U.S. Secures 3 Trade Deals; But Tariff Risks Persist

Ahead of the August 1 deadline for reciprocal tariff negotiations, the U.S. has reached three new trade deals with Japan, Indonesia, and the Philippines, and could reach additional deals in the coming weeks.  

Under the U.S.-Japan agreement, Japanese exports to the U.S. will be taxed at a 15% rate, down from the previously announced 25% tariff. Additionally, the tariff on Japanese automobile exports will be lowered from 25% to 15%. In return, Japan will make investments totaling $550 billion (€468 billion) in the U.S. under which 90% of the profits will be returned to the U.S. Japan will also open its markets to imports of U.S. goods including cars, trucks, rice, and other agricultural products.  

The U.S. has also reached a trade agreement with the Philippines, under which the U.S. will charge a 19% tariff on all imports and will increase bilateral military cooperation. U.S. President Donald Trump has also indicated that as part of the deal, the Philippines will remove all tariffs on American goods. Additional terms of the deal have not yet been specified.

Additionally, following the announcement of a U.S.-Indonesia trade agreement, the U.S. will enact a 19% tariff on Indonesian goods, a significant decrease from the previously threatened 32% tariff. Although the specific details of the agreement have yet to be released, Indonesia has reportedly promised to increase exports of critical minerals including copper to the U.S and has also agreed to purchase an unspecified number of jets from American aircraft manufacturer, the Boeing Company. Like the previous U.S.-Vietnam reciprocal tariff agreement, the U.S-Indonesia deal also reportedly includes a clause enacting higher tariffs on goods that are trans-shipped through Indonesia, although this higher rate has not yet been disclosed. Indonesia’s government has indicated plans to continue negotiating for a lower baseline tariff rate in the long-term. 

Table 1: Status of selected new U.S. tariff rates and trade deals with U.S. by country (source: Everstream Analytics) 

U.S. imposes tariff threats on Canada, Mexico, E.U., and Russia

On July 11, President Trump threatened a new 35% tariff on Canada effective August 1. Goods covered by the United States-Mexico-Canada Agreement will continue to be exempted from tariffs. President Trump cited Canadian restrictions on dairy imports and lack of action on halting fentanyl exports to the U.S. as reasons for the increase. The U.S. and Canada will continue negotiations until August 1, extending the previous deadline from July 21. However, Canadian policymakers increasingly suggest that some tariffs will remain in place, and current negotiations seek to minimize the tariffs but are unlikely to fully rescind the U.S. measures.

Amid concerns about U.S. steel and aluminum tariffs leading to dumping of cheap steel and imports in Canada, the Canadian government has enacted quotas on imports of foreign steel products. The quotas are set at one-half of 2024 imports from countries that do not have a free-trade agreement with Canada. Imports that exceed these quota limits will be charged with a 50% tariff. The new policy has drawn criticism from China, a major exporter of steel to Canada, which alleges that the quotas are against World Trade Organization (WTO) policy.

The U.S. has further threatened to enact 30% tariffs on Mexico on August 1 over U.S. allegations that the Mexican government has failed to address crimes from Mexican drug cartels, as well as ongoing concerns about the U.S. trade deficit with Mexico, replacing the previous 25% tariff. The new 30% tariff will similarly exclude goods covered by USMCA. However, Mexican President Claudia Sheinbaum has indicated she remains confident that a deal will ultimately be reached before these new tariffs are enacted.

Meanwhile, trade negotiations between the U.S. and the E.U. have deteriorated after the U.S. threatened to enact a 30% tariff on E.U. imports on August 1. President Trump has stated that these tariffs could only be removed if the E.U. rescinds all tariffs on U.S. imports and guarantees open market access for American firms.
In response, the E.U. recently released a finalized list of U.S. goods valued at €72 billion ($83 billion) to target with 30% tariffs effective August 1 if the U.S. moves forward with reciprocal tariffs. The targeted American products are expected to include aircraft and aviation parts, automobiles and auto parts, precision tools and instruments, and bourbon whiskey. In addition, unspecified items from the machinery, medical devices, chemicals, plastics, electrical equipment, and industrial goods sectors may be affected. These proposed tariffs would require formal approval from E.U. member states before being implemented and would be targeted in addition to the previously approved €21 billion ($23.2 billion) worth of U.S. goods, which include items such as soybeans, diamonds, agricultural products, steel and aluminum, poultry, and motorcycles. Several E.U. leaders have indicated they would prefer to continue negotiations over enacting new countermeasures but may have no choice if the 30% tariff comes into effect without an agreement.

Separately from existing reciprocal tariff measures, the United States has also threatened to enact a 100% tariff on imports from Russia if Russia does not agree to a peace deal with Ukraine as soon as September 3. Under the measure, the U.S. could also sanction buyers of Russian products, potentially impacting buyers of Russian energy products in countries such as China, India and Turkey. In addition to impacting global oil and gas markets, domestic industry associations in the U.S. have also raised concerns that tariffs on Russia could have a negative impact on urea and fertilizer availability in the U.S., potentially causing widespread disruptions to U.S. agriculture if these products are not exempted. 

Table 2: Key dates for upcoming trade restrictions (source: Everstream Analytics). 

U.S. and China announce new trade talks from July 28-29

The U.S. has announced plans to hold a third round of trade talks with China in Stockholm, Sweden from July 28-29. The topics of discussion will include an extension to the August 12 deadline for a finalized trade agreement, Chinese export controls on rare earth products, Chinese purchases of sanctioned Russian and Iranian oil products, market access, and the overall tariff rate. In line with the previous agreement for the U.S. and China to lift export controls on both sides, the U.S. lifted export controls on artificial intelligence chips on July 14. American manufacturers including Nvidia and Advanced Micro Devices (AMD) have resumed exports to China, although export licenses from the U.S. government are reportedly still required. China has also agreed to suspend its antitrust investigation into DuPont de Nemours Inc.

Despite these new talks, China has announced plans on July 15 to implement new export controls on technologies used to manufacture key materials in electric vehicle batteries. These technologies include products used to manufacture battery-cathode materials production and non-ferrous metal refinery or processing, such as technologies for spodumene-based lithium carbonate production. Under the measure, all exporters will be required to gain a license from the Chinese government, and five additional control points will be added to metal refinery and processing technologies. Additionally, from the American side, the U.S. Federal Communications Commission announced a proposal to ban undersea submarine communication cables that contain Chinese technology or equipment from being connected to the U.S. The policy is due to concerns over the potential for Chinese espionage. 

Everstream clients are receiving more detailed insights and recommendations about this risk. 

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