australia's second and third biggest export markets and its third and fourth top two-way trading partners. Australia has not received a tariff letter, meaning most of its exports to the US remain subject to the baseline 10 per cent while steel and aluminium has had a 50 per cent tariff imposed. Prime Minister Anthony Albanese maintained the higher tariffs on Japan and Korea would not raise domestic prices because the federal government was not increasing tariffs. "Tariffs are a penalty on the country that is imposing them because what they require is for goods to be purchased with a tax on top," Mr Albanese told reporters in Tasmania on Tuesday. "The US has made that decision." The government would continue to try negotiate a total exemption from US tariffs, he said, even though no country in the world had done so. But Opposition Leader Sussan Ley noted it would be difficult for those discussions to occur if the prime minister couldn't secure a face-to-face meeting with Mr Trump. "I note the changes in some tariffs in some countries today - I care about Australia," she told reporters in Melbourne. "I would urge the prime minister do everything possible to achieve that meeting, to build that relationship." While the tariffs are unlikely to have a significant direct impact on Australia, the uncertainty they create could wreak havoc on living standards across the globe. Were it not for that, modelling from the Productivity Commission has found Australia could receive some benefits from US tariffs. However, the federal government's independent research and advisory body has recommended Australia mitigate impacts by committing to free-trade agreements, reducing some of its own tariffs and working towards open markets - offering much-needed certainty for exporters. Any retaliatory tariffs could escalate into a broader trade war, potentially exacerbating uncertainty, which the commission warned would bring "serious consequences". In 2025, economic uncertainty in Australia and across the world reached its highest level since the COVID-19 pandemic. The speed, frequency and varying scope of Mr Trump's tariffs created an environment where world trade could be transformed at any time and without warning, resulting in uncertainty that could slow economic activity, household consumption and investment. Of the scenarios modelled by the commission, Australia would do better under a "Liberation Day" situation where - much like the real event - Australia's exports face only the baseline tariff of 10 per cent while other countries' goods are hit with higher rates. Since Australian items are impacted by a lower rate, they would be comparatively cheaper, meaning American consumers would shift demand to Australian goods. Lower US demand for other countries' imports would decrease their price, reducing the cost of import inputs used in Australian production. The US tariffs would also likely lead capital to flow out of America and high-tariffed countries, benefiting other economies like Australia. This means Liberation Day tariffs, alongside Mr Trump's levies on steel and aluminium, could lead to a 0.37 per cent increase in Australia's real gross domestic product and a 30.9 per cent increase in US demand for Australian exports. While it is unclear whether Australia could negotiate a tariff exemption, the government could take things into its own hands by removing more of its own "nuisance" levies. It has already abolished almost 500 of these tariffs, which impose high costs on businesses and generate little revenue, but the commission identified another 315 that could be urgently removed. "Australia is best served by continuing to advocate for free and fair trade - and that's exactly what we've done," Treasurer Jim Chalmers said in response to the report.
