Trump’s tariff deadline delay brings hope, confusion to trade partners and businesses

WASHINGTON – US President Donald Trump’s latest tariff delay provided some hope to major trade partners Japan, South Korea and the European Union that deals to ease duties could still be reached, while bewildering some smaller exporters such as South Africa and leaving companies with no clarity on the path forward.

Mr Trump’s formal letters to 14 countries informing them of planned tariff rates of 25 per cent to 40 per cent provided what he called a final warning on his “reciprocal” tariffs, while

pushing back a previous July 9 deadline

to Aug 1, a date he said on July 8 was final, declaring: “No extensions will be granted.”

The move reflects his frustration with trade negotiations that are proving lengthier and more complicated than the “90 deals in 90 days” that he expected, trade experts and administration officials say.

The US leader, who announced on July 8

a 50 per cent tariff on imported copper

and said long-threatened levies on semiconductors and pharmaceuticals were coming soon, said he has long favoured simple tariffs over tedious trade talks that often involve red lines for some countries and their own requests for US concessions.

Japanese Prime Minister Shigeru Ishiba focused on the positive, saying his government would press ahead with negotiations towards a deal that “benefits both countries, while protecting Japan’s national interest”.

Facing a 25 per cent general US tariff, Japan wants relief for its export-dependent auto industry from Mr Trump’s separate 25 per cent automotive tariffs. It also has resisted demands for increased purchases of American rice.

Japan, once viewed as an early favourite for a deal, faces an Upper House election on July 20 and too many concessions could put Mr Ishiba’s ruling Liberal Democratic Party at risk.

“These countries are not folding. They’re not giving him what he wants, so he’s added another threat,” said Mr William Reinsch, a former US Commerce Department official who is a senior trade adviser at the Centre for Strategic and International Studies. “He’s put a new number to it and extended the deadline.”

South Korea, where President Lee Jae Myung has been in office less than a month, also pledged to intensify talks for “a mutually beneficial result” while analysts warned he would not be “a pushover” for Mr Trump or put South Korea at a disadvantage to Japan.

Mr Stephen Miran, chairman of the White House’s Council of Economic Advisers, told Fox News on July 8 that more deals were possible even before the end of this week, as long as countries made concessions deemed worthy by Mr Trump.

India, in particular, looked close to a deal, but prospects were less clear for smaller countries such as South Africa, Thailand and Malaysia, which face tariffs of 30 per cent, 36 per cent and 25 per cent, respectively.

South African President Cyril Ramaphosa pushed back on Mr Trump’s 30 per cent tariff rate, calling it out of sync with an average 7.6 per cent South African tariff rate. But he instructed his negotiators to “urgently engage” with Mr Trump’s team on a framework first submitted by the South African side on May 20.

The Trump administration’s negotiating time may be eaten up with larger partners, such as the EU, which did not get a warning letter or a change to its prescribed 20 per cent tariff rate, double the 10 per cent baseline.

Sources familiar with the EU talks have told Reuters that a deal could involve carve-outs for aircraft and parts, medical equipment and alcoholic spirits. They say the EU also wants certain automakers to export to the US at rates below the 25 per cent auto tariff.  

Such a deal would be similar to a framework agreement with Britain that had carve-outs for autos, steel and aircraft engines.

FInal squeeze

After

announcing his global “Liberation Day” tariffs

of 11 per cent to 50 per cent in early April, Mr Trump quickly dialled them back to 10 per cent for most countries amid bond market turmoil to buy time for negotiations to lower foreign tariffs and trade barriers.  

Mr Ryan Majerus, another former US Commerce official, said Mr Trump’s three-month pause had not produced the desired results, and now the President was seeking to maximise his negotiating leverage.

“They’re going to pressure-test things and see how far they can go, particularly for countries where there hasn’t been any movement in the talks,” said Mr Majerus, who is a partner at Washington’s King and Spalding law firm.

Steadier markets and strong economic data give Mr Trump some room to manoeuvre, but time is short and “the more granular you get in negotiating these things, the tougher the sledding gets”, he added.

The deadline extension provides no relief to companies that are trying to keep up with Mr Trump’s tariffs. Executives say the rapidly shifting tariff landscape has paralysed decision-making as they try to adjust their supply chains and cost structures to avoid tariff-induced price hikes.

“No company can really prepare for this,” said Mr Hubertus Breier, chief technology officer for Germany’s Lapp Holdings, a family-owned maker of cables, wires and robotics for factories. “We are already incurring losses simply because of the uncertainty of the daily changing situation.”

Lapp has difficult choices – absorb additional costs or pass them on to customers. Assuming permanently higher prices and costs, however, could threaten its long-term existence, Mr Breier added.

DeMejico, a family business in Valencia, California, with a plant in Mexico that builds traditional Spanish and Mexican-style furniture, is struggling to adapt to Mr Trump’s 50 per cent tariffs on imported steel.

Mr Robert Luna, the company’s president, said the firm is importing heavy steel latches, hinges and trim parts separately to simplify the tariff calculation process and installing them at its Los Angeles-area showroom.

The tariffs and higher US wage costs are already inflating prices, and DeMejico faces further cost increases on furniture if Mr Trump hits Mexico with a reciprocal tariff, he said.

“It’s hard to do anything about this as a small business owner, so I just try to be stoic and see what happens,” he said, adding: “My biggest worry is just keeping the company alive.” 

Mr Luna said he thought the Trump administration was “setting up the foundation to train people to pay tariffs”. REUTERS