Breakingviews - Trump's trade war promises no real endgame
Japan and South Korea provide cautionary tales. Trump's April trade announcement applied levies of 24% and 25%, respectively, only to be delayed for negotiations. He has since vented that Japan does not buy enough American rice, opens new tab and cars. Yet half of all the tariff-free rice Japan imports comes from the U.S. already. Meanwhile, U.S. rice exports to all countries account for a measly $2 billion, opens new tab, less than the $13 billion Japanese tourism, opens new tab contributed to the domestic economy in 2019, according to the State Department. Trump and spokesperson Karoline Leavitt nonetheless fixate on this one issue.
South Korea shows the cost of failing to satisfy such whims. The country sealed a free trade agreement with the U.S. that came into force in 2012. It did nothing to prevent today's broadside. Now, Trump's agenda could slow Korean industrial giants' efforts to ramp production on American shores: recent cuts to electric-vehicle subsidies may ding the likes of battery maker SK On and automaker Hyundai.
Tariff threats against smaller countries are particularly difficult to appease. Look at, say, Laos. Its goods imports from the U.S. amounted to, opens new tab $40 million, versus $803 million in goods exports, in 2024. This is infinitesimal in the scheme of the U.S.'s overall $1.2 trillion goods trade deficit, yet a promised 40% tariff on its exports would be extremely material to Laos's own $16 billion economy.
Furthermore, what any country gets for reaching a 'deal' is still nebulous beyond lowering rates that have never been imposed. Look at Vietnam, where Trump announced a tentative agreement setting a 20% tariff and a levy designed to target products passing through the country from elsewhere. Monday's announcements for South Korea and Japan, where there is no deal, involve the same 'trans-shipment' charge plus a 25% baseline rate. According to the White House, Vietnam even dropped its tariffs on U.S. goods to zero.
Meanwhile, new bugbears – like an additional threatened 10% duty on the BRICS nations – creep up. Whether the tumult can ever really end is unclear. The best outcome for any country might be the framework sealed with the UK, which softened some trade barriers but little else. It's a small win now, without relying on Trump not to simply change his mind in the future.
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