The Advertiser
35 minutes ago
- The Advertiser
Trump ramps up trade war in tariff letters to leaders
President Donald Trump has begun telling trade partners - from powerhouse suppliers like Japan and South Korea to minor players - that sharply higher US tariffs will start August 1, marking a new phase in the trade war he launched earlier this year. The imposition of the 25 per cent levy on US importers of all goods from key allies Japan and South Korea rattled Wall Street, with the S&P 500 Index knocked back sharply, though markets in Asia were taking the latest news in stride. The 14 countries sent letters so far, which included smaller US exporters like Serbia, Thailand and Tunisia, hinted at opportunities for additional negotiations while at the same time warning any reprisal steps would be met with a like-for-like response. "If for any reason you decide to raise your Tariffs, then, whatever the number you choose to raise them by, will be added onto the 25% that we charge," Trump said in letters, released on his Truth Social platform, to Japan and South Korea. The higher tariffs take effect August 1, and notably will not combine with previously announced sector tariffs such as those on automobiles and steel and aluminum. That means, for instance, that Japanese vehicle tariffs will remain at 25 per cent, rather than the existing 25 per cent auto sector tariff climbing to 50 per cent with the new reciprocal rate as has occurred with some of Trump's tariffs. The clock has been ticking for countries to conclude deals with the US after Trump unleashed a global trade war in April that has roiled financial markets and sent policymakers scrambling to protect their economies. Trading partners got another reprieve as Trump signed an executive order on Monday extending the Wednesday deadline for negotiations to August 1. Asked if the deadline was firm, Trump said: "I would say firm, but not 100 per cent firm. If they call up and they say we'd like to do something a different way, we're going to be open to that." Trump has kept much of the world guessing on the outcome of months of talks with countries hoping to avoid the hefty tariff hikes he has threatened. The rate for South Korea is the same as Trump initially announced, while the rate for Japan is one point higher than the one announced on April 2. A week later, he capped all of the so-called reciprocal tariffs at 10 per cent until Wednesday. Only two agreements have so far been reached, with Britain and Vietnam, while Washington and Beijing in June agreed on a framework covering tariff rates. Wendy Cutler, vice president of the Asia Society Policy Institute, said it was unfortunate Trump was hiking tariffs on imports from two of the closest US allies, but there was still time for a breakthrough in negotiations. "While the news is disappointing, it does not mean the game is over," Cutler said. Trump said that the United States would impose 25 per cent tariffs on goods from Tunisia, Malaysia and Kazakhstan; 30 per cent on South Africa, Bosnia and Herzegovina; 32 per cent on Indonesia; 35 per cent on Serbia and Bangladesh; 36 per cent on Cambodia and Thailand and 40 per cent on Laos and Myanmar. Japanese Prime Minister Shigeru Ishiba said on Tuesday some progress had been made on avoiding higher tariffs of up to 35 per cent that Trump had suggested recently. "We have received a proposal from the United States to swiftly proceed with negotiations towards the newly set August 1 deadline, and that depending on Japan's response, the content of the letter could be revised," Ishiba told a meeting with cabinet ministers to discuss Japan's strategy on the tariffs. South Korea said it planned to intensify US trade talks and considers Trump's latest plan as effectively extending a grace period on implementing reciprocal tariffs. "We will step up negotiations during the remaining period to reach a mutually beneficial result to quickly resolve the uncertainties from tariffs," the country's Industry Ministry said. President Donald Trump has begun telling trade partners - from powerhouse suppliers like Japan and South Korea to minor players - that sharply higher US tariffs will start August 1, marking a new phase in the trade war he launched earlier this year. The imposition of the 25 per cent levy on US importers of all goods from key allies Japan and South Korea rattled Wall Street, with the S&P 500 Index knocked back sharply, though markets in Asia were taking the latest news in stride. The 14 countries sent letters so far, which included smaller US exporters like Serbia, Thailand and Tunisia, hinted at opportunities for additional negotiations while at the same time warning any reprisal steps would be met with a like-for-like response. "If for any reason you decide to raise your Tariffs, then, whatever the number you choose to raise them by, will be added onto the 25% that we charge," Trump said in letters, released on his Truth Social platform, to Japan and South Korea. The higher tariffs take effect August 1, and notably will not combine with previously announced sector tariffs such as those on automobiles and steel and aluminum. That means, for instance, that Japanese vehicle tariffs will remain at 25 per cent, rather than