President Donald Trump has already rattled global markets by dispatching letters to 14 of the United States’ trading partners. To start, he has threatened to impose new tariffs on their exports, which would begin on Aug. 1. The proposed tariffs—up to 40% in Japan and 25% in South Korea—hit some of our closest allies. Together with other developments, this move signals a troubling new precedent for the future of U.S. international trade relations.
It got much worse this week when Trump announced his intention to slap a 50% tariff on all copper imports, starting Tuesday. He’s recently threatened tariffs on pharmaceuticals, too. This recent development is part of a larger strategy of employing tariffs as a negotiating chip. Anon, The White House has now officially confirmed it will be sending out additional tariff letters in the coming days. This indicates that the administration is leaning towards making cap and trade a prominent issue in trade negotiations.
European Union (EU) leaders are keenly cognizant of this. They’re in the trenches, every day seeking to finalize a comprehensive deal with the US to avoid crippling import duties. Olof Gill, an EU representative, stated, “We aim to reach a deal before [1 August], potentially even in the coming days.” This urgency is due, in part, to the prospect of the first tariff deadline of July 9. To facilitate further negotiations, Trump pushed it back to August 1.
Trump has praised the European Union, hinting at the possibility of establishing a new tariff rate for the bloc shortly. He noted that the White House is “at most two days late” on issuing these rates. Italy’s Economy Minister Giancarlo Giorgetti acknowledged that the negotiations had become difficult. He acknowledged the talks are “extremely complicated” and may go to the wire on a deadline.
Analysts are watching the situation closely, with some analysts doubtful that Trump is bluffing. Dan Coatsworth commented, “It’s almost like Trump is losing credibility in terms of negotiating tactics… his bark is worse than his bite.” These sentiments speak to an underlying worry by investors that Trump’s threats will be erratic and hard to read.
Analysts at Pantheon Macroeconomics have similarly warned that moving ahead with tariffs would largely shift their meaning into a big, dangerous risk to the US economy. Still, investors are nervous over the specter of Trump’s tariff threats. So much so, that they’ve invented a word, ‘TACO’, for ‘Trump always chickens out’, to encompass their cynicism. Her reaction embodies a growing fear of the possible economic consequences coming from damaging trade policies.
As we count down the days to August 1, the future shape of international trade remains uncertain. These negotiations will determine our future trading partners as we weave together a new, globally competitive regional economy. Their eventual outcome has the potential to fundamentally reshape our global economy.