Trump unleashes a flurry of trade surprises on eve of deadline
Trump on Wednesday announced tariffs of 15 per cent on imports from South Korea that matched the rate for neighbour Japan, and a painful 25 per cent levy on imports from India that was accompanied by criticism of its purchases of Russian energy and weapons.
Deals were also in the offing for Thailand and Cambodia after they agreed to a ceasefire on Monday, buttressing Trump's self-professed goal of being seen as a global peacemaker. Trump shocked markets with new tariff rules on copper, sinking prices in New York by a record after exempting the most widely traded forms of the metals from 50 per cent tariffs.
The onslaught comes on the eve of an Aug 1 deadline, when the White House threatened reciprocal levies for countries without bilateral agreements, which most do not have. Trump has said rates globally will come in from 15 per cent all the way to 50 per cent – executing policies he believes will bring home manufacturing and raise government revenue, while giving him enormous leverage on countries whose exports depend on US consumers.
'Today we got a flurry of details and it's the case of the old saying: 'you can't see the forest for the trees,'' said Rob Subbaraman, chief economist at Nomura Holdings 'Stepping back, Trump has by and large followed through on his tariff threats. Right now it's just a lot of noise.'
Most countries are still without a trade deal, and key details are scant for those who have one – including potential exemptions, investment promises and potential changes to rules of origin. The uncertainty and confusion amid the long rollout of Trump's new trade order has already hit global economic growth and weighed on investment, even as markets remain optimistic.
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'These deals ramming against the clock – it's really not a good sign,' said Alicia Garcia Herrero, chief economist for Asia-Pacific at Natixis. The reach pushes countries to an agreement to avoid potentially higher levies, but could end up costing their economies more, she said.
Meanwhile, the mood music between the US and China remains favourable for now. Speaking in the White House on Wednesday, Trump said the US will have a 'very fair deal with China.' Talks this week in Sweden strengthened trust between the two sides and boosted confidence in resolving economic disputes via discussions, the Communist Party's official newspaper said.
The trade news was not limited to foreign countries. US consumers and small businesses will soon face higher costs on shipments, as Trump announced tariffs would apply from Aug 29 on de minimis shipments, or imports that are below US$800. Such shipments have been a boon for consumers and retailers, many of them in China, that ship products direct.
A surprise reprieve for many Brazilian goods rallied its currency and stocks. Meantime, Bloomberg News reported Trump will speak with his Mexican counterpart Claudia Sheinbaum on Thursday morning, sending the peso higher.
Canadian Prime Minister Mark Carney said on Wednesday that talks with the US may not finish by Trump's Friday deadline. Prospects for a better deal dimmed further when Trump posted on Truth Social that Canada's decision to back Palestinian statehood 'will make it very hard for us to make a Trade Deal with them.'
For South Korea, the 15 per cent includes autos, as well as a US$350 billion South Korean fund for US investments including energy and shipbuilding. As with Japan, the US investments would be directed by Trump, the president said. And for both funds, 90 per cent of the profits would flow back to the US, Commerce Secretary Howard Lutnick said in a post on X.
For India, Trump threatened a still-undefined additional penalty over its purchases of Russian energy, on top of a 25 per cent tariff on imports from the nation.
Any move on Russian oil may come up in talks with China, given that Beijing also takes substantial volumes of Moscow's crude, which the US has targeted since its 2022 invasion of Ukraine. Oil was holding on Thursday near the highest in almost six months. BLOOMBERG
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