the existing 25 per cent auto sector tariff climbing to 50 per cent with the new reciprocal rate as has occurred with some of Trump's tariffs. The clock has been ticking for countries to conclude deals with the US after Trump unleashed a global trade war in April that has roiled financial markets and sent policymakers scrambling to protect their economies. Trading partners got another reprieve as Trump signed an executive order on Monday extending the Wednesday deadline for negotiations to August 1. Asked if the deadline was firm, Trump said: "I would say firm, but not 100 per cent firm. If they call up and they say we'd like to do something a different way, we're going to be open to that." Trump has kept much of the world guessing on the outcome of months of talks with countries hoping to avoid the hefty tariff hikes he has threatened. The rate for South Korea is the same as Trump initially announced, while the rate for Japan is one point higher than the one announced on April 2. A week later, he capped all of the so-called reciprocal tariffs at 10 per cent until Wednesday. Only two agreements have so far been reached, with Britain and Vietnam, while Washington and Beijing in June agreed on a framework covering tariff rates. Wendy Cutler, vice president of the Asia Society Policy Institute, said it was unfortunate Trump was hiking tariffs on imports from two of the closest US allies, but there was still time for a breakthrough in negotiations. "While the news is disappointing, it does not mean the game is over," Cutler said. Trump said that the United States would impose 25 per cent tariffs on goods from Tunisia, Malaysia and Kazakhstan; 30 per cent on South Africa, Bosnia and Herzegovina; 32 per cent on Indonesia; 35 per cent on Serbia and Bangladesh; 36 per cent on Cambodia and Thailand and 40 per cent on Laos and Myanmar. Japanese Prime Minister Shigeru Ishiba said on Tuesday some progress had been made on avoiding higher tariffs of up to 35 per cent that Trump had suggested recently. "We have received a proposal from the United States to swiftly proceed with negotiations towards the newly set August 1 deadline, and that depending on Japan's response, the content of the letter could be revised," Ishiba told a meeting with cabinet ministers to discuss Japan's strategy on the tariffs. South Korea said it planned to intensify US trade talks and considers Trump's latest plan as effectively extending a grace period on implementing reciprocal tariffs. "We will step up negotiations during the remaining period to reach a mutually beneficial result to quickly resolve the uncertainties from tariffs," the country's Industry Ministry said. President Donald Trump has begun telling trade partners - from powerhouse suppliers like Japan and South Korea to minor players - that sharply higher US tariffs will start August 1, marking a new phase in the trade war he launched earlier this year. The imposition of the 25 per cent levy on US importers of all goods from key allies Japan and South Korea rattled Wall Street, with the S&P 500 Index knocked back sharply, though markets in Asia were taking the latest news in stride. The 14 countries sent letters so far, which included smaller US exporters like Serbia, Thailand and Tunisia, hinted at opportunities for additional negotiations while at the same time warning any reprisal steps would be met with a like-for-like response. "If for any reason you decide to raise your Tariffs, then, whatever the number you choose to raise them by, will be added onto the 25% that we charge," Trump said in letters, released on his Truth Social platform, to Japan and South Korea. The higher tariffs take effect August 1, and notably will not combine with previously announced sector tariffs such as those on automobiles and steel and aluminum. That means, for instance, that Japanese vehicle tariffs will remain at 25 per cent, rather than the existing 25 per cent auto sector tariff climbing to 50 per cent with the new reciprocal rate as has occurred with some of Trump's tariffs. The clock has been ticking for countries to conclude deals with the US after Trump unleashed a global trade war in April that has roiled financial markets and sent policymakers scrambling to protect their economies. Trading partners got another reprieve as Trump signed an executive order on Monday extending the Wednesday deadline for negotiations to August 1. Asked if the deadline was firm, Trump said: "I would say firm, but not 100 per cent firm. If they call up and they say we'd like to do something a different way, we're going to be open to that." Trump has kept much of the world guessing on the outcome of months of talks with countries hoping to avoid the hefty tariff hikes he has threatened. The rate for South Korea is the same as Trump initially announced, while the rate for Japan is one point higher than the one announced on April 2. A week later, he capped all of the so-called reciprocal tariffs at 10 per cent until Wednesday. Only two agreements have so far been reached, with Britain and Vietnam, while Washington and Beijing in June agreed on a framework covering tariff rates. Wendy Cutler, vice president of the Asia Society Policy Institute, said it was unfortunate