President Donald Trump's trade war risks reigniting next week when a temporary suspension on sweep tariffs expires, potentially raising businesses' costs and increasing consumer prices.
Trump and administration officials have recently shown that deadlines could be pushed back, but the president told reporters Tuesday that he had no plans to extend and had notified the country of the new tariff rate. He said it would be more difficult than planned to carry out trade transactions with many foreign governments.
“We're very easily determining numbers and writing nice letters to them,” Trump said he was in Air Force 1. “Maybe a page or a half pages are essentially “Congratulations. I'm honored to be able to do business in the United States.”
Trump said Wednesday that he had reached a trade deal with Vietnam. There, the US-based company must pay 20% tariffs on Vietnamese goods and 40% tariffs on goods routed through Vietnam from other countries. Vietnam has agreed not to charge customs duties on US goods.
“Freeing” has been delayed
The tariff was announced at a huge fanfare called the “Freed Day,” the event in April, called the “White House,” and imposed taxes on dozens of countries. They included a 24% tariff on Japanese imports and a 20% tariff on European Union products. At the time, Trump said his duties would end “looting, looting, raping, looting and looting” in the United States for decades.
The move has resulted in a tumultuous stocks and erased $5 trillion worth of S&P 500, but global investors began to flee US assets, increasing government borrowing costs. Just a week later, Trump said he was suspending most of these tariffs to give him time to broker new trade deals with up to 75 trading partners in 90 days.
White House officials framed the announcement and subsequent suspension as negotiation tactics and the “art of dealing.” But the $80 billion that customs officials estimate the US has collected with additional tariff revenue pales in the side of the multi-billion dollar revolving market at that time.
After almost three months, the trade agreement has not been completed. The talks continue with the US closest trading partners and have reached a framework of one agreement with the UK, but details need to be attacked.
With the July 9 deadline approaching, US businesses are once again facing the threat of paying large taxes on products purchased from overseas. Taxes are taxes paid to the federal government by US-based companies that import products or parts. Companies can absorb these fees, get lower profits elsewhere, reduce costs, and pass costs to customers in the form of higher prices.
“Customer fatigue”
The imposition of more tariffs could rekindle the stock market volatility caused by the initial announcement. Investors are primarily hoping he will extend the July 9 deadline for most trading partners and do not expect a major surge in corporate tariff costs over the next few days.
“Despite evidence of investor 'tax fatigue', trade policy concerns persist,” Hussein Malik, global research director at JPMorgan, wrote in a note to his client last week. “We believe the tariff deadline for the coming July is not that important,” he said, but “volatility may continue until we reach a final decision this summer. The ability of businesses and consumers to absorb tariff shocks is important in determining macro outcomes.”
During the suspension, some customs duties are in effect during the suspension, including 10% tariffs on all imports and higher charges for iron, aluminum and automobiles. The US and China announced a 90-day suspension in May for most of the recent tariffs, with the US reducing the effectiveness rate for Chinese imports from 145% to 30%.
So far, these tariffs have not seemed to disrupt the economy much, but Federal Reserve Chairman Jerome Powell said Tuesday that more effects could soon be seen. Uncertainty in tariffs has slowed further interest rate cuts, he said. And while many businesses stocked stock in the spring to prepare for tariffs, executives warn that consumers can see higher prices this summer and as these supplies drop.
Vietnam trading framework
White House officials say they are in regular consultations with 18 top US trading partners, including the EU, Japan and India, to negotiate trade deals.
In propaganda about the trade deal, Trump said the US has reached Vietnam, suggesting that Trump could open the Vietnamese market with American-made SUVs. Vietnam is an increase in US trade dealers, but the purchasing power of most Vietnamese people is limited to average wages at around $600 a month.
“We could sell our products to Vietnam at zero tariffs,” Trump wrote in a social media post. “It is my opinion that an SUV or, as mentioned occasionally, a big engine vehicle that works very well in the US would be a great addition to the various product lines within Vietnam.”
Trump did not disclose further details of the contract. US imports from Vietnam rose nearly 20% to $136.6 billion last year, as more companies like Nike are changing production from China to avoid paying tariffs imposed on China during Trump's first term.
Trump on Tuesday suggested that a trade deal with India would be near, but administrative authorities have been proposing it for several weeks. Previously, Trump had threatened India with 26% tariffs.
“It's going to be a deal where we can come in and compete,” he told reporters. “Now, India is not accepting anyone. I think India is going to do that. If so, they're going to trade because there are far fewer tariffs.”
Discussions between Japan and the EU
Trump said Tuesday that he was unlikely to agree to buy US rice, a move that could hurt Japanese farmers. Japan is already facing a 25% tariff on vehicles shipped to the US and a 24% mutual tariff if the tariff suspension expires.
The European Union's top trade negotiators were scheduled to come to Washington on Wednesday to continue discussions. The EU is threatening to retaliate if there is no transaction by July 9th, with retaliatory tariffs worth at least $100 billion worth and plans to limit the shipment of SCRAP steel and certain chemicals to the United States.
White House officials have shown they don't have time to start serious trade talks with their small trading partners, creating uncertainty about what will happen if the suspension expires. Some of these countries sell relatively small amounts of goods to the US, but they can control the supply of items in certain regions. For example, Madagascar is the US main supplier of vanilla used for baking, facing 47% tariffs when the suspension expires.