US President Donald Trump announced that the United States is on the verge of finalizing several trade agreements in the coming days, a move that could significantly alter international trade dynamics. As tensions escalate, Trump will have to notify countries of the increase in tariff rates by July 9th. These increased rates go into effect August 1. The timing of the announcement is momentous, as it comes at the 17th BRICS summit, taking place right now in Rio de Janeiro, Brazil. Global trade and economic cooperation have become the key buzz words of this event.
Congress should work with the President on his goal of using tariffs to strengthen the US economy and help American producers. Instead, he very publicly announced that any country that joins BRICS will be subject to a 10% additional tariff. We will make no exception to this rule. While other countries make similar moves, this strategic move should stand out as significant change in the US’s trade relations. This is especially hard on our top trading partners, namely Mexico, China and Canada, who together accounted for 42% of all US imports in 2024.
Implications of New Tariffs
Trump’s desire to influence the imposition of tariffs on Mexico, China and even Canada is part of an overall strategy to protect domestic industries. Mexico has emerged as a significant player, standing out as the top exporter to the US with $466.6 billion in exports in 2024. By targeting these key countries, the Trump administration aims to reshape its trade policies in a manner that prioritizes American interests.
In a press conference following the decision, Commerce Secretary Howard Lutnick provided some additional details on the new expected tariff rates, which will be set by July 9th. He stated that it is important that they come to an agreement with the US. Principally, countries out of compliance will be notified of what their tariff rate will be by that deadline. This proactive approach suggests that the administration is keen on establishing a clear framework for international trade, especially as the presidential election approaches in November 2024.
Economists are still at odds over whether tariffs are the appropriate response. Proponents claim such measures can save domestic jobs and industries. Opponents like the think tank the Information Technology and Innovation Foundation argue that they risk inciting countermeasures from the targeted countries. This debate is a critical one to have as the administration determinedly tries to figure out its way forward in a much more complicated global market.
Market Reaction and Economic Indicators
US stock index futures are reacting with concern to this latest development. As a result, they are now reflecting losses between 0.35% and 0.6%. It seems that investors are concerned about potential shifts in trade relations, benefits thereof, and what these mean for overall economic growth. This uncertainty, combined with the unpredictability of market players in reaction to Trump’s tariff announcements, has helped create a great deal of frayed nerves.
In the meantime, overseas economic data continues to trend in a mixed direction. Germany’s industrial production increased 1.2% m/m in May, indicating ongoing strength in its manufacturing sector. Such growth would be welcome news to jittery global markets already worried about the lurch toward US unilateralism and protectionism. Globally, the effects of these new tariffs are still a hot topic and concern among economists is high, with many watching the situation unfold with bated breath.
As the BRICS summit continues, leaders from member countries are likely discussing strategies to navigate the challenges posed by US trade policies. For countries similarly looking to BRICS, now is the time to rethink their competitive trade strategy to avoid being caught in the crossfire of these elusive new tariffs.
The Road Ahead
Regardless, the next few weeks will be pivotal for US trade relations and overall global market stability. Trump’s emphasis on using tariffs as a tool during the election run-up indicates a commitment to prioritizing domestic economic interests over international collaboration.
The confusion about when and if tariffs will actually be implemented could require other countries to change their trade policy accordingly. Those countries that are unsuccessful in negotiating improved terms for the US will have to prepare for the inevitable 10% tariffs to come. These tariffs would severely change their economic landscapes.