Trump was hiking tariffs on imports from two of the closest US allies, but there was still time for a breakthrough in negotiations. "While the news is disappointing, it does not mean the game is over," Cutler said. Trump said that the United States would impose 25 per cent tariffs on goods from Tunisia, Malaysia and Kazakhstan; 30 per cent on South Africa, Bosnia and Herzegovina; 32 per cent on Indonesia; 35 per cent on Serbia and Bangladesh; 36 per cent on Cambodia and Thailand and 40 per cent on Laos and Myanmar. Japanese Prime Minister Shigeru Ishiba said on Tuesday some progress had been made on avoiding higher tariffs of up to 35 per cent that Trump had suggested recently. "We have received a proposal from the United States to swiftly proceed with negotiations towards the newly set August 1 deadline, and that depending on Japan's response, the content of the letter could be revised," Ishiba told a meeting with cabinet ministers to discuss Japan's strategy on the tariffs. South Korea said it planned to intensify US trade talks and considers Trump's latest plan as effectively extending a grace period on implementing reciprocal tariffs. "We will step up negotiations during the remaining period to reach a mutually beneficial result to quickly resolve the uncertainties from tariffs," the country's Industry Ministry said. President Donald Trump has begun telling trade partners - from powerhouse suppliers like Japan and South Korea to minor players - that sharply higher US tariffs will start August 1, marking a new phase in the trade war he launched earlier this year. The imposition of the 25 per cent levy on US importers of all goods from key allies Japan and South Korea rattled Wall Street, with the S&P 500 Index knocked back sharply, though markets in Asia were taking the latest news in stride. The 14 countries sent letters so far, which included smaller US exporters like Serbia, Thailand and Tunisia, hinted at opportunities for additional negotiations while at the same time warning any reprisal steps would be met with a like-for-like response. "If for any reason you decide to raise your Tariffs, then, whatever the number you choose to raise them by, will be added onto the 25% that we charge," Trump said in letters, released on his Truth Social platform, to Japan and South Korea. The higher tariffs take effect August 1, and notably will not combine with previously announced sector tariffs such as those on automobiles and steel and aluminum. That means, for instance, that Japanese vehicle tariffs will remain at 25 per cent, rather than the existing 25 per cent auto sector tariff climbing to 50 per cent with the new reciprocal rate as has occurred with some of Trump's tariffs. The clock has been ticking for countries to conclude deals with the US after Trump unleashed a global trade war in April that has roiled financial markets and sent policymakers scrambling to protect their economies. Trading partners got another reprieve as Trump signed an executive order on Monday extending the Wednesday deadline for negotiations to August 1. Asked if the deadline was firm, Trump said: "I would say firm, but not 100 per cent firm. If they call up and they say we'd like to do something a different way, we're going to be open to that." Trump has kept much of the world guessing on the outcome of months of talks with countries hoping to avoid the hefty tariff hikes he has threatened. The rate for South Korea is the same as Trump initially announced, while the rate for Japan is one point higher than the one announced on April 2. A week later, he capped all of the so-called reciprocal tariffs at 10 per cent until Wednesday. Only two agreements have so far been reached, with Britain and Vietnam, while Washington and Beijing in June agreed on a framework covering tariff rates. Wendy Cutler, vice president of the Asia Society Policy Institute, said it was unfortunate Trump was hiking tariffs on imports from two of the closest US allies, but there was still time for a breakthrough in negotiations. "While the news is disappointing, it does not mean the game is over," Cutler said. Trump said that the United States would impose 25 per cent tariffs on goods from Tunisia, Malaysia and Kazakhstan; 30 per cent on South Africa, Bosnia and Herzegovina; 32 per cent on Indonesia; 35 per cent on Serbia and Bangladesh; 36 per cent on Cambodia and Thailand and 40 per cent on Laos and Myanmar. Japanese Prime Minister Shigeru Ishiba said on Tuesday some progress had been made on avoiding higher tariffs of up to 35 per cent that Trump had suggested recently. "We have received a proposal from the United States to swiftly proceed with negotiations towards the newly set August 1 deadline, and that depending on Japan's response, the content of the letter could be revised," Ishiba told a meeting with cabinet ministers to discuss Japan's strategy on the tariffs. South Korea said it planned to intensify US trade talks and considers Trump's latest plan as effectively extending a grace period on implementing reciprocal tariffs. "We will step up negotiations during the remaining period to reach a mutually beneficial result to quickly resolve the uncertainties from tariffs," the country's Industry Ministry